[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                     DEPARTMENT OF VETERANS AFFAIRS
                 BUDGET PRIORITIES FOR FISCAL YEAR 2005

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, FEBRUARY 12, 2004

                               __________

                           Serial No. 108-19

                               __________

           Printed for the use of the Committee on the Budget


  Available on the Internet: http://www.access.gpo.gov/congress/house/
                              house04.html


                                 ______

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                        COMMITTEE ON THE BUDGET

                       JIM NUSSLE, Iowa, Chairman
CHRISTOPHER SHAYS, Connecticut,      JOHN M. SPRATT, Jr., South 
  Vice Chairman                          Carolina,
GIL GUTKNECHT, Minnesota               Ranking Minority Member
MAC THORNBERRY, Texas                JAMES P. MORAN, Virginia
JIM RYUN, Kansas                     DARLENE HOOLEY, Oregon
PAT TOOMEY, Pennsylvania             TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington             DENNIS MOORE, Kansas
ROB PORTMAN, Ohio                    JOHN LEWIS, Georgia
EDWARD SCHROCK, Virginia             RICHARD E. NEAL, Massachusetts
HENRY E. BROWN, Jr., South Carolina  ROSA DeLAURO, Connecticut
ANDER CRENSHAW, Florida              CHET EDWARDS, Texas
ADAM PUTNAM, Florida                 ROBERT C. SCOTT, Virginia
ROGER WICKER, Mississippi            HAROLD FORD, Tennessee
KENNY HULSHOF, Missouri              LOIS CAPPS, California
THOMAS G. TANCREDO, Colorado         MIKE THOMPSON, California
DAVID VITTER, Louisiana              BRIAN BAIRD, Washington
JO BONNER, Alabama                   JIM COOPER, Tennessee
TRENT FRANKS, Arizona                RAHM EMANUEL, Illinois
SCOTT GARRETT, New Jersey            ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   DENISE MAJETTE, Georgia
THADDEUS McCOTTER, Michigan          RON KIND, Wisconsin
MARIO DIAZ-BALART, Florida
JEB HENSARLING, Texas
GINNY BROWN-WAITE, Florida

                           Professional Staff

                       Rich Meade, Chief of Staff
       Thomas S. Kahn, Minority Staff Director and Chief Counsel


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, February 12, 2004................     1
Statement of:
    Hon. Anthony J. Principi, Secretary, Department of Veterans 
      Affairs....................................................     5
    John C. Bollinger, Deputy Executive Director, Paralyzed 
      Veterans of America........................................    44
    Rick Surratt, Deputy National Legislative Director, Disabled 
      American Veterans..........................................    48
    Paul A. Hayden, Deputy Director, National Legislative 
      Service, Veterans of Foreign Wars of the United States.....    53
    Richard ``Rick'' Jones, National Legislative Director, AMVETS    58
Prepared statement:
    Mr. Principi.................................................    11
    Mr. Bollinger................................................    46
    Mr. Surratt..................................................    49
    Mr. Hayden...................................................    54
    Mr. Jones....................................................    59

 
 DEPARTMENT OF VETERANS AFFAIRS BUDGET PRIORITIES FOR FISCAL YEAR 2005

                              ----------                              


                      THURSDAY, FEBRUARY 12, 2004

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:05 p.m. in room 
210, Cannon House Office Building, Hon. Jim Nussle (chairman of 
the committee) presiding.
    Members present: Representatives Nussle, Shays, Gutknecht, 
Hastings, Schrock, Brown, Putnam, Bonner, Spratt, Baldwin, 
Moore, Edwards, Capps, Thompson, Baird, Majette, and Kind.
    Chairman Nussle. Good afternoon. This is the full committee 
hearing on the budget, the President's budget for veterans for 
fiscal year 2005. We have two witnesses for us today, two 
panels of witnesses, I should say. The first panel is, of 
course, the very honorable Secretary of Veterans Affairs, 
Anthony Principi, who we welcome back to the Budget Committee. 
We are pleased to have you here today. We welcome you, and your 
secretaries and staff to the committee room.
    We are holding hearings, as you know, all year on the 
budget and on the President's budget in particular. And I 
happen to believe this is probably one of the most important 
hearings that we will hold all year. Today we have the 
opportunity to focus on our Nation's more than 25 million 
veterans who have served our country, the men and women who 
have made sacrifices for all of us to protect our freedom.
    Like the roughly 60,000 veterans that I am proud to 
represent, and the over 280,000, as I understand it who live in 
the State of Iowa, veterans throughout the country are the 
reason we have been and will remain a great Nation.
    And I know there are a number of veterans that are here in 
the room today. And we welcome you, and we thank you for your 
service to our country.
    I know that all of us in Congress are truly grateful to 
veterans, including all of the men and women who are currently 
serving us throughout the world protecting our freedom and 
keeping that light burning. We know that they sacrifice so that 
we can continue to have the luxury of living in the greatest 
democracy in the world.
    So while there is likely to be differences of opinion 
between parties and across the aisle on different issues from 
time to time, it is my hope that we are all able to work 
together in a bipartisan way to address the needs of veterans 
here in the country, even though we may have our differences.
    There are Republican veterans, there are Democrat veterans, 
there is independent veterans, they come in many sizes and 
shapes and forms. And, but in the same way that each of us want 
to put each and every one of them put their differences aside 
for the cause that they served in service to our country I hope 
that we can do the same.
    That said, I am pleased to say that over the past several 
years, I believe we have shown a level of gratitude befitting 
the service that these men and women have provided us through 
hefty increases in funding and substantial increases in 
benefits and services.
    Since Republicans took control of Congress in 1995, I would 
like to highlight some of the things that have occurred that we 
built upon and that we hope to build upon even today. So let's 
take a look at some of those improvements. In 1999, as an 
example, the Republican Congress extended VA medical care to 
veterans returning from combat zones. This now includes Reserve 
and National Guard personnel called to active duty who are 
returning from Iraq and the Afghanistan conflicts.
    I have got some charts that I would like to refer to. Since 
1995, if you look at the first chart, total spending on 
veterans has increased from 38 billion to $60 billion. That is 
a 58-percent increase compared with a 36-percent increase 
during the previous 10 years. So we build upon a base of 
support that I think is certainly one that deserves credit.
    Secondly, spending per veteran. The substantial increases 
in veterans benefits have occurred while the actual number of 
veterans has of course and unfortunately declined, especially 
over the last 10 years. As a result, payments per veteran rose 
from approximately $1,300 in 1995 to about $2,400 in 2004. That 
is a 79-percent increase if you compare it to the previous 10 
years, which was only a 39-percent increase.
    So, again, whether you look at total spending or on a per 
veteran basis, the increases in the budget have been 
substantial and appropriate.
    Let's look at medical care funding as an example. In just 
this past 10 years, VA medical care funding VA has been 
increased by 75 percent, from $16 billion to $28 billion with a 
especially large increases of 13 percent in both 2003 and 10 
percent in 2004.
    Let's look at medical care eligibility. In 1996, the 
Republican Congress led the way for an historic expansion in 
eligibility for VA medical care. As you can see from the chart 
here, at the same time the number of veterans using VA medical 
care has increased from 2.5 million in 1995, to now almost 5 
million veterans using VA medical care today.
    Let's look at the Montgomery GI bill. Since 1995, the 
monthly education benefit payment levels under the GI bill have 
expanded or increased from $405 to $985. That is a percentage 
increase of 143, 143-percent increase, far higher than the 35-
percent increase during the previous 10 years.
    Military retirees injured in combat, while training for 
combat, now, and who are 50 percent or more disabled are able, 
for the first time in over a century, to receive retirement 
benefits concurrently with veterans disability compensation.
    The Republican Congress has passed significant expansion in 
military health care program for the over 65 military retirees, 
the TRICARE-for-Life program.
    We have also ensured that we are providing for those men 
and women serving our country now. Over the past 3 years, we 
have increased military basic pay of 21 percent, and when food 
and the housing allowances are added, the increase has reached 
almost 29-percent increases for the men and women who are 
serving our country.
    Simultaneously, the Department of Defense's annual budget 
has increased almost $150 billion to prosecute the global war 
on terrorism and to carry out military transformation.
    And I will assure you that I, joined with members of this 
committee and Congress, on both sides, will continue our 
commitment ensuring that those who have served our country with 
pride and valor and dignity receive the best of America's 
appreciation.
    Now, having said that, I know that it is probably never 
going to be exactly enough, that there will be more requests, 
more interest in increasing funding. And certainly we will take 
those requests under advisement, under very specific 
advisement, because we are in the process of setting 
priorities.
    But, I think it is very important for us to remember where 
we have come and how far we have gone as we build upon those 
accomplishments. Today, we have asked the Department of 
Veterans Affairs, Secretary Principi, to discuss with us the 
President's request for veterans benefits funding for fiscal 
year 2005.
    So, Secretary, we welcome you. We look forward to your 
testimony. And we know that this is a critical issue of 
personal issue for you. And a personal crusade that you have 
been on yourself, and we are proud to work with you. And with 
that, I would like to turn it over to Mr. Spratt for any 
comments he would like to make.
    Mr. Spratt. Secretary Principi, we are glad to have you 
here, and appreciate the fact that you would come and testify. 
And your reputation precedes you. You have a long record of 
service as the Secretary of the Department, the Deputy 
Secretary, and, I believe, an apprenticeship here on the Hill 
to boot.
    I want to welcome also the witnesses from our second panel 
representing Amvets, the Paralyzed Veterans of America, DAV, 
the Disabled American Veterans, and the VFW, the Veterans of 
Foreign Wars.
    These four organizations once again have collaborated to 
come up with an assessment of the resources that they feel are 
needed to meet the promises that were made to our veterans. 
They have published it in what they call the independent 
budget. It is always a thorough piece of work, a challenging 
piece of work, and it commands great respect and we look 
forward to having their testimony today.
    Trying to find the right funding for veterans programs 
involves a number of challenges. Some of them are shared across 
the Federal budget, and some are unique to veterans. About half 
of the VA budget goes to compensation and pensions and other 
entitlement programs that operate under permanent law. That is 
not primarily our concern today.
    The other half, our chief concern, is appropriated annually 
by Congress. That portion is mainly devoted to veterans health 
care. And most, but not all, of the controversy in recent years 
over the level of funding has centered on this portion of the 
budget.
    If I can have the first chart. This is our calculation of 
what the President's budget does to the discretionary portion 
of the veterans budget over time when you measure it in real 
purchasing power. The blue line being constant purchasing 
power, is about $30 billion, the red line showing that every 
year in real terms constant dollars purchasing power, funding 
for veterans health care goes steadily downward.
    Now, spending on veterans health care, the chairman is 
correct, has risen substantially over the past few years. But 
frankly the demand for these services seems also to be growing 
and even faster. There has been a marked increase in both the 
demand and the resources for health care since Congress 
expanded access to the system several years ago.
    Let me reference, if I could, chart No. 3. That steep 
incline in the mid 1990s showed you what happened when we went 
out and tried to enroll all veterans, extended the service of 
the Veterans Administration hospitals to everybody who we could 
capture in the system, not only the 1s and 2s, but the 7s and 
8s as well.
    And we had a precipitous increase. And the fact of the 
matter is, we are now attempting to serve that population and 
serve them with a budget that doesn't fully meet the needs of 
all of the people who would otherwise be qualified. That is the 
dilemma that we find for ourselves.
    Last year there was an attempt to lower the funding levels 
for veterans programs. The proposal this year for us for 
programs such as veterans health care and the administration of 
benefits, construction, cemeteries, also is a bit below current 
service. It is $257 million by our calculation. That is using 
the CBO baseline. I understand if you use the OMB baseline, it 
is actually even more below the level of current services. We 
believe $257 million is the amount that the request is this 
year below current services.
    That is a lot of money. But, if you run it out over 5 years 
it is even more. Because, by our calculation over 5 years, the 
level of funding for appropriated veterans programs, mainly 
veterans health care, over 5 years, is about $13.5 billion 
below current services. That is big money. That is a big 
shortfall.
    At the end of this 5-year period, the funding in this 
budget for health care and other discretionary programs is 
about 14\1/2\ percent below today's current services levels. 
Now, this is not because the number of patients is going down; 
it is not. It is not because health care inflation is coming 
down, it probably won't. It is not a result of anomalies in the 
baseline.
    In fact, if you compare the CBO baseline, the OMB baseline, 
the OMB baseline shows the cuts even deeper. Now some may say 
these are just cuts against a baseline, which is a construct, 
it is not a real number, it is not a real cut, it is a paper 
cut. But, the fact is, that while this budget proposes a 
nominal increase of $521 million in 2005 above 2004, there is 
still a cut in real purchasing power of $257 million.
    And over the next 5 years, this cut gets even worse. There 
is no increase for inflation, no increase for the extra 
caseloads. We fall farther and farther behind as we go out in 
time. That is a problem that we have all got to confront and 
deal with today, that is why we asked the veterans themselves 
to come to us to find out that their picture, their 
appreciation of the adequacy of this budget.
    The President's budget attempts to deal with the enormous 
deficits that we have got. It is $521 billion this year, $368 
billion next year, 2005. That doesn't include the likely sum of 
$50 billion needed to support our troops in Iraq and 
Afghanistan. So it is a tough problem. But he has chosen to 
focus most of his spending restraints on one particular 
category of the budget known as nondefense discretionary 
spending, and the veterans administration health programs 
happen to come out of that particular segment of the budget.
    And by bearing down on that segment, and not looking at 
other places in the budget, and particularly the other side of 
the ledger, tax cuts as an additional request in this year's 
budget for a trillion, $200 billion in additional tax cuts, 
what happens is, we make a small dent in the deficit, but we 
make a big hole in the programs that happen to fall in this 
category of the budget. And the Veterans Administration is one 
of them.
    We are seeing now what we have been talking about for 
several days since we first saw the President's program, the 
consequences for essential programs like this, if we pursue the 
budget path the President has laid out, which concentrates a 
lot of its effort on cost savings on discretionary spending.
    Now, if that were a solution to the problem, if it were a 
solution to the problem, we would say this may simply have to 
be. Because we got to get our books back in balance. But, as I 
said, this doesn't solve the problem, because it doesn't begin 
to encompass everything that is happening in the budget. We 
have had huge tax cuts. Additional tax cuts will only drive us 
deeper in the hole and make it harder and harder to reach the 
levels, attain the levels that we all recognize are necessary 
if we are going to keep our promises to our veterans.
    So we look forward to your testimony today, Mr. Secretary. 
We appreciate your being here. We look forward to working with 
and seeing if we can keep our promises to our veterans and give 
them the services and the programs that they deserve and were 
told that they would have the right to.
    Chairman Nussle. Thank you, Mr. Spratt. Mr. Secretary, 
welcome again. Your entire testimony will be made part of the 
record. And you may summarize as you feel necessary. Welcome.

STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, DEPARTMENT OF 
                        VETERANS AFFAIRS

    Secretary Principi. Thank you. Good afternoon, Mr. 
Chairman, Mr. Spratt, members of the committee. It is certainly 
a pleasure to appear before the Budget Committee on a very, 
very important budget, as you have indicated.
    This year and next year, if this budget is approved, 
800,000 more veterans, a very significant number, will receive 
VA medical care than in 2001, the year I became Secretary of 
Veterans Affairs. And I believe that these veterans are the 
beneficiaries of respect of the American people as reflected in 
the budget increases requested by the President, combined with 
the active and successful advocacy and support of Members of 
Congress.
    As the first graph shows, our health care budget alone over 
the past 4 years, with the enactment of the 2005 budget, has 
increased over 40 percent. And I thank the members of the 
committee for your tremendous contribution to this achievement.


    This is the golden age of VA health care. Never before has 
the quality of VA health care been so good. This is not my 
dad's VA. Never before has access been this broad. We now have 
some 700 community-based outpatient clinics in the VA. Prior to 
1994-95 we had virtually no community-based outpatient clinics.
    Never before have we treated so many veterans at so many 
locations. As the second graph shows, the number of new veteran 
enrollees has increased rather substantially from 6 million in 
fiscal year 2001 to our projected 8 million in 2005.
    The number of veterans enrolling in the VA health care 
system has risen rather dramatically as a result of open 
enrollment in 1998. And the number of veterans treated has also 
risen dramatically, from about 4.3 million in fiscal year 2001 
to 5.3 million projected in the fiscal year 2005.
    This year we are on track to do 50 million outpatient 
visits in the VA, up from 41 million just a few years ago. And 
we expect to fill almost 110 million prescriptions for drugs. 
About 565,000 veterans will be inpatients in one of our 
facilities at some point this year.
    With 2005, our total health care budget authority would 
increase 4.1 percent over fiscal year 2004, and sustain the 
gains veterans achieved over the last 3 years. And this chart 
shows the President's request from the prior year, and I think 
over the past 4 years, we have seen dramatic increases in the 
President's request to the Congress, and the Congress has, of 
course, this past year in 2004, added to the President's 
request.





    I believe that we will be able to maintain our status as 
the standard of quality care and meet our goal of scheduling 
nonurgent primary care appointments for veterans within 30 
days, and 99 percent within 90 days. My goal is to eliminate 
our waiting list this spring, 90 days after receiving the 
fiscal year 2004 appropriations.
    And we will continue, Mr. Chairman, Mr. Spratt, members of 
the committee, to focus on the medical needs of veterans 
identified by Congress as the highest priority, the service 
connected disabled, the lower income veterans, who have few, if 
any, options for care other than the VA, and of course, those 
who need specialized services like spinal cord injury, blind 
rehabilitation and mental health.
    This budget request also more than doubles from the current 
fiscal year our appropriation request for construction of the 
new and improved facilities soon to be identified through our 
CARES process. And I know construction and CARES has been an 
important issue to Members of the Congress. But this request 
will double the amount of money that we have allocated for the 
CARES process.



    And, in addition, I plan to use the authority granted by 
Congress and apply up to $400 million of medical care 
appropriations to CARES projects so that we can get on with 
modernizing our VA infrastructure. This makes a total of 
approximately $1 billion we will now be able to commit in 
fiscal year 2004 and 2005 to transforming VA's legacy 
infrastructure into a 21st century health care system.
    Perhaps most importantly, the budget will fund high quality 
care for veterans returning to our shores from Iraq and 
Afghanistan. Of the approximately 83,000 veterans who have been 
discharged and served in Enduring and Iraqi Freedom, roughly 12 
percent have come to us for care, about 9,700. Of those who 
have been discharged after serving in Afghanistan, about 1,400 
of those veterans have came to the VA for health care.
    There is no question, however, that we still have 
challenges ahead of us. And we are trying to respond to those 
challenges with policy initiatives. First, we emphasize our 
commitment to the highest priority veterans, by asking Congress 
to raise the income threshold to $16,500 from $9,800 and 
thereby exempting low income veterans from pharmacy copayments, 
lifting the burden from the poorest of the poor in the veteran 
population.
    We also asked Congress to eliminate all copayments for 
former prisoners of war, and propose to eliminate copayments 
for veterans who are in hospice care programs in home or under 
contract.
    And in those cases where our patients must make copayments 
to their health insurers for emergent health care in private 
sector hospitals, we asked for the authority to reimburse them 
for those costs to their insurance companies.
    At the same time, we also asked Congress to approve both a 
modest increase in pharmacy copayments and a modest annual fee 
totaling less than $21 a month, a very small portion of the 
cost of care for higher income nondisabled veterans using our 
system.
    This is not an enrollment fee. Any veteran in categories 1 
through 7 can continue to enroll. It would be an annual fee 
collected from veterans receiving care, again, the higher 
income nonservice disabled, and could be paid on a monthly or 
annual basis.
    The budget request also sustains our tremendous progress in 
bringing our disability claims backlog under control. By the 
end of last fiscal year, we reduced our inventory of rating-
related claims, claims for disability compensation and pension 
from 253,000 down from a high of 432,000, notwithstanding the 
fact that we get about 60,000 new claims in each and every 
month in the VA, a very high number.



    The percentage of veterans waiting more than 6 months for a 
decision on their claims has dropped from 48 percent to 18 
percent. There was a court decision in September of 2003 which 
prevented us from acting on many claims. But Congress corrected 
that problem for us and we are back on track in deciding those 
claims. And that number in terms of timeliness and the size 
should be coming down.
    It is interesting to note that the number of veterans 
receiving service-connected disability compensation is 
projected to increase to 2.6 million from 2.3 million in 2001, 
reflecting in part implementation of decisions to automatically 
service connect veterans with diseases associated with exposure 
to herbicides like Agent Orange, and also our focus on reducing 
this enormous backlog, getting decisions made, we have 
increased the number of veterans who are in receipt of 
disability compensation.
    VA is not only health care and benefits, as you know, we 
also honor our veterans in their final rest. And the 
President's budget request will continue the greatest expansion 
of our national cemetery system since the Civil War. We plan to 
open 12 new national cemeteries by 2009. We have opened one in 
Oklahoma this past year. We will open up five more in the 
coming year, and then an additional six national cemeteries by 
the year 2009. That will increase the number of grave sites in 
the VA by 85 percent, almost a doubling of the capacity of our 
national cemetery system, and that is important because, we 
have so many World War II and Korean veterans passing from us, 
almost 1,800 a day.
    So these new national cemeteries, along with the State 
cemetery system program, are very, very important for our aging 
veteran population.
    I would just like to comment before closing on our 
financial management initiatives, because I know they are so 
important to this committee. We are working very, very 
diligently to increase our medical care collections. And we are 
hopeful to achieve $2.4 billion in 2005. Congress allows us to 
keep medical care cost collections from insurance companies and 
copayments at the VA where they are collected.



    This, is a 38-percent increase above 2004, and more than 
three times 2001. We have also strengthened our debt management 
efforts, collecting $381 million in 2003 or about $63 for every 
dollar we spend on debt collection activities.
    We have completed 43 of the 65 recommendations of the 
procurement reform task force I established, with savings of 
about $250 million by the end of this fiscal year. This figure 
will increase after we complete all 65 recommendations.
    National purchasing reforms generated savings of $1.1 
billion in the purchase of pharmaceuticals alone between 2001 
and 2003, $78 million in the purchase of medical supplies and 
equipment, and $108 million through a national information 
technology contract.
    I am very proud of the improvements in the work of the men 
and women of the VA. I thank the members of this committee, the 
President, all of you for your support, as we try to build on 
our record of success and meet the debt that we owe to the men 
and women who serve our nation in uniform.
    Thank you, Mr. Chairman, Mr. Spratt, and members of the 
committee.
    Chairman Nussle. Thank you, Mr. Secretary.
    [The prepared statement of Secretary Principi follows:]

    Statement of Hon. Anthony J. Principi, Secretary, Department of 
                            Veterans Affairs

    Mr. Chairman and members of the committee, good afternoon. I am 
pleased to be here today to present the President's 2005 budget 
proposal for the Department of Veterans Affairs (VA). The focal point 
of this budget is our firm commitment to continue to bring balance back 
to our health care system by focusing on veterans in the highest 
statutory priority groups.
    The President's 2005 budget request totals $67.7 billion (an 
increase of $5.6 billion in budget authority)--$35.6 billion for 
entitlement programs and $32.1 billion for discretionary programs. Our 
request for discretionary funds represents an increase of $1.2 billion, 
or 3.8 percent, over the enacted level for 2004, and supports my three 
highest priorities:
     provide timely, high-quality health care to our core 
constituency-veterans with service-connected disabilities, those with 
lower incomes, and veterans with special health care needs;
     improve the timeliness and accuracy of claims processing;
     ensure the burial needs of veterans and their eligible 
family members are met, and maintain veterans' cemeteries as national 
shrines.
    The growth in discretionary resources will support a broad array of 
benefits and services that VA provides to our Nation's veterans. 
Including medical care collections, funding for the medical care 
program rises by $1.17 billion over the 2004 enacted level. As a 
principal component of our medical care budget, we are requesting $524 
million to begin implementing recommendations stemming from studies 
associated with the Capital Asset Realignment for Enhanced Services 
(CARES) program.
    We are presenting our budget request using a slightly modified new 
budget account structure that we proposed for the first time last year. 
This new structure more clearly presents the full funding for each of 
the benefits and services we provide veterans. This will allow the 
Department and our stakeholders to more effectively evaluate the 
program results we achieve with the total resources associated with 
each program. I am committed to providing Congress with the information 
and tools it needs to be comfortable with enacting the change.

                              MEDICAL CARE

    The President's 2005 request includes total budgetary resources of 
$29.5 billion (including $2.4 billion in collections) for the medical 
care program, an increase of 4.1 percent over the enacted level for 
2004, and more than 40 percent above the 2001 level. With these 
resources, VA will be able to provide timely, high-quality health care 
to nearly 5.2 million unique patients, a total 21 percent higher than 
the number of patients we treated in 2001.
    I have taken several steps during the last year to refocus VA's 
health care system on our highest priority veterans, particularly 
service-connected disabled veterans who are the very reason this 
Department exists. For example, we recently issued a directive that 
ensures veterans seeking care for service-connected medical problems 
will receive priority access to our health care system. This new 
directive provides that all veterans requiring care for a service-
connected disability, regardless of the extent of the injury or 
illness, must be scheduled for a primary care evaluation within 30 days 
of their request for care. If a VA facility is unable to schedule an 
appointment within 30 days, it must arrange for care at another VA 
facility, at a contract facility, or through a sharing agreement.
    By highlighting our emphasis on our core constituency (priority 
levels 1-6), we will increase our focus on the Congressionally 
identified highest priority veterans. The number of patients within our 
core service population that we project will come to VA for health care 
in 2005 will be nearly 3.7 million, or 12 percent higher than in 2003. 
During 2005, 71 percent of those using VA's health care system will be 
veterans with service-connected conditions, those with lower incomes, 
and veterans with special health care needs. The comparable share in 
2003 was 66 percent. In addition, we devote 88 percent of our health 
care funding to meet the needs of these veterans.
    While part of our strategy for ensuring timely, high-quality care 
for our highest priority veterans involves a request for additional 
resources, an equally important component of this approach includes a 
series of proposed regulatory and legislative changes that would 
require lower priority veterans to assume a small share of the cost of 
their health care. These legislative proposals are consistent with 
recent Medicare reform that addresses the difference in the ability to 
pay for health care. We are submitting these proposals for Congress' 
reconsideration because we strongly believe they represent the best 
opportunity for VA to secure the necessary budgetary resources to serve 
our core population. Among the most significant legislative changes 
presented in this budget are to:
     assess an annual use fee of $250 for priority 7 and 8 
veterans; and
     increase copayments for pharmacy benefits for priority 7 
and 8 veterans from $7 to $15.
    We will work with Congress to enact our legislative proposal to 
eliminate the pharmacy copayment for priority 2-5 veterans, who have 
fewer means by which to pay for these costs, by raising the income 
threshold from the pension level of $9,894 to the aid and attendance 
level of $16,509 (for a single veteran). This would allow about 394,000 
veterans within our core constituency to receive outpatient medications 
without having to make a copayment.
    The 2005 budget includes several other legislative and regulatory 
proposals that are designed to expand health care benefits for the 
Nation's veterans. Among the most significant of these is a provision 
that would give the Department the authority to pay for insured veteran 
patients' out-of-pocket expenses for urgent care services if emergency/
urgent care is obtained outside of the VA health care system. This 
proposal would ensure that veterans with life-threatening illnesses can 
seek and receive care at the closest possible medical facility. In 
addition, we are proposing to eliminate the copayment requirement for 
all hospice care provided in a VA setting and all copayments assessed 
to former prisoners of war. Currently, veterans are charged a copayment 
if hospice care cannot be provided in a VA nursing home bed either 
because of clinical complexity or lack of availability of nursing home 
beds.
    The President's 2005 budget for VA's medical care program also 
continues our effort to expand access to long-term care for veterans. 
This budget includes a legislative proposal to focus long-term care on 
noninstitutional settings by expanding the 1998 average daily census 
nursing home capacity requirement to include the following categories 
of extended care services-nursing homes, community residential care 
programs, residential rehabilitation treatment programs, home care 
programs, noninstitutional extended care services under VA's 
jurisdiction, and long-term care beds for which the Department pays a 
per diem to States for services in State homes. As part of this effort, 
we aim to significantly enhance access to noninstitutional care 
programs that allow veterans to live and be cared for in the comfort 
and familiar setting of their home surrounded by their family.
    We are continuing our work with the Department of Health and Human 
Services to implement the plan by which priority 8 veterans aged 65 and 
older, who cannot enroll in VA's health care system, can gain access to 
the new ``VA Advantage'' program. This would allow these veterans to 
use their Medicare benefits to obtain care from VA. In return, we would 
receive payments from a private health plan contracting with Medicare 
to cover the cost of the health care we provide.
    In return for the resources we are requesting for the medical care 
program in 2005, we will continue to aggressively pursue my priority of 
providing timely and accessible health care that sets a national 
standard of excellence for the health care industry. During the last 3 
years, we have significantly enhanced veterans' access to health care. 
We have opened 194 new community clinics, bringing the total to 676. 
Nearly 9 out of every 10 veterans now live within 30 minutes of a VA 
medical facility. This expanded level of access has resulted in an 
increase in the number of outpatient visits from 44 million in 2001, to 
51 million in 2003, as well as a 26 percent rate of growth in the 
annual number of prescriptions filled to a total of 108 million last 
year. To further highlight the Department's emphasis on the delivery of 
timely, accessible health care, our standard of care for primary care 
is that 93 percent of appointments will be scheduled within 30 days of 
the desired date and 99 percent of all appointments will be scheduled 
within 90 days. For appointments with specialists, the comparable 
performance goal is 90 percent within 30 days of the desired date.
    As I mentioned earlier Mr. Chairman, a key component of our overall 
access goals is the assurance that veterans seeking care for service-
connected medical problems will receive priority access to health care. 
In addition, we have dramatically reduced the number of veterans on the 
waiting list for primary care. We will eliminate the 6-month waiting 
list no later than April 2004.
    VA's health care system continues to be characterized by a 
coordinated continuum of care and achievement of performance outcomes 
that improve services to veterans. In fact, VA has exceeded the 
performance of private sector and Medicare providers for all 18 key 
health care indicators, from diabetes care to cancer screening and 
immunizations. The Institute of Medicine has recognized the 
Department's integrated health care system, including our framework for 
using performance measures to improve quality, as one of the best in 
the nation. Additionally, VA's quality score based on a survey 
conducted by the Joint Commission on Accreditation of Healthcare 
Organizations exceeds the national average quality score (93 versus 
91).
    We will continue to use clinical practice guidelines to help ensure 
high-quality health care, as they are directly linked with improved 
health outcomes. We expect to show improvements in both of our 
principal measures of health care quality. The clinical practice 
guidelines index will rise to 71 percent in 2005, while the prevention 
index will increase to 84 percent.
    The 2005 budget includes additional management savings of $340 
million that will partially offset the need for additional funds to 
handle the increasing utilization of health care resources, 
particularly among our highest priority veterans who require much more 
extensive care, on average, than lower priority veterans. We will 
achieve these management savings through improved standardization 
policies in the procurement of supplies, pharmaceuticals, and other 
capital purchases, as well as in other operational efficiencies such as 
consolidations.
    As you may know Mr. Chairman, one of the President's management 
initiatives calls for VA and the Department of Defense (DOD) to enhance 
the coordination of the delivery of benefits and service to veterans. 
To address this Presidential initiative, our two Departments 
established a high-level Joint Executive Council to develop and 
implement significant collaborative efforts. We are focusing on three 
major systemwide issues: (1) facilitating electronic sharing of 
enrollment and eligibility information for services and benefits; (2) 
establishing an electronic patient health record system that will allow 
rapid exchange of patient information between the two organizations by 
the end of 2005; and (3) increasing the number of shared medical care 
facilities and staff. The sharing of DOD enrollment and eligibility 
data will reduce the burden on veterans to provide duplicative 
information when making the transition to VA for care or benefits. 
Shared medical information is extremely important to ensure that 
veterans receive safe and proper care. VA and DOD are working together 
to share facilities and staff in order to provide needed services to 
all patients in the most efficient and effective manner.

        CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

    The 2005 budget includes $524 million of capital funding to move 
forward with the Capital Asset Realignment for Enhanced Services 
(CARES) initiative, a figure more than double the amount requested for 
CARES for 2004. This is a multi-year program to update VA's 
infrastructure to meet the needs of veterans in the 21st century and to 
keep our Department on the cutting edge of medicine. CARES will assess 
veterans' health care needs across the country, identify delivery 
options to meet those needs in the future, and guide the realignment 
and allocation of capital assets so that we can optimize health care 
delivery in terms of both quality and access. The resources we are 
requesting for this program will be used to implement the various 
recommendations within the national CARES plan by funding advance 
planning, design development, and construction costs for capital 
initiatives.
    Mr. Chairman, the independent commission that is reviewing our 
draft CARES plan will be delivering their report later this afternoon. 
The commission had originally intended to complete their work by the 
end of November, but due to the intense interest in this project and 
the overwhelming volume of information they are faced with examining, 
their report has been delayed a few months. I look forward to reviewing 
the commission's analysis and recommendations. We will thoroughly 
evaluate their report and seriously consider their recommendations 
before making our final realignment decisions and preparing for the 
next phase of the CARES program.

                    MEDICAL AND PROSTHETIC RESEARCH

    The President's 2005 budget includes total resources of $1.7 
billion to support VA's medical and prosthetic research program. This 
request is comprised of $770 million in appropriated funds, $670 
million in funding from other Federal agencies such as DOD and the 
National Institutes of Health, as well as $230 million from 
universities and other private institutions. Our budget includes an 
initiative to assess pharmaceutical companies for the indirect 
administrative costs associated with the clinical drug trials we 
conduct for these organizations.
    This $1.7 billion will support nearly 2,900 high-priority research 
projects to expand knowledge in areas critical to veterans' health care 
needs-Gulf War illnesses, aging, diabetes, heart disease, mental 
illness, Parkinson's disease, spinal cord injury, prostate cancer, 
depression, environmental hazards, women's health care concerns, and 
rehabilitation programs.

                           VETERANS' BENEFITS

    The Department's 2005 budget request includes $36 billion for the 
entitlement costs associated with all benefits administered by the 
Veterans Benefits Administration (VBA). Included in this total, is an 
additional $2.740 billion for disability compensation payments to 
veterans and their survivors for disabilities or diseases incurred or 
aggravated while on active duty. Recipients of these compensation 
benefits will have increased from 2.3 million in 2001 to over 2.6 
million in 2005. The budget includes another $1.19 billion for the 
management of these programs--disability compensation; pensions; 
education; vocational rehabilitation and employment; housing; and life 
insurance. This is an increase of $26 million, or 2.2 percent, over the 
enacted level for 2004.
    We have made excellent progress in addressing the Presidential 
priority of improving the timeliness and accuracy of claims processing. 
Not only have we hired and trained more than 1,800 new employees in the 
last 3 years to directly address our claims processing backlog, but the 
productivity of our staff has increased dramatically as well. Between 
2001 and 2003, the average number of claims we completed per month grew 
by 70 percent, from 40,000 to 68,000. Last year the inventory of 
rating-related compensation and pension claims peaked at 432,000. By 
the end of 2003, we had reduced this backlog of pending claims to just 
over 250,000, a drop of over 40 percent. We have experienced an 
increase in the backlog during the last few months, due in large part 
to the impact of the court decision (PVA v. Secretary of Veterans 
Affairs) that interpreted the Veterans Claims Assistance Act of 2000 as 
requiring VA to wait a full year before denying a claim. However, this 
rise in the number of pending claims will be temporary, and we expect 
the backlog to be back down to about the 250,000 level by the end of 
2004. We thank the committee for the legislation that eliminated the 
mandatory 1-year waiting period.
    In 2002 it took an average of 223 days to process a claim. Today, 
it takes about 150 days. We are on track to reach an average processing 
time of 100 days by the end of 2004 and expect to maintain this 
timeliness standard in 2005. One of the main reasons we will be able to 
meet and then sustain this improved timeliness level is that we have 
reduced the proportion of claims pending over 6 months from 48 percent 
to just 19 percent during the last 3 years.
    To assist in achieving this ambitious goal, VA established benefits 
delivery at discharge programs at 136 military installations around the 
country. This initiative makes it more convenient for separating 
servicemembers to apply for and receive the benefits they have earned, 
and helps ensure claims are processed more rapidly. Also, the 
Department has assigned VA rating specialists and physicians to 
military bases where servicemembers can have their claims processed 
before they leave active duty military service.
    We expect to see an increase in claims resulting from the return of 
our brave servicemen and women who fought to protect the principles of 
freedom in Operation Enduring Freedom and Operation Iraqi Freedom. We 
propose to use $72 million of the funds available from the war 
supplemental during 2004 to address the challenges resulting from an 
increasing claims processing workload in order to assist us in reaching 
our timeliness goal of 100 days by the end of 2004. We propose to use 
the remaining $28 million in 2005 to help sustain this timeliness 
standard.
    At the same time that we are improving timeliness, we will be 
increasing the accuracy of our claims processing. The 2005 performance 
goal for the national accuracy rate for compensation claims is 88 
percent, well above the 2001 accuracy level of 80 percent.
    In support of the education program, the budget proposes $5.2 
million for continuing the development of the Education Expert System. 
These resources will be used to expand upon an existing prototype 
expert system and will enable us to automate a greater portion of the 
education claims process and expand enrollment certification. This 
initiative will contribute toward achievement of our 2005 performance 
goals for the average time it takes to process claims for original and 
supplemental education benefits of 25 days and 13 days, respectively.
    In order to make the delivery of VA benefits and services more 
convenient for veterans and more efficient for the Department, we are 
requesting $1.5 million for the collocation and relocation of some 
regional offices. Some of this will involve housing regional office 
operations in existing VA medical facilities. In addition, we are 
examining the possibility of collocations using enhanced-use authority, 
which entails an agreement with a private developer to construct a 
facility on Department-owned grounds and then leasing all or part of it 
back to VA. At the end of these long-term lease agreements, the land 
and all improvements revert to VA ownership.
    In recognition of the fact that the home loan program is primarily 
a benefit that assists veterans in making the transition from active 
duty life to veteran status, the 2005 budget includes a legislative 
proposal to phase in an initiative to limit eligibility for this 
program to one-time use. Under our proposal, one-time use of the loan 
program would apply to any person who becomes a veteran after the date 
this proposed legislation becomes law. Those who are already veterans, 
or who will achieve veteran status prior to enactment of the proposed 
law, would retain their eligibility to use the home loan benefit as 
many times as they need to for a period of 5 years after the law takes 
effect. Once that 5-year period has passed, they would no longer be 
able to use this benefit more than once. This legislative proposal does 
not change eligibility for active duty personnel who would retain the 
ability to use this benefit as many times as they need it. VA home 
loans are important for first-time buyers because they require no down 
payment--making them riskier than other loans. After the first use, 
home equity can be used to obtain more favorable terms from 
conventional loans, or through the Federal Housing Administration. 
Therefore, limiting this benefit to its original intent of one-time use 
after leaving the military will lower loan volume and risk, save money 
over the long-term, and coordinate Federal programs.

                                 BURIAL

    The President's 2005 budget includes $455 million for the burial 
program, of which $181 million is for mandatory funding for VA burial 
benefits and payments and $274 million is for discretionary funding, 
including operating and capital costs for the National Cemetery 
Administration and the State Cemetery Grant program. The increase in 
discretionary funding is $9 million, or 3.4 percent, over the enacted 
level for 2004, and includes operating funds for the five new 
cemeteries opening in 2005.
    This budget request includes $926 thousand to complete the 
activation of new national cemeteries in the areas of Detroit, MI and 
Sacramento, CA. These are the last two of the six locations identified 
in the May 2000 report to Congress as the areas most in need of a 
national cemetery. The other four cemeteries will serve veterans in the 
areas of Atlanta, GA, south Florida, Pittsburgh, PA, and Fort Sill, OK.
    With the opening of new national cemeteries and State veterans 
cemeteries, the percentage of veterans served by a burial option within 
75 miles of their residence will rise to 83 percent in 2005. The 
comparable share was less than 73 percent in 2001.
    The $81 million in construction funding for the burial program in 
2005 includes resources for phase 1 development of the Sacramento 
National Cemetery (CA) as well as expansion and improvements at the 
Florida National Cemetery (Bushnell, FL) and Rock Island National 
Cemetery (IL). The request includes advanced planning funds for site 
selection and preliminary activities for six new national cemeteries to 
serve veterans in the following areas: Bakersfield, CA; Birmingham, AL; 
Columbia/Greenville, SC; Jacksonville, FL; Sarasota County, FL; and 
southeastern Pennsylvania. Completion of these new cemeteries will 
represent an 85 percent expansion of the number of gravesites available 
in the national cemetery system since 2001, almost doubling the number 
of gravesites during this time period. In addition, the budget includes 
$32 million for the State Cemetery Grant program.
    In return for the resources we are requesting for the burial 
program, we expect to achieve extremely high levels of performance in 
2005 and to continue our noble work to maintain the appearance of 
national cemeteries as shrines dedicated to honoring the service and 
sacrifice of veterans. Our performance goal for the percent of survey 
respondents who rate the quality of service provided by the national 
cemeteries as excellent is 96 percent, and our goal for the percent of 
survey respondents who rate national cemetery appearance as excellent 
is 98 percent. In addition, we will continue to place emphasis on the 
timeliness of marking graves. Our performance goal for the percent of 
graves in national cemeteries marked within 60 days of interment is 82 
percent in 2005, a figure dramatically above the 2002 performance level 
of 49 percent.

                         FINANCIAL STEWARDSHIP

    We have taken numerous steps during the last few years to improve 
the efficiency and effectiveness of our business practices in order to 
help ensure that we fulfill our responsibility to act as sound stewards 
of the funds with which we are entrusted. Financial management 
initiatives in areas such as medical care collections, debt management, 
and procurement reform will continue to increase the resources 
available for the Department to use in providing services and benefits 
to veterans. Our sound stewardship of financial resources is 
demonstrated by the fact that VA has received a clean audit opinion for 
the last 5 years.
    Our projection of medical care collections for 2005 is $2.4 
billion. This total is 38 percent above our estimated collections for 
2004 and is more than three times the collections level from 2001. 
Approximately $407 million, or 61 percent, of the increase above 2004 
is possible as a result of the proposed medical care policy 
initiatives. In addition, the Department continues to implement the 
series of aggressive steps identified in our revenue cycle improvement 
plan in order to maximize the health care resources available for the 
medical care program. We are establishing industry-based performance 
and operational metrics, developing technological enhancements, and 
integrating industry-proven business approaches, including the 
establishment of centralized revenue operation centers. For example, 
during the last year we have lowered the share of reimbursable claims 
receivable greater than 90 days old from 84 percent to 39 percent, and 
we have decreased the average time to produce a bill from 117 days to 
49 days.
    The Department has been very successful in strengthening our debt 
management efforts. At the close of 2003, VA had referred 98 percent 
($221.3 million) of the total delinquent debt eligible for the Treasury 
Offset Program and 96 percent ($152.2 million) of the total delinquent 
debt eligible for Treasury's cross-servicing program. These proportions 
are dramatically higher than the comparable shares (67 percent and 17 
percent, respectively) in 2000. Our Debt Management Center (DMC) 
collected $381.7 million in 2003, or about $63 for every dollar spent 
on debt collection activities.
    We continue to make excellent progress in implementing the 
recommendations of our Procurement Reform task force, as 43 of the 65 
recommendations have been completed. By the end of 2004, we expect to 
implement all of the remaining recommendations. These procurement 
reforms will optimize the performance of VA's acquisition system and 
processes by improving efficiency and accountability. We expect to 
realize savings of about $250 million by the end of 2004 as a result of 
these improvement initiatives. This figure will rise after we have 
completed all 65 recommendations.
    As a result of a variety of improved management and business 
practices to take full advantage of national purchasing opportunities, 
VA has realized savings of $1.1 billion in the purchase of 
pharmaceuticals between 2001 and 2003, $78 million in the purchase of 
medical equipment, medical and surgical supplies, and prosthetic 
equipment, and $108 million through a national information technology 
contract.
    In December 2001, Public Law 107-103 was enacted to prohibit 
veterans who are fugitive felons, or their dependents, from receiving 
certain veterans' benefits. Since that time, the Department has 
conducted computerized matches between fugitive felon files of law 
enforcement organizations and VA benefit files. When appropriate, 
criminal investigators from VA's Office of Inspector General assist law 
enforcement agencies in apprehending fugitives. In May 2003, 986 
fugitive felon cases were mailed to VA regional offices. We have taken 
action on 420 of these cases, the total value of which is $6.6 million.

                     OTHER MANAGEMENT IMPROVEMENTS

    Mr. Chairman, we have made excellent progress during the last year 
in implementing the President's Management Agenda. Our progress in the 
financial, electronic government, budget and performance, and DOD/VA 
coordination areas is currently rated ``green.'' Our human capital 
score is ``yellow'' due only to some very short-term delays. However, 
VA's competitive sourcing rating is ``red'' because existing 
legislation precludes us from using necessary resources to conduct cost 
comparisons of competing jobs such as laundry, food and sanitation 
service. The administration will work with Congress to develop 
legislation to advance this effort that would free up additional 
resources to be used to provide direct medical services to veterans. We 
will continue to take the steps necessary to achieve the ultimate goals 
the President established for each of the focus areas.
    During 2005 VA will continue developing our enterprise architecture 
that will ensure that all new information technology (IT) projects are 
aligned with the President's e-government initiatives as well as the 
Department's strategic objectives. The enterprise architecture will 
help eliminate redundant systems throughout VA, improve IT 
accountability and cost containment, leverage secure and 
technologically sound solutions that have been implemented, and ensure 
that our IT assets are built upon widely accepted industry standards 
and best practices in order to improve delivery of benefits and 
services to veterans. One of our primary focus areas in IT will be 
cyber security. We will concentrate on securing the enterprise 
architecture and providing continuous protection to all VA systems and 
networks. This will require purchases of both hardware and software to 
address existing vulnerabilities.
    The Department has developed a comprehensive human capital 
management plan and has started implementing some of the strategies 
outlined in this plan. In addition, we are implementing a redesigned 
performance appraisal system to better ensure that all employees' 
performance plans are linked with VA's mission, goals, and objectives.

                                CLOSING

    Mr. Chairman, VA has achieved numerous successes during the last 3 
years that have significantly improved service to our country's 
veterans. We have enhanced veterans' access to our health care services 
that set the national standard with regard to quality; improved the 
timeliness of health care delivery; expanded programs for veterans with 
special health care needs; dramatically lowered the time it takes to 
process veterans' claims for benefits; and expanded access to our 
national cemetery system. The President's 2005 budget will provide VA 
with the resources necessary to continue to improve our delivery of 
benefits and services, particularly for veterans with service-connected 
conditions, those with lower incomes, and veterans with special health 
care needs.
    That concludes my formal remarks. I would be pleased to answer any 
questions.

    Chairman Nussle. Let me begin by asking you to speak to the 
veterans that are here today, because on the second panel, as 
you might imagine and appropriately so, four very honored 
veterans will come forward and tell us as a committee that 
there isn't enough. They would like to have some more. They 
would like to see more resources in the budget. They would like 
to see more opportunity for changes and increases in a number 
of areas.
    And I would like you to, through me, and through this 
question, speak to them and answer that question of either why 
we can't, or how we are going to begin to address those 
requests over time.
    Secretary Principi. Certainly, Mr. Chairman. I work--I try 
to work very, very closely with the veterans service 
organizations----
    Chairman Nussle. I guess I shouldn't have assumed that 
there was a disagreement. Maybe there isn't. But I also suspect 
that they might want just a little bit more.
    Secretary Principi. Well, they do. I appreciate the role 
they play as advocates for our veterans. It is quite 
understandable that they would come before this committee and 
all committees and request a higher budget. I think they are 
very well intentioned. I believe that we have done 
extraordinarily well. And, again, I thank not only the 
President, I thank them for their advocacy, and I thank the 
Members of Congress on both sides of the aisle for everything 
you have done for my agency and the men and women we serve.
    These have been extraordinary increases. This year, 
although we received our appropriation late, we all know that, 
I understand how this works up here, I spent many years of my 
life up in Congress as a staffer. But we received almost a $3-
billion increase this year. And that has to be historic. I 
don't think it has ever been equal that. And that will help us 
lay the foundation of meeting the demands that are being placed 
on us.
    I am confident that with the budget that you appropriated 
to my agency in 2004, coupled with this budget, and the 
efficiencies and the work we are doing that we will provide 
care to every veteran in category 1 to 7 who comes to us for 
care. And that is the commitment I make.
    You know, and I would also say that veterans are Americans, 
first and foremost. We have sacrificed, we have gone to war. 
And we have asked for very little in return. And I think what 
the Congress, the President has given us over the years, and 
throughout history has demonstrated our commitment to them.
    But we are also, as Americans, concerned about the economy, 
concerned about education for our children, concerned about 
terrorism, and protecting our families. And there are a lot of 
demands and priorities for our country. And what we are trying 
to do is meet them all in a wise manner. So I would say to 
them, we can provide good quality care, timely care to veterans 
with the budget that we have proposed.
    Chairman Nussle. But in fairness to their requests, and as 
you said this is not your father's VA, this was not--in other 
words, there has been a time in our history where veterans, as 
we saw in some of the charts that were put up, didn't receive 
some of the increases that we saw over the last couple of 
years, let alone the increases that you are requesting this 
year.
    What has changed? What in your opinion has changed to 
make--what are some of the biggest changes you have seen that 
makes this not your father's VA, as you pointed out.
    Secretary Principi. Well, I think the VA, over the past 10 
years, has transitioned from a hospital centric health care 
system to a patient focused health care system. We have seen 
the VA migrate to community-based outpatient clinics, bringing 
health care closer to the patient.
    We have placed tremendous effort, not just myself, but my 
predecessor, and the Under Secretaries of Health before me, 
have placed a high priority on improving quality of care in the 
VA.
    We have established a computerized patient record which is 
the envy of the health care world. Our patient safety program 
was honored by Harvard University and the Ford Foundation and 
the pharmacy benefit management program that has been able to 
provide an increasing number of veterans coming to us for 
pharmaceuticals, while maintaining costs at almost a straight 
line level received the Innovation in Government Award.
    There have been so many remarkable changes in the VA, and 
part of it was brought about by the open enrollment that came 
about in 1998. The bill was passed in 1996, but was enacted--
became effective in 1998. And we went from 3 million veterans 
who were eligible for comprehensive care in the VA, 3 million 
were only eligible for the comprehensive care, the service 
disabled, the poorest of the poor, and those in need of 
specialized services to 25 million equally eligible for care.
    That, coupled with the opening of the clinics, the 
improvements in quality and this great pharmacy benefit 
management program has caused this tremendous growth in 
workload. And those are some of the dramatic changes that have 
taken place.
    Chairman Nussle. Mr. Secretary, in a VA hospital in Iowa, I 
have been told a story, it is a parochial issue, but I did want 
to bring it up and just ask your comment on this more than 
anything else, how to address it, for that matter if you have 
seen it in other areas.
    That is, we have had a difficult time recruiting a 
provider, a radiologist. And my understanding is that as a 
result of that, some of the services had to be outsourced to a 
private institution, and as a result of that the costs have 
been, as I understand it, three times higher in order to 
accomplish it.
    I am not sure how I should even phrase the question. Is 
this being discussed? Do you see this in other areas? Is there 
a way to address this from your standpoint.
    Secretary Principi. Certainly. Recruiting physicians, 
nurses into the VA system is difficult. And certainly more 
difficult in certain rural areas. We have the same challenges 
as private sector health care in rural areas, recruiting 
specialists, radiologists, cardiologists, urologists. So we are 
no different than the private sector.
    I think a couple of things to bear in mind. First, we are 
affiliated with just about every medical school in this Nation, 
maybe all of the medical schools, thereby that gives us a 
competitive edge, we are able to work closely hand in glove 
with the medical schools, with teaching hospitals. So we are 
able to attract some of the finest physicians to the VA.
    And, secondly, we have a robust research program which also 
serves as an incentive to bring high quality physicians to our 
Department. And, third, we have a physician pay reform bill 
that we sent up to Congress last year. It has not been acted 
upon. I believe that if Congress will enact physician pay 
reform, we will be able to compete even more effectively 
against the private sector and bring some of those physicians 
to the VA.
    Chairman Nussle. Thank you. Mr. Spratt.
    Mr. Spratt. Thank you, Mr. Chairman. Mr. Secretary, let me 
show you a couple of charts again just to depict what our 
concern is. We are not trying to harangue you, I understand the 
situation you find yourself in.
    But, when we look at those bar graphs, it gives us pause. 
First of all, chart No. 2. This shows in blue bar graphs the 
baseline budget if you adjust it every year for just inflation. 
It is the CBO baseline. As you see it climbs from a little over 
$29 billion to a little over $33 billion over the period 2004-
09.
    Each year, however, beside it is a red bar which shows what 
your actual funding level is. And the discrepancy between 
current services and actual funding gets worse and worse as you 
go out in time. It is $257 million this year. That is not an 
insignificant sum. But, the real concern is in the outyears. 
Because, if this effort to reduce the deficit continues intense 
in the outyears and it is concentrated on discretionary 
spending, this may be the fiscal future that you face.
    By the year 2009, the cumulative shortfall between current 
services and actual funding is $13.5 billion, a huge sum of 
money for your budget.
    Now, let me show you on chart No. 5, please, the way we 
look at your budget in very simple terms, arrayed against what 
would be ideal or optimum. First of all, the first bar is 2004 
enacted. The next bar is 2005. There is an increase there. But 
it is still, as we have said $257 million beyond current 
services.
    The next year, it is our understanding from your previous 
testimony, that you requested for 2005, $1.2 billion more than 
OMB was able to give you. So we have simply put in the next 
bar, the next to last bar, the VA request to OMB at $1.2 
billion above the actual requested level.
    And then finally the last bar is the independent budget 
which is a depiction of what is needed.
    One thing that concerns us, if we can look back at chart 
No. 2, is that we are seeing in your budget a practice that 
is--appears to be true throughout the discretionary budget. In 
2005 there is an increase. In your case, it is less than 
current services, but it is a nominal increase, $500-and-
something million, I believe.
    However, in years 2006, 2007, 2008 and 2009, the 
programmatic numbers are not in the budget request but they are 
in a computer run. And when you go back to that computer run, 
you lose money every year.
    The situation gets worse and worse and worse. And though, 
so it looks like you are doing OK, just about treading water 
this year, $257 million out of $30 billion for current services 
sufficiency. But, in the outyears, you don't sustain that 
level, you get bigger and bigger hits every year, if we can 
take these computer runs as the likely path that the 
appropriations are likely to follow.
    Is that a concern of yours? Have you expressed this concern 
to the Office of Management and Budget?
    Secretary Principi. I always express my concerns to the 
Office of Management and Budget. But, Mr. Spratt, a couple of 
points. The chart you show assumes no improvements in cost 
effectiveness. You know, we have gone from keeping veterans in 
inpatient beds to moving them into outpatient centers where 
they can get day surgery and go home that day.
    The fact is, we are treating more patients than ever 
before. I mean, I am serious when I say, we have treated 
800,000; almost a million more veterans have been provided 
health care since 2001.
    So we must be doing something right, coupled with the 
increases in the budget that the President requested and that 
you have also added to. I really do believe that VA is a much 
more efficient provider of health care today than it was 10, 
20, 30 years ago. And will continue to make the improvements.
    I would also add that we have increased the number--the 
amount of collections from insurance companies, notwithstanding 
the fact that Medicare is off the table to the VA, and the 
majority of our veterans are Medicare eligible. But, the amount 
of money that we have collected from insurance companies for 
nonservice connected disabled veterans, as well as modest 
copayments of $7 per prescription, for a 30-day prescription, I 
think the greatest pharmaceutical benefit in this country has 
allowed us, these are new resources that we can use.
    And I would also point out, that I see your graphs for the 
outyears, but there is nothing to preclude myself or my 
successor to request more money from OMB and the President, and 
the Congress in future years.
    Mr. Spratt. I am simply putting before you OMB's projection 
of what your funding levels are going to be. They are not ours. 
We didn't come up with them ourselves.
    Secretary Principi. Well, if more money is needed to meet 
the demand that is being placed upon us, then that is something 
that we would have to do.
    Mr. Spratt. I guess the question I am asking is, is the 
outyear budget realistic? I am not threatening you with that 
budget, I just look at it and wonder if it can be attained.
    Secretary Principi. You mean 2006, 2007.
    Mr. Spratt. Yes, sir.
    Secretary Principi. It may not be. But I don't know. We may 
have to request more money. We also have a decline in the 
veteran population. It is going to start dropping. The number 
of hospital beds have decreased. We have moved more patients 
into outpatient care. The fact of the matter is, can we meet 
the demand that is being placed upon us for health care? 
Through 2005, my answer to you, Mr. Spratt, is we can.
    Mr. Spratt. Let me ask you about waste, fraud and abuse. 
This committee last year, in reporting the budget resolution on 
the floor and afterwards, sent direction to every committee of 
jurisdiction and told them they wanted them to wring out their 
budgets and come up with realistic proposals of how much 
savings could be affected through rooting out waste, fraud and 
abuse. In the case of the Veterans Affairs Committee, it was 
$3.9 billion.
    Is that a realistic expectation from you over the near 
term? Can you identify $4 billion of waste, fraud and abuse 
that you can wring out of your operations and put back into 
savings.
    Secretary Principi. I think we have just begun to scratch 
the surface. I am very proud of the progress we have made. 
Again, $1.1 billion in savings over 3 years in pharmaceuticals 
alone, just in pharmaceuticals. We are probably, outside of 
Defense, the largest procurer of goods and services in the 
Federal Government. And I am absolutely confident, by 
standardization and national contracting we can drive down the 
cost and yield significant savings in the hundreds of millions 
of dollars.
    Mr. Spratt. I will make you a proposition.
    Secretary Principi. Yes, sir.
    Mr. Spratt. You take your expertise in buying prescription 
drugs at discounted price down to HHS, and half of what you 
save Medicare we will try to appropriate back to you. How is 
that for saving money on waste, fraud and abuse?
    Secretary Principi. Well, I better not go there. I can say, 
Mr. Spratt, that I am really proud of what the VA has done with 
the national formulary use of generic drugs--65 percent of the 
drugs we prescribe are generic. And we--our procurement process 
is using a consolidated mail-out pharmacy program. It is a 
tremendous, tremendous program.
    Mr. Spratt. I bear the testimony of the veterans I 
represent. They think it is a great program. They have got 
their own complaints about it, but nevertheless, it is one of 
the best things that the VA ever did, no question about it.
    Let me ask you about the GI bill, something that has been 
one of the greatest social experiments the United States ever 
undertook. It phased out after Vietnam, came back here and 
Sonny Montgomery was a great champion of it.
    You remember Sonny Montgomery from working here. Of course 
Sonny is still around. But, that is one of his legacies so much 
so that we named it after him.
    When I read the section in the budget for the Veterans 
Administration, I noticed there was a box score which purports 
to evaluate performance of select programs. And in the case of 
the VA, one of the programs selected for evaluation was the 
Montgomery GI bill.
    And the explanation is the program is well-managed, but 
lacks strong outcome goals. I am not sure what that means. Most 
efficient levels of monthly educational assistance to support 
the programs purposes are unknown. It goes on to recommend a 
cost effectiveness study, readjustment of the bonus amount.
    I can't understand all of that verbiage there, Mr. 
Secretary. Is somebody zeroing in on the Montgomery GI bill? 
Are they proposing to reduce benefits or restrict access to it.
    Secretary Principi. Mr. Spratt, I wholeheartedly agree with 
you. Congressman Montgomery is my mentor. And I believe that 
education is the key to the door to a successful life. As you 
indicated, it built a generation of leaders after World War II 
that propelled America to greatness in the 20th century. And I 
believe that the Montgomery GI bill will continue to do the 
same in the 21st century.
    We may want to look at the program. Program evaluations I 
think are good and important. But I think it is the greatest 
program that the VA has really, in helping young men and women 
who serve their country, get back to school and be a success in 
life.
    So I applaud what Congress has done in increasing the 
funding or the, you know--the amount that veterans can use 
under the GI bill, The President's increased proposed increase 
in the past. So it is just a great program.
    Mr. Spratt. Let me explain one thing with respect to what 
the chairman showed us earlier with regard to the Montgomery GI 
bill program. Those of us who were here at the time years ago, 
recall that Sonny was able to get that adopted because in the 
first 5 to 10 years, it made money for the Federal Government. 
The GIs who had to put aside their $1,800 to qualify for the 
program were actually putting more down than the beneficiaries 
were taking out for some substantial period of time.
    So Sonny was pushing this on the services, couldn't get the 
services to support it. And then he came up with this budgetary 
angle that made it virtually a noncost item, a gainer for the 
budget. And it was the method by which we were able to get it 
passed in the Armed Services Committee.
    Namely it didn't add to the deficit. These fellows sitting 
behind you recall that. It was a coup d' grace. It was a real 
coup for the Montgomery bill. It was the way that we eventually 
got it passed.
    But, the consequence of that is that the costs in the near 
term were not substantial, but in the long term, they will be 
substantial, as more and more veterans begin to draw down their 
benefits. I think we can expect it to increase.
    And one way it is a healthy indication because it means 
that these GIs are taking advantage of the program and going 
and getting their educations.
    Secretary Principi. We have, I believe, almost 400,000 
active duty service members and veterans in school under the 
Montgomery GI bill. It is interesting that in 1995, the amount 
was $440; today it is over $1,000. And the participation rate 
has gone up to 56 percent, because for a long time, the 
participation rate in the GI bill was less than 50 percent. So 
we are making progress getting more and money, men and woman 
coming out of the military to avail themselves of this 
wonderful, wonderful benefit.
    Mr. Spratt. Thank you very much.
    Chairman Nussle. Mr. Gutknecht.
    Mr. Gutknecht. Thank you, Mr. Chairman. Let me, first of 
all, thank the ranking member, Mr. Spratt, for acknowledging 
that there is waste and abuse in some of our programs, and that 
is probably true in every department.
    But, let me also say, Mr. Principi, we appreciate the job 
that you do. And thank you for coming today. And thank you to 
all of the people who work for you. The truth of the matter is, 
most of us have had the opportunity to visit the VA hospitals, 
the VA clinics, and the VA homes.
    And my impression has been that they are world class, and 
that the people in those hospitals are dedicated individuals, 
and really care about our vets. They do a wonderful job.
    So I think on behalf of all members on both sides of the 
aisle, I hope that ultimately we can agree that we in Congress 
have not ignored the vets. And I would even go further to 
assure you that on behalf of all of us we never will.
    Now, obviously if you looked at any chart and extended it 
on almost any issue related to aging populations here in the 
United States, and especially as it involves health care, we 
are reaching a situation on all of those fronts that by simple 
extrapolation, we simply cannot afford to spend 50 percent of 
our gross domestic product on health care, particularly for the 
aging baby boomers. So at some point, we are going to have to 
come to grips with those issues.
    We are going to have to find more efficient ways to deal 
with them. And again, congratulations to you and to the VA for 
what you have done.
    I do want to come back to a parochial concern that Mr. 
Spratt raised, and that is the issue of prescription drugs. 
Because I think for the record I just want to make it clear 
that you do negotiate prices relative to prescription drugs.
    Secretary Principi. That is correct.
    Mr. Gutknecht. Have you ever done an analysis of how much 
those prescription drugs would cost the Federal Government if 
you were to pay full retail price for the name brand drugs 
rather than negotiated prices on the generics.
    Secretary Principi. I don't know if we have that total 
amount. I am told several billion dollars more a year. The 65 
percent that are generic, that we prescribe, account for 8 
percent of our costs. The 35 percent that are brand name 
account for 92 percent of our $3 billion pharmacy bill.
    Mr. Gutknecht. But you negotiate on both the name brand and 
the generics.
    Secretary Principi. Yes.
    Mr. Gutknecht. Now, the other point that you made, I want 
to make very clear, because I think it is a misunderstanding 
among some even at the FDA. You mail those drugs out, don't 
you.
    Secretary Principi. Yes, we do.
    Mr. Gutknecht. Have you ever had a problem where someone 
has intervened and gotten into those packages and counterfeited 
or done something in terms of adultering those drugs.
    Secretary Principi. We have a pretty close to perfect 
record with regard to our mailout, our mailout pharmacy 
program. After the first fill is done at the medical center, 
from that point on everything is mailed through one of our six 
or seven consolidated mailout pharmacies.
    Mr. Gutknecht. So you have confidence in the safety of the 
chain of supply or the chain of command of the drug supplies 
that goes to the vets?
    Secretary Principi. Without question.
    Mr. Gutknecht. Thank you very much; and, again, thank you 
for all you do. I think I speak for everyone in this committee, 
we are going to do our part to make certain that we never 
ignore our vets. Thank you very much.
    Chairman Nussle. Mr. Edwards.
    Mr. Edwards. Secretary Principi, thank you for being here 
and throughout your lifetime for being an advocate for 
veterans. I know your commitment to our vets is deep and 
genuine and real, and I respect you for that.
    You know, I respect the fact also that, once the 
administration approves a VA budget request, it is your legal 
responsibility and obligation to defend that budget and to use 
that money as wisely as you can; and it is your responsibility 
to defend that budget even if you personally had asked OMB for 
additional money. I believe the testimony last week said that 
you had asked OMB for $1.2 billion in additional VA spending 
for programs you felt were important to fund.
    Let me just make a comment about the OMB. These are the 
same green eye-shaders who one year ago recommended--while 
17,000 troops from my district in Fort Hood were literally 
getting on the airplane to fly to Iraq to fight for our country 
and risk their lives, they recommended a $31 million cut for 
those same soldiers' children's education in the Fort Hood area 
school districts. They were wrong in that case, and I am glad 
that Congress on a bipartisan basis through this committee's 
leadership corrected that mistake.
    I think they are wrong to reduce by $1.2 billion the 
request made in good faith in the VA for adequate funding for 
veterans programs this year.
    Let me just mention a comment about percentages. I know it 
sounds like a lot when you raised health care expenditures by 
75 percent since 1995, but I think it is important for us to 
stop and consider that if you just assumed 7 percent inflation 
a year, over 10 years you would have to increase programs 
funding by 100 percent in order to maintain the same level of 
services. We can use statistics one way or another, but the 
fact is that that 75 percent really doesn't mean anything to 
the end service, to the veteran. What counts is whether their 
services are increased or reduced.
    I want to comment, Mr. Secretary, on what the CARES 
Commission is going to do later today, and probably supporting 
most if not all of the recommendations of Under Secretary of 
the VA Roswell who oversees health care programs.
    I just want to say for the record that, with America at 
war, a war against terrorism, a war in Afghanistan, a war in 
Iraq, it sends a terrible message to our troops in the field 
today risking their lives, and to our veterans who did so 
yesterday, that America can afford to build new hospitals in 
Iraq, but we cannot afford to keep open VA hospitals here at 
home.
    Let me add that I am one of those who supports President 
Bush's efforts to spend money in Iraq to bring about democracy 
there. But if we are going to ask our troops to fight that war, 
we ought to be willing as taxpayers to keep open our veterans' 
hospitals and fund them adequately.
    Now I do understand the need for spending money 
efficiently, but there were grave problems in the process used 
by Secretary Roswell and his staff in coming up with these 
recommendations to close seven VA hospitals, four of which 
focus on specialty care for mental health care.
    First of all, in the case of Waco, TX, which is, as you 
know, a neighbor to Fort Hood, there was no cost analysis done 
before he made the recommendation to close it. So he made the 
recommendation to save money before he even knew whether it 
would save money or not. I don't think any business would 
tolerate putting that cart before that horse in such an 
important process and making a recommendation to close 
something as valuable as a VA hospital.
    Secondly, he overturned the original conclusion, after an 
extensive process, by professional VA staff to actually expand 
the use of the Waco VA hospital, make it a national center of 
excellence for mental health care, totally opposite from the 
BRAC hearing I just listened to from Department of Defense 
officials where they had nonpolitical staff spend a year or 
years trying to develop recommendations on which to close. In 
this case, Mr. Roswell gave the VA personnel--the professional 
personnel in Texas, two weeks to answer the question: what 
would you do, given the fact that I want to close the Waco VA 
hospital?
    I think that is not a healthy process, even though I 
respect the need to bring about efficiencies.
    Finally, I think the CARES Commission has said publicly 
that they were very limited in their time and resources to do 
an independent analysis.
    I guess I would just ask you this. Can you consider in your 
final decisions on whether to close veterans' hospitals during 
a time of war the cost of replacing those existing facilities 
to taxpayers, the number of troops that are returning from 
Iraq, how many of those would need health care? And what is the 
status of your mental health care task force that I believe, as 
you have told me, is reviewing the VA system in terms of mental 
health care services?
    Chairman Nussle. The gentleman's time has expired. The 
witness may answer the questions
    Secretary Principi. Yes, Mr. Edwards. I very much 
appreciate your concerns. We have had discussions on this 
subject.
    Let me just say that I really believe that my predecessor 
was right in starting the CARES process and that I was right to 
continue it. Because I believe that we will break our trust 
with veterans in the 21st century if we don't modernize our 
infrastructure. I know it means making hard decisions, but 
there is also very many positive decisions.
    This calls for $4.6 billion in new construction. It calls 
for many more outpatient clinics. It calls for new hospitals. 
We just have to modernize an infrastructure that has been built 
up over the past 150 years, and my task force on mental health 
is--they are due to give me a report any day now. We certainly 
will study that.
    Again, we are not going to reduce beds; we may relocate 
beds in mental health and long-term care. But I think this is a 
very important undertaking, and I am hopeful we can work 
together to address the issues at Waco and other places around 
the country to ensure that we are making the right decisions to 
benefit 21st century veterans with 21st century health care, 
and not the century gone by.
    Chairman Nussle. Mr. Schrock.
    Mr. Schrock. Thank you, Mr. Chairman; and thank you very 
much, Mr. Principi, for being here and everybody that is 
associated with you. You guys do a great job. I know what I am 
talking about. I am not only a veteran, I am a retired veteran. 
So I know it, and I know it well, and I appreciate what you do.
    Let me mention one thing. You know, when we see all these 
charts, no matter who is putting them in, they are all bogus, 
they are not worth the paper or the celluloid they are written 
on. In 2001----
    Chairman Nussle. The gentlemen's time has expired--oh, I am 
sorry. I thought you would at least like my charts.
    Mr. Schrock. With the exception of the chairman's charts.
    Chairman Nussle. The gentleman may continue.
    Mr. Schrock. Thank you very much.
    In 2001, the CBO said we would have a surplus of $5.6 
trillion. That didn't happen. Today they are saying $2.1 
trillion in the hole. That is not--how do we know? How do we 
know what is going to happen tomorrow, let alone next year, 
2008, 2009? We just don't. So that is bogus stuff. And when you 
see those charts, they have no credibility with me.
    You just need to look at what has happened in the 108th 
Congress that has made historic gains for veterans. It is 
absolutely monumental. Nothing has ever happened before like 
it, especially when you talk about the historic breakthroughs 
on concurrent receipt, which sat there dormant for year after 
year after year. More has happened with concurrent receipt this 
year or last year than ever happened before, and I hope every 
veteran in this room understands that, because those are the 
facts.
    Mr. Secretary, the most frequent complaints I get from 
veterans who are my constituents is their frustration with the 
processing of disability claims; and I think we talked about 
that. I wonder if you could speak to what improvements are 
being put into place to address this problem.
    I know when I have problems with the constituents, I take 
care of it. Now I am going to ask the veterans who speak today 
if they have gone to their Congressman or they have gone to 
their Senator or if they are coming here first to say they have 
problems. What they need to do first is go to their 
Congressman, and my guess is the congressional people can fix 
it. I fixed most of them in the district I represent. But I am 
just wondering, is infrastructure in place to make sure some of 
these things are taking care of?
    Secretary Principi. Well, it certainly has been a big, big 
problem with veterans waiting years for decisions on claims. 
Shortly after I came into office we convened a processing 
reform task force to look at this. I established the claims 
processing reform task force to see what changes need to be 
taking place, and we started with the President and the 
Congress giving us more people to decide claims. We hired up 
some 1,300 people. We have trained them. We now have some 
wonderful ratings specialists out there.
    Secondly, we reformed our processing and changed how we do 
this. We created a tiger team in Cleveland to look at the 
oldest claims for our veterans over the age of 70. So we 
literally reengineered our entire claims processing task force.
    I brought in Adm. Ian Cooper, who commanded our nuclear 
power submarine force Atlantic Fleet and he has done a 
marvelous job. His people at every level of the veterans 
benefits administration have pulled together and have 
demonstrated that a large bureaucracy can in fact accomplish 
its mission when they all believe that it is important to do 
so.
    So with new processes, new people, and dynamic leadership 
and performance standards, I think we have really done veterans 
a great service.
    Mr. Schrock. Mr. Secretary, the President's budget request 
includes proposals to concentrate VA's health care resources to 
meet the needs of the high-priority core veterans, those with 
service-connected conditions, those with lower income, and 
those veterans with special health care needs. Are these core 
veterans now waiting behind the non-core veterans for care and 
would non-core veterans continue to receive care if your 
proposals were enacted?
    Secretary Principi. Yes, I was very concerned that disabled 
veterans were waiting in line too long to get the needed care, 
and we put together a regulation that requires all of our 
health care facilities to give veterans with service-connected 
disabilities a priority for care.
    Secondly, we continue to take care of all veterans who are 
currently enrolled, whether they be the poor, the service 
disabled, or those with higher incomes, those in categories 7s 
and 8s. They still receive care on an equal footing.
    We also continue to enroll veterans in categories 1 through 
7.
    So my answer is in the affirmative. We are providing care 
to all veterans who are enrolled.
    Mr. Schrock. Great.
    Thank you, Mr. Chairman.
    Chairman Nussle. Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman; and welcome, Secretary 
Principi.
    Congress has increased the VA budget the last several years 
over the President's request, and I certainly strongly hope 
that we do so again. I believe, given your testimony last week 
to the Veterans Affairs Committee, that you could use $1.2 
billion in additional funds.
    I am mindful, as my colleague, Mr. Edwards has said, that 
it is very important as we consider this budget--which is, of 
course, a reflection of our values--during a time of war, not 
only for the message that it sends but also because these 
veterans are returning from Iraq and they are coming back and 
joining to the need for veterans' services.
    Mr. Secretary, I understand you have two sons that have 
served or are serving in Iraq, and I extend my personal 
gratitude to you and your family. It is a personal situation 
when you have that in your family.
    I am a nurse; and, as many of my colleagues have done, as I 
have visited Walter Reed Hospital I have been so impressed and 
struck by the nature not only of the care and the very skilled 
care that is rendered there but the devastating injuries that 
these veterans are coming back with is part of what we must 
consider with this budget here.
    Many of these soldiers--and you know better than I this 
fact--are going to need care the rest of their lives. We know 
many are returning without visible physical injuries. We 
learned a few things over the past years and post-traumatic 
stress disorder is a casualty of this conflict as well and will 
be. I notice for example, that the medical and prosthetic 
research budget has been cut by $20 million.
    So that is to frame what I would like you to use this time 
to talk about, how we--if there is additional funds, how they 
can be used. And perhaps even more, that we should be 
addressing with the nature of the war now, the kinds of 
injuries our veterans have and what we are faced with in the 
future and maybe some projections about what this cost will be 
over these years
    Secretary Principi. Sure. Congresswoman Capps, I share your 
concerns. And certainly having been up to Walter Reed and 
Bethesda as well, there are some pretty catastrophic injuries 
up there. I can't think of any higher priority than to make 
sure that this very large budget overall that we have of close 
to $64 billion today, that we have got to make sure that we 
take care of the men and women coming back from Iraq and 
Afghanistan or any serviceman or woman who is injured or 
disabled as a result of military service. I think that is why 
we were created. And, again, I am confident that we can do so.
    Fortunately, the numbers are not as great as they were in 
previous wars, you know, with Vietnam and Korea and World War 
II. I really do believe that we can take care--we will take 
care of them if they come to us. Most of them are being cared 
for by the Department of Defense today at military hospitals, 
but we are caring for about 12,000 of those who have been 
discharged and have come to us. We just continually have to be 
there and make sure that when they need our services, they need 
new prosthetic limbs, that we are able to provide them to them.
    Mrs. Capps. But then, saying that, how could we possibly in 
this budget cut the research for prosthetics? I mean, the 
veteran that I--the injured veteran that comes to my mind told 
me that if it had been Iraq I, he would not have survived his 
injures. He survived them, but barely. And the cost for 
rehabilitating this young man I know, we all know, it is going 
to be life long. Are we going to really be there for them?
    Secretary Principi. The prosthetic research budget is not 
being cut. Our research budget overall shows $50 million less 
than last year. But I would only say to you that the 
appropriation of over $800 million for our research program is 
roughly half of what we receive. We receive about another $800 
million from NIH, from the Defense Department, and from 
pharmaceutical companies to undertake research. Our entire 
research budget at the VA is closer to $1.6 billion.
    Mrs. Capps. Well, perhaps the gentleman, if there is 
someone here representing the Paralyzed Veterans of America, 
that is where I got that number. So perhaps they will have some 
other discussion to bring up.
    Secretary Principi. Yes, I would certainly--but the 
prosthetics alone is not being cut, that I know of.
    Mrs. Capps. OK. And, of course, prosthetics are one small 
piece of it, actually
    Secretary Principi. Well, yes, they are. They are a very 
important piece, and we need to continue to focus on amputation 
research for prosthetics and rehabilitation. Given what is 
happening up at Walter Reed and the men and women who are 
coming back, we need to make sure that we are developing the 
latest in technology in prosthetic limbs.
    Mrs. Capps. Thank you very much
    Chairman Nussle. Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for coming today and for all you 
do for the veterans around the country and particularly in my 
congressional district. I applaud you for coming down and to 
speaking to the Blind Association.
    I just want to report back to you that we had a 
groundbreaking the other day for our outpatient clinic. We are 
going from 4,000 square feet to 12,000 square feet, and I 
certainly applaud you for that.
    Another area that we have been working on--of course, you 
have been part of it, too--is the consolidation of services 
between the Medical University of South Carolina and the 
veterans and also maybe including DOD. This is a move that I 
know is being tested in other areas, but certainly I think it 
is an efficiency move and also an opportunity to increase the 
level of service for our veterans.
    I applaud you on the prescription drug program, and I know 
that this has been certainly a savings, but it has also been an 
access solution, too. And I applaud you for that.
    I was over in Iraq, and we visited one of the hospitals 
there. No wounded were there because they transport them to 
America. But one of the reasons is because the hospitals, of 
course, there they are using the same hospitals for not only 
the Americans but for the Iraqis, not only the military side 
but the civilian side, too; and those hospitals certainly need 
to be upgraded in order to be able to accommodate the type of 
injuries that are coming in.
    So I think it is necessary that we are spending those funds 
to improve the hospitals over there, not discounting what is 
being done here. But I believe, by and large, that the veterans 
are being taken care of, I know particularly in my district. I 
applaud you for shortening that lead time between the time that 
the veteran looks for an appointment and the time he is being 
accommodated
    I don't have a question. I just want to applaud you for 
your service and for what you do for the veterans. And just 
like the counterpart here, if there is a veteran in my area 
that is having a problem, I certainly would ask them to call 
me. A lot of them do. And I am certainly there to accommodate 
them. But thank you very much for being here today.
    Chairman Nussle. Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman.
    Mr. Secretary, thank you very much for being here; and I, 
too, want to join the choir thanking you for the great job that 
you do. I have the very distinct impression that it is more 
than a job with you, it is really a commitment. I appreciate 
the passion that you bring to the job and the passion you bring 
for the people that you serve.
    I am a little bit concerned with some of the assumptions 
that go into your budget, specifically the assumption that we 
are going to approve the enrollment fees and the copayment 
fees. If that doesn't happen--and I don't think some of the 
veterans that are impacted by this can be classified as high-
income veterans, and I am not going to support it. So I don't 
know how it is all--how all my colleagues are going to vote on 
this, but I am not sure it is a slam dunk. It creates about a--
what--about a $1.5 billion hole. If that happens, are you going 
to have the money to do the things that you want to do?
    Secretary Principi. No.
    Mr. Thompson. Is the President going to provide the money? 
Are they going to find it somewhere else?
    Secretary Principi. I will not have the money. The policy 
proposals will generate revenues slightly less than $1.5 
billion but certainly--certainly $1 billion, $890 million, 
somewhere in there. So that would create a problem for us, and 
it would mean longer waiting times for veterans to get the care 
they need.
    Mr. Thompson. It is the proverbial two horns of the 
dilemma. You either don't have the money that you need, or you 
are shifting the cost to a specific group of veterans.
    Secretary Principi. I agree with you. You know, some may 
have high incomes. I mean, we have veterans in those categories 
who do have very high incomes, and they are eligible. They 
served.
    But I would only point out to you that keep in mind that a 
service member who retired, an enlisted man or woman who spent 
20 years or more on active duty, a tech sergeant, a staff 
sergeant, a petty officer, and they have incomes less than 
these veterans who may have only served 2 years or 4 years on 
active duty, are asked to pay $254 to be enrolled in the 
TRICARE Prime program. So I think there is an equity issue 
here.
    Congress has mandated that retired enlisted people with 20 
years or more of active duty to be enrolled in the DOD TRICARE 
program have to pay $254 a year enrollment fee. I don't think 
it is that unreasonable to ask someone who only served a couple 
years on active duty, have no military-related disabilities, 
may never have left the United States, and have a higher income 
than that retired petty officer, that they don't have to pay 
anything. At the same time, we are asking the poorest of the 
poor, we are asking Congress to lift the burden of copays on 
them, the people who only have incomes of $9,000 or $10,000. So 
we are trying to be equitable in our sense. And if Congress 
does reject it, though, I appreciate that, but we will not have 
enough money.
    Mr. Thompson. Well I am concerned about those income levels 
and the families that will be impacted by that.
    The second question I had is on a project that your folks 
helped me with quite a bit, and that is the Project SHAD. These 
are the military people who were used as test subjects for a 
number of years; and then the DOD, as you know, denied that it 
happened. We finally found out that it did happen, and we are 
trying to get upwards of around 5,000 veterans do be evaluated 
by VA to see if exposure to things like sarin gas and VX nerve 
gas and anthrax and e-coli have caused them any long-term 
problems.
    I just want to know if you feel that you have the resources 
in this budget to be able to serve the needs of those veterans 
that were these test subjects and if you feel comfortable that 
there has been enough research done to try and identify those 
people and if, in fact, this Dr. Spinlove's deposition 
regarding the additional files at Deseret Test Center is going 
to produce any more veterans
    Secretary Principi. I think we have made great progress in 
identifying those veterans who were involved in those tests. 
There may be some that we don't know yet. We have done a major 
outreach to them to get them in, to get them evaluated, to make 
sure they understand
    Mr. Thompson. Have you been able to look at Spinlove's 
testimony that there is some files at Deseret that would 
disclose further veterans or a greater extent of the tests?
    Secretary Principi. I haven't, Mr. Thompson, but I will do 
so.
    Mr. Thompson. Thank you very much.
    Chairman Nussle. Ms. Brown-Waite.
    Ms. Brown-Waite. Thank you, Mr. Chairman.
    Secretary Principi, I want to thank you very much for 
caring and truly caring about veterans, getting those 
disability claims times down and making sure that there is a 
greater access to health care out there.
    Given the fact that last year when the President's budget 
included some copays and user fees, given the fact that it 
obviously wasn't successful last year--and, quite honestly, I 
am not quite sure that the chances for success this year are 
any greater--wouldn't it be better if the committee counted--in 
other words, increased the recommended amount? Because the 
truth of the matter is, I am just not sure that those copays 
are going to pass. So we want to make sure that you are 
adequately funded.
    Would you respond to that, please.
    Secretary Principi. Well, if I understand your question, 
Congresswoman Brown-Waite, if Congress doesn't enact the policy 
initiatives, then clearly our budget is not going to be 
adequate to meet the full demand for care.
    You know, when I talked about the $1.2 billion that I 
requested in response to a question, I don't want it to be 
misconstrued. That was part of the negotiation process. As a 
result of that process, we came up with these policy 
initiatives. But the fact of the matter is that we are counting 
on the revenues from those co-pays to help us meet the demand 
for care.
    Ms. Brown-Waite. But if you don't get the copays, then 
obviously you are not going to be able to meet the demand for 
care.
    Secretary Principi. That is correct.
    Ms. Brown-Waite. Is that a logical conclusion?
    Secretary Principi. That is correct.
    Ms. Brown-Waite. OK. So that making sure that you have 
adequate funding for that level of care, one way of 
accomplishing that would be to increase the requested amount 
by--that Congress would increase that requested amount. I am 
sure you wouldn't object to that, would you, sir?
    Secretary Principi. Well, I believe our budget proposal is 
a good one. If the copays are rejected, then we will need 
additional funding or we are going to have longer waiting 
times. So that is a decision that Congress will have to make.
    Ms. Brown-Waite. When is the CARES report actually 
scheduled to come out? I keep hearing it is coming out, and it 
keeps getting postponed and postponed. Quite honestly, I just 
haven't read why it has been postponed.
    Secretary Principi. In 1 hour. It is going to be delivered 
to me at 3:30. Today, I received the report from the chairman 
of the Commission. It was delayed because they needed 
additional time to complete their work, which I granted because 
this is a very important process. But it will be delivered 
today. And the Congress will be--congressional staff are going 
to be briefed tomorrow.
    Ms. Brown-Waite. That is great.
    I am also hearing that many of the medical records at the 
various hospitals and the clinics are going to be available 
online. So when a veteran goes from one facility to another, 
that there is not this, well, gee, it will take us three days 
to get your paperwork out of a storage facility. How soon is 
that actually going to be online.
    Secretary Principi. It is actually coming online this year, 
but it will be completed by the end of fiscal year 2005. So 
that the computerized patient record of anywhere a veteran 
travels, that record can be accessed at the hospital he visits. 
So if he is coming from New York to Florida for the wintertime, 
they will have that record in Florida.
    Ms. Brown-Waite. That is great. And are you concentrating 
on those States where there is a lot of mobility first?
    Secretary Principi. Yes, indeed.
    Ms. Brown-Waite. Great.
    One last question. I briefly read something last week about 
you were doing something about prescription drugs, a survey or 
something, about prescription drugs only.
    Secretary Principi. You know, we are looking at the issue 
of about 30 percent of the veterans who come to us for care are 
coming for prescription drugs only; and, of course, we enroll 
them in the system and provide them the care and the lab tests 
before prescribing drugs. We are going to do some surveys to 
see what percentage of the veteran population are interested in 
the prescription drug only program and trying to get better 
information so that we can fashion our programs accordingly.
    So we had a pilot program a while ago. Any veteran who was 
on a waiting list who only wanted prescription drugs, we filled 
them. Now we are going to try to do a survey to better 
understand the veteran population, what their needs are, so 
that we can make better policy proposals to Congress on 
prescription drugs.
    Ms. Brown-Waite. Thank you very much, Mr. Chairman.
    Thank you very much, Mr. Secretary.
    Chairman Nussle. Ms. Majette.
    Ms. Majette. Thank you, Mr. Chairman; and thank you, Mr. 
Secretary, for the work that you are doing on behalf of this 
Nation's veterans.
    I represent Georgia's Fourth Congressional District, and I 
am proud to have the Atlanta VA Medical Center in my district. 
I am very proud of the hard-working and dedicated employees 
that I believe has made this one of the most successful VA 
hospital in the country.
    I just recently visited the hospital and the facility and 
met with the hospital director, Thomas Capello. I met many of 
the very dedicated employees, and I spoke with some of the 
patients who were very pleased with the care that they were 
receiving, and I certainly want to pass that on to you.
    But, Mr. Secretary, while being at the facility I 
discovered what a difficult job it is that these men and women 
have to provide the kind of care that our veterans need and 
that the job is getting more and more difficult. In this 
facility this year alone, they treated more than 10 percent 
more than--their patient--the number of patients treated was 
more than 10 percent, or a 10-percent increase, rather, than 
over last year. There is a wonderful eye clinic, and they are 
able to do so much for the patients, but they could do more 
with more resources.
    I certainly agree with you that it is imperative that we 
modernize the infrastructure, and they have a great challenge 
at this particular facility. The wards are very attractive, 
given what they have, but they are also outdated, many of 
them--or many of the rooms are not handicapped accessible, and 
they have not been structurally improved since 1967.
    I was pleased to see that one of the wards has been funded 
with a minor construction project, but there are still two 
others that remain that need to be remodeled and revamped. They 
are just structurally inadequate.
    I know that you asked for $1.2 billion more in your 
Department's budget more than the President had included in his 
request. If you would, please address for me how you think that 
extra $1.2 billion would be best spent, how you would allocate 
those additional resources, and whether any of that money would 
go to improving the facilities in Georgia in particular.
    Secretary Principi. Well, the $1.2 billion is basically--
the policy initiatives that we are proposing really amounts to 
the $1.2 billion. So, you know, I had requested $1.2 billion 
and no changes in policy proposals; and, as a result of 
negotiation, you know, the increasing copays and user fee were 
substituted in its place. So it would be for medical care.
    I would answer your question by saying that, historically, 
over the past, I would say, 10--at least 10 years, the VA's 
construction budget, in my opinion, has been somewhat 
underfunded. Congress has waited until we complete this CARES 
process. They did not want to provide significant increases in 
the construction budget until we made decisions as to what 
changes we were going to make to our infrastructure.
    But now that we have completed the CARES process, I think 
it is critically important that we get the funding necessary to 
modernize infrastructure, like the Atlanta VA Medical Center. 
The average age of our facilities are 50 years old. That 
compares to about 9.3 years in the private sector. It is just 
very, very costly to maintain, and we have not been able to 
keep pace with the modernization effort.
    Now the budget that we have this year is a significant 
increase over last year, but, generally speaking, our 
construction budget has been very, very low. And that is not a 
partisan issue. I am just saying we have not devoted the amount 
of money necessary to maintain our facilities in good 
condition.
    Ms. Majette. And I agree with you. It is not a partisan 
issue. We really do have to maintain the standards that our 
veterans deserve, and we have to continue to demonstrate our 
commitment to our troops as they are serving now by keeping the 
pledges and the promises that we have made to the veterans. So 
I would certainly be in support of increasing the ability to 
provide adequate infrastructure for the continuing growing 
need.
    Secretary Principi. Congresswoman, I would also add that 
the network that includes Georgia has, in this fiscal year--
because of the tremendous increase we received, their budget is 
going to increase 10.7 percent. So that should help the 
director, Tom Capello, and the network director really expand 
the reach of health care. So I think you could be very proud of 
that increase.
    Ms. Majette. I am certain that they will be very 
appreciative of that. Thank you.
    Chairman Nussle. Mr. Hastings.
    Mr. Hastings. Thank you, Mr. Chairman; and thank you, Mr. 
Principi, for being here and for the work you do on behalf of 
our veterans. I would share an earlier comment that certainly 
your passion for this job certainly comes through, and I 
congratulate you for that and certainly on behalf of the 
veterans that are in my district.
    I have heard a great deal about the CARES report when I 
have my town hall meetings and the meetings with the veterans, 
and I am glad it is finally appears to be coming to a 
conclusion. I look forward to the report that you will be 
giving, the release of briefing you will be giving to our 
staffs. I am impacted a bit, because--in the northwest with 
Walla Walla and Seattle and Vancouver, so I won't ask you to 
comment on it.
    But I will point out the problem that I have in my 
district. Generally, it is a rural district, and the two 
closest facilities are in Walla Walla or in Seattle. There are 
certain times of the year--and certainly this was one of those 
times of the year or one of those years where it is very 
difficult for veterans desiring health care to travel to those 
areas just because of the snow and ice storms that we had. It 
is difficult for them to travel under those conditions.
    I have been an advocate of community-based facilities and 
continue to be an advocate of that. So if you commented on this 
in your opening remarks, I apologize, because I missed that. 
But would you comment on what the plans are that you have for 
delivering health care, particularly in rural areas.
    Secretary Principi. I think we make an enormous 
contribution delivering health care in rural areas, and I think 
the way we do that is in several ways.
    First, I think the community-based outpatient clinic is 
terribly important so that veterans have access to primary 
care, get their pharmaceuticals; and we will continue to expand 
that program, continue to open outpatient clinics so that 
veterans on average do not have to drive more than 30 minutes 
from their home to access a VA as opposed to 3 or 4 hours 
sometimes in bad weather.
    Secondly, I think we need to partner with the private 
sector. You know, historically, everyone was opposed to 
veterans going to the private sector. They called it 
mainstreaming. Today, I think we all--and veterans groups 
alike--recognize the importance of partnership with the private 
sector, if you need emergency care for a heart attack, to be 
able to go down to the private sector emergency room and the VA 
would pick up the cost of care if the veteran wasn't insured. 
We are asking for the authority to pay copayments for veterans 
who are insured and have to seek private sector emergency care.
    Thirdly, I believe that we need to continue to rely on the 
Seattles, if you will. We need to have good, strong tertiary 
care inpatient facilities so that when veterans do need to go 
under--into surgery for open heart or whatever it might be, 
they are going to the best tertiary care hospitals the VA has, 
like Seattle, where we are affiliated with a great medical 
school and we can provide top-notch care, and throughout the 
country, Richmond and northern California, where we have those 
kinds of facilities.
    Also, telemedicine. The VA is one of the leaders in 
telemedicine today so that veterans, you know, can get care 
through this modern technology we call telemedicine.
    So I think we have to approach it in several different 
ways. Community-based outpatient clinics, partnering with the 
private sector where it makes sense, and also maintaining a 
good tertiary care capability inside the VA.
    Mr. Hastings. Just to follow up on that, one of the--part 
of the debate of the Medicare reform last year that we had was 
how the formula--the reimbursement formulas affect rural 
hospitals. Mine was one of those areas that was 
undercompensated, as was the chairman's in Iowa. It seems to me 
there is a real opportunity--because in many cases these 
facilities are in place but there the beds aren't being filled. 
Part of that is because of technology in delivering of medical 
care today, but there could be a variety of reasons. So if you 
are talking about partnering, are you talking about partnering 
in that sense, potentially?
    Secretary Principi. We could. We could create--have 
contracts with private sector health care systems, national 
networks, where we get a contract price, a discounted contract 
price. So that if veterans are going to be going into the 
private sector, service-connected disabled veterans, they are 
part of a network and, therefore, the VA receives a discounted 
price for the cost of their care.
    I think we just need to look for the most cost-effective 
way to do it, given the constraints on our budget; and that is 
what we are trying to focus on.
    Mr. Hastings. Well, thank you very much. I look forward to 
working with you on that, because I think there is a blend 
there that can be beneficial to all sides. Thank you very much.
    Chairman Nussle. Mr. Moore.
    Mr. Moore. Thank you, Mr. Chairman; and thank you, Mr. 
Secretary, for being here. I want to join everybody else and I 
think probably every other Member of Congress who thinks you do 
a wonderful job with very limited resources for the veterans in 
our country, and I very much appreciate that.
    I don't have a veterans' hospital facility in my district, 
which is the suburbs of Kansas City, KS. But there is one, 
obviously, in Kansas City, MI; and there is one up at Fort 
Leavenworth. I was concerned last year when I heard that there 
might be a curtailment of some of the services or at least the 
hours at the Fort Leavenworth facility. Based on that 
information--which maybe turned out not to be correct--But 
based upon that information, I filed a resolution that would 
require you, sir, to give 60 days advance notice to Congress 
before any facility was closed in terms of--or significantly 
alter the hours. And I got within just a few days 199 Democrats 
and Republicans working together, because they care about our 
veterans.
    It is not any--it is not pointed at you. I am not saying 
anything bad about you, sir, because I think there is some 
waste in our system everywhere. If there are hospitals right 
now that are not providing needed services, maybe they can be 
closed. But I just wanted to make sure that didn't happen 
precipitously, and that was the reason for that.
    But I want to talk to you for just one moment about another 
matter. You--I think you would agree and I think everybody else 
would agree here that veterans are patriots who care very 
deeply about our country; and, in fact, they put themselves on 
the line for our country. You said that they understand the 
need, just as other Americans do, for fiscal responsibility and 
to deal with this horrible deficit problem we have right now. 
And, in fact, the deficit next year is projected to be $521 
billion.
    Well, Mr. Secretary, we talk a lot about values in this 
country, how much--we in Congress, about how much we value our 
children, education and our veterans and a lot of other things. 
I think it is very important that we do prioritize and truly 
put our money where we say our values are, and veterans and 
education and children are certainly some of those things that 
I think most Americans would say should be at the top of our 
priority list.
    We talk now today--and I have heard questions and you have 
answered the questions as best you could, sir--about the 
copays, the user fees necessary to meet the needs of our 
veterans. You talked about this $1.2 billion--or at least you 
have been questioned about that, and you, I think, tried not to 
talk about it. You have been questioned about it. And I believe 
we should not--as much as I want to balance our budget and get 
rid of these horrible deficits, and I mean that sincerely, I 
don't believe we should try to balance our budget on the backs 
of our veterans. And I think most Members of Congress would 
agree with that as well.
    So my question is going to be this, and maybe I don't know 
that you can even answer this, and maybe--I don't know that you 
can even answer this. There is a proposal to permanently repeal 
the estate tax and some other taxes. Should we short-change our 
veterans in order to give additional tax cuts such as permanent 
repeal of an estate tax or could we wait until we are in a 
better fiscal position--I am talking about in terms of 
eliminating some of these deficits--and really, again, put our 
priorities where we say our values are and take care of our 
veterans first, and then worry about some of these other 
things, such as repeal the estate tax.
    Secretary Principi. Well, Mr. Moore, with all due respect, 
I really can't answer that question.
    Mr. Moore. I understand.
    Secretary Principi. It goes above and beyond, you know, 
where I am.
    But let me just say, it was so great to be with you at the 
50th anniversary of the hospital in Kansas City. I really very 
much enjoyed being with you for that.
    You know, we all want more. I mean, I think if I had all my 
colleagues in the Cabinet here, I think we would probably all 
say, sure, we could all use more. But I don't think that you or 
the President are shortchanging veterans. I think you care very 
deeply, the President I know cares deeply and I know you care 
deeply about veterans, and you have stepped up to the plate. 
You gave us $3 billion, I think, close to $3 billion this year. 
In the history of the VA, I don't think we ever received that, 
even if you adjusted it for real dollars or whatever.
    The fact of the matter is, we are doing more today for our 
veterans, and I am very proud of that. I am very proud of what 
you have done, that Congress has done, and I think we will 
continue to do it. Because everyone cares deeply about the men 
and women who serve.
    So, sure, if I get more money, I can take care of more 
veterans. That is a fact of life. But I guarantee you that we 
are going to continue to do everything within our power to 
expand the reach of health care with the dollars appropriated 
and help to repay the debt
    Mr. Moore. Mr. Secretary, thank you very much. You--and I 
really mean this as a compliment. You are the ultimate good 
soldier.
    Mr. Schrock. Or sailor.
    Mr. Moore. Military person.
    Chairman Nussle. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Secretary, welcome; and I wanted again to join the 
chorus of congratulations on your good work with the resources 
you have.
    I do have two veterans hospital either right in or right 
next to my district, McGuire in Richmond and Hampton, that I 
intend to visit in the next couple of days. Should I--I hope I 
have no fear of either of these hospitals getting on a closure 
list any time in the foreseeable future.
    Secretary Principi. I certainly don't think so.
    Mr. Scott. OK.
    Secretary Principi. I haven't seen the report. I will in 
about 30 or 40 minutes. The Richmond VA Medical Center is a 
jewel in our crown and provides high-quality care. The Under 
Secretary of Health, I know, knows that very, very well. We 
have a wonderful heart transplant program there. I have talked 
to veterans who are waiting for new hearts, and we can be very 
proud of the care that is provided there, and Hampton as well.
    Mr. Scott. Thank you. I don't want to go over and over the 
same issue, but I think you have heard enough from this 
committee to raise questions about whether we are going to 
actually pass this copay, particularly in light of the last 
question you had about equity within--the veterans is one 
thing. But when you are at the same time recommending tax cuts 
for dead multi-millionaires and expect the--because it only 
applies--the estate tax only applies to people with multi-
million dollar estates for a couple. You have got to be up to 
$2 million before it even kicks in. And to give them a tax cut 
at the same time we are asking our veterans to sacrifice is 
something that is going to be heavy lifting for this Congress 
to actually pass. So I think we need to be prepared for 
alternative funding sources other than that.
    I have had some questions about House Bill 3473, the 
veterans high treatment safety. I understand that the situation 
that provoked the legislation has been taken care of, is that 
right?
    Secretary Principi. That is correct. The optometrists are 
not doing the laser surgery at this time.
    Mr. Scott. On the one thing about the copay, if the copay 
were to go into effect, I understand that a lot of veterans 
would opt out of the system altogether.
    Secretary Principi. I sincerely don't believe that would be 
the case, because that use fee is only $21 a month. You can 
stay enrolled in the VA health care system; it is only if you 
use the VA health care system would that fee be assessed. And I 
would think that--and, of course, it only applies to those with 
incomes above--I think it starts at 24,000 or 25,000. It only 
applies to those with incomes above that level and no 
disabilities.
    Now some who have other options, they may have an employer-
based insurance program. They may say, well, it doesn't pay for 
me to pay the $21. I have insurance through my employer. 
Therefore, I can get it through the private sector. But I think 
anyone who needs health care, that is a very reasonable fee.
    Mr. Scott. So 200,000 people opting out of the system would 
be a number--you wouldn't agree with that number?
    Secretary Principi. No, I would not
    Mr. Scott. OK. Could you say a word about the diversity in 
your workforce, particularly in the higher levels?
    Secretary Principi. We have work to do. Although I want to 
state that the VA is somewhat unique in Federal agencies. We 
just do not have SES. We are Title 38, so there is an SES 
equivalent. You know, doctors and others do not come under the 
traditional SES program.
    Mr. Scott. Could you have your HR people get us what the 
actual numbers are so that we can know exactly what is going 
on?
    Secretary Principi. I can tell you that, on the SES side, 
19 percent of our women are in the SES core, 7 percent African 
Americans, and 3 percent Hispanic.
    Mr. Scott. OK.
    Secretary Principi. And then doctors, we have 27 percent 
are female; 4 percent of our doctors are African American; 6 
percent are Hispanic; 22 percent are Asian.
    Mr. Scott. Thank you.
    I have another question. I obviously don't have time to ask 
it, so let me just ask it for the record so I can get some--so 
that you can respond. That is the effect of the Allen decision 
on how you are treating veterans with substance abuse problems 
and what the effect of the case is and how we are going to be 
treating veterans with substance abuse problems. Particularly, 
Mr. Chairman, we have mental health problems particularly with 
soldiers, with military personnel in Iraq. So we will have more 
to do in that. So if you could respond for the record, I would 
appreciate it. My time has obviously expired.
    Chairman Nussle. The time has expired, but the gentleman 
may respond.
    Secretary Principi. I think this is a very important issue, 
and I believe legislation to overturn the Allen decision is 
important. Prior to the Allen decision, we did not give 
disability compensation to veterans for substance abuse. The 
Allen decision court said that the way the law was written, 
that if a veteran has a secondary--how do you describe it--has 
a secondary condition to, let us say, PTSD, then we were 
required to pay disability compensation.
    I think we need to treat people who have substance abuse 
problems. We need to help them get off drugs and have 
rehabilitation programs, treatment programs. We can't do enough 
for them. But to give them tax-free disability compensation, I 
think--speaking philosophically--I think makes a mockery of the 
disability compensation program; and I don't think there is any 
incentive to get better. Because if you get better, you lose 
your disability compensation. So why get off drugs? We want men 
and women who are on drugs, substance abuse to get cured, to 
get back into society. But by saying, well, we will pay you to 
use drugs, is counter, I think, to good medicine and good 
treatment.
    So I say take the money and help veterans and build more 
rehabilitation programs and get them back into the mainstream 
of society and off drugs. I think it is counter to good 
medicine. That is my own personal view.
    Chairman Nussle. Thank you.
    Mr. Secretary, for the record, do you know how much the 
Allen decision is driving as far as a cost, just again for the 
record.
    Secretary Principi. We estimated that if everyone who has a 
substance abuse problem secondary condition to another problem, 
it could be as high--every veteran, it would be as high as $2.8 
billion over 10 years. So it is significant. If those figures 
hold true, it is very significant. I don't think it would be 
that high, but clearly it has a very major financial impact on 
the agency, a lot of money that could be used for treatment 
programs.
    Chairman Nussle. Thank you.
    Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman, Ranking Member 
Spratt; and thank you, Secretary Principi, for being here.
    Like so many of my colleagues, and obviously you, Mr. 
Secretary, I prioritize advocacy for our Nation's veterans in 
my legislative work and in our district activities and am 
looking forward to being home in Wisconsin tomorrow to spend a 
lot of the day with some of our veterans.
    I wanted to pursue a couple of lines of questioning as time 
permits.
    First of all, starting along the lines of Congresswoman 
Capps' question regarding the research budget of the VA, I 
believe it was in 1999--I am not sure of the specific date--
that the Institute of Medicine issued a report scrutinizing the 
research on deployment-related illness, conditions, and 
injuries. And among the concerns that I know, in response to 
Congresswoman Capps' question, you pointed out that not all of 
the budget research is funded from the VA budget, but in fact 
DOD and NIH and others contribute to the total research budget 
on deployment-related conditions, illnesses, and injuries.
    Several concerns were raised about that fact in the 
Institute of Medicine Report. One key concern that I know many 
veterans hold is--I hate to say it, but a sort of distrust 
because there is almost a financial incentive because of the 
budgetary constraints in the VA, the DOD, et cetera, to not 
recognize certain things as deployment-related and concerns 
that it is almost an inherent conflict of interest when looking 
at the effects of exposure to Agent Orange or the condition of 
the atomic veterans or posttraumatic stress disorder or even 
Gulf War Syndrome.
    So that was one concern that the Institute of Medicine 
articulated.
    A second was a lack of coordination because of the various 
funding sources. I read very carefully that Institute of 
Medicine Report, and I have actually been involved in crafting 
legislation to implement in a number of its recommendations. 
But I am wondering--and certainly I am catching you without 
that legislation before you, so I could take your answer at a 
future point. But my legislation and the IOM recommend creation 
of an independent authority to coordinate the research agenda 
for many reasons and make sure that we provide a clearinghouse 
to make certain that the best information, the best research is 
really getting out into the field to the physicians treating 
our returning service members, wherever they are in the United 
States, including addressing some of the concerns about service 
in rural areas of our country. So I would love either now or at 
the future point to hear your reaction.
    A second question I have relates to a memorandum that was 
issued back in July of 2002 by Deputy Secretary Laura Miller, 
and I am sure you are familiar with that. It was a directive to 
VA network directors to halt all outreach activities aimed at 
enrolling new veterans, and this in lieu of bringing more 
resources to deal with an impending crisis and gap between 
demand and resources.
    I know that you have heard other inquiries about that. You 
indicated in a letter to our colleague, Congressman Strickland, 
that this was a temporary restriction. I am wondering if that 
remains the policy of the Department, and I would note that it 
is in such stark contrast to the philosophy of our State 
veterans organizations and my office where we are trying to 
inform every veteran of what they are entitled to, to make sure 
that we keep our promises to those individuals.
    Secretary Principi. Two very important issues. The first I 
would say that I think we have come a long way from the early 
days of Vietnam and unwillingness to recognize that there is a 
lot more to the relatively modern technological battlefield 
than bullet wounds and shrapnel and that environmental hazards 
kill. I think, as a result of that, we also went back and 
looked at ionizing radiation from the atomic--atmospheric 
atomic test, the occupation of Hiroshima and Nagasaki, and have 
really been able to put together not only research but also 
Congress and we now have automatic service connection for 
certain diseases. So that if you have a certain form of cancer 
and you were in Vietnam or you were at Hiroshima or Bikini 
Atoll, you automatically get disability compensation. And we 
contract with the National Academy of Sciences every year to 
update us on the literature as to what diseases are associated 
with what exposures.
    There was a lot of recalcitrance on Persian Gulf Syndrome. 
We went through this, I know Congressman Shays and others went 
through this, is it stress or is there more to it? And I 
created a Persian Gulf advisory committee; and, you know, I 
appointed people who explore unconventional theories. It 
doesn't sit well with mainstream research and scientists, but I 
felt that we needed to look at other theories as to why were 
people getting sick. Was there genetic disorders? Was something 
else going on here that two soldiers in the same field of 
operations, one gets sick and the other doesn't? What happened? 
Why?
    So I think, Congresswoman, that we are making strides.
    On the second issue, I think there is a lot of confusion. I 
want to take responsibility, not Laura Miller, for that memo. 
Because I was very deeply concerned when I came on board that 
we had over 300,000 veterans who were told to enroll in the VA 
health care system and put on waiting lists for a year to get 
health care, and I felt that that was irresponsible. I said, 
you can do outreach, you can educate and tell veterans what 
their benefits are, but don't crank up the marketing printing 
presses to get veterans to enroll and then say, well, we can't 
give you really health care, you are going to have to be put on 
a waiting list. I said, don't take dollars away from doctors 
and nurses.
    So we are doing outreach. I insist that we do outreach. I 
insist that we do health fairs and standdowns for homeless 
veterans and that we do tap programs. A lot is going on in this 
area, and I can assure you we will continue do to that.
    Chairman Nussle. For our last set of questions, Mr. Shays.
    Mr. Shays. Thank you.
    Mr. Principi, I have a problem because I went to Principia 
College, so I sometimes don't know quite how to say your name.
    If this has been like all the other experiences in this 
committee, we are criticized for the deficits, and then we are 
criticized for not spending enough money. But when it comes to 
veterans' issues, I just--the partisan person in me comes out--
and it doesn't come out often. I am so tired of hearing the 
misrepresentation of what this administration has done and what 
this Republican Congress has done.
    Just in total outlay, since 2001-05, it has gone up from 
$45 billion to $67 billion anticipated. Only in Washington, 
when you are basically spending so much more, do people call it 
a cut.
    I would like to go to chart No. 1.
    In chart one, we saw in the last 10 years of a previous 
Congress budget authority go up nearly 36 percent; and budget 
authority under this Congress--Republican Congress--has gone up 
58 percent. Certainly better than what was done in the past.
    In spending per veteran, on chart 2, we have seen it go 
from 38 percent--under previous Congress and a different party, 
go from 38 percent basically now to 79-percent increase over 
the last 10 years.
    In discretionary spending, in chart 3, there it is somewhat 
equal. It is 39 percent in the 10 years of the Democrat 
Congress and then 65, almost 66 percent in the last 10 years.
    In total budget authority, there it is pretty equal. It has 
gone from about 74 or 75 to about 75 in chart 5.
    Chart 4 fascinates me. On chart 4, we have seen the GI bill 
education benefit basically kind of go up 35 percent, from 300 
to 405 in a 10-year period. From 405 in 1994 or 1995, it has 
gone up to 985, an increase of 143 percent. Only in this city 
would they say somehow we are shortchanging veterans.
    Then just chart No. 6, the number receiving medical care. 
We have seen that number in 1991 go from 2.3 to now 4.7 because 
of the tremendous initiative that was taken under a Republican 
Congress.
    I don't always bring up Republican Congresses, because I do 
think veterans is a bipartisan issue and I do think we have 
tended to work together on veterans issues. But it has just 
been constant how I have met with veterans who will tell me we 
have actually cut spending, that they get less; and it just 
simply isn't true.
    The thing I am most impressed with what you have done is, 
even with the additional dollars we have given you, you have 
gotten more out per veteran. You have become more efficient. 
You have done things like step up to the plate about Gulf War 
illnesses and be willing to confront somewhat the medical 
community and even the Department of Defense in their 
reluctance to want to deal with this issue.
    I mean, for me, Mr. Secretary, you are a real hero; and I 
just congratulate for what you have done. I stayed today in 
part because I wanted the opportunity to say that to you to 
your face publicly: A job well done. I am proud of what you 
have done.
    Chairman Nussle. Mr. Secretary, thank you so much for 
coming before us yet again and testifying today about the 
budget for this year for veterans. We appreciate your advocacy 
in leadership, and we look forward to working with you as we 
move forward to enact this and provide the benefits that 
veterans do deserve. So thank you very much.
    Secretary Principi. Thank you. Thank you, Mr. Spratt and 
members of the committee.
    Chairman Nussle. We will take a very brief time-out recess 
while we change panels. We would invite the second panel to 
begin making their way forward.We will stand in recess very 
briefly. [Recess]
    We will resume the hearing with panel No. 2, and we invite 
forward four very distinguished Americans to testify on behalf 
of America's veterans.
    First, we have from the AMVETS, Rick Jones, and we welcome 
Rick. He is an Army veteran, a medical specialist--as I 
understand it--during the Vietnam War. And we appreciate your 
service and your advocacy, and we appreciate your commitment.
    From the Paralyzed Veterans of America, we have John 
Bollinger, and John is a veteran with the United States Navy; 
and we welcome you to the committee and we thank you for your 
service and advocacy.
    We have Rick Surratt.
    Am I saying that correctly?
    Mr. Surratt. Yes.
    Chairman Nussle. Deputy National Legislative Director for 
the Disabled American Veterans, also with the United States 
Army and a Vietnam veteran. We appreciate your service to the 
country and your advocacy, and we welcome you.
    Last and certainly not least, from the VFW, Paul Hayden, 
who served in Desert Shield and Desert Storm with the Army, and 
we appreciate your service to our country, your advocacy, and 
we welcome you to the committee.

  STATEMENTS OF JOHN C. BOLLINGER, DEPUTY EXECUTIVE DIRECTOR, 
 PARALYZED VETERANS OF AMERICA; RICK SURRATT, DEPUTY NATIONAL 
   LEGISLATIVE DIRECTOR, DISABLED AMERICAN VETERANS; PAUL A. 
HAYDEN, DEPUTY DIRECTOR, NATIONAL LEGISLATIVE SERVICE, VETERANS 
  OF FOREIGN WARS OF THE UNITED STATES; AND RICHARD ``RICK'' 
          JONES, NATIONAL LEGISLATIVE DIRECTOR, AMVETS

    Chairman Nussle. All of you have written testimony, as I 
understand it, which will be made part of the record at this 
point, and what I would like to ask you to do is, during your 5 
minutes, to summarize, or however you would like to proceed. 
But I would invite you to summarize your testimony as you see 
fit, and----
    Mr. Scott. Mr. Chairman, point of personal privilege?
    Chairman Nussle. Yes, the gentleman is recognized.
    Mr. Scott. Thank you, Mr. Chairman.
    I had a conversation with the Secretary after his 
testimony. I asked a question which may not have been as 
precise as it should have been, and he would like the 
opportunity to clarify his answer.
    The question was whether or not people would not enroll in 
the Veteran's Administration health care program, if they had 
the copays, and whatnot, and he said, ``no.''
    There may be many people who may not take advantage of the 
services, and he would like an opportunity to clarify more 
precisely because of the imprecision of my question.
    Chairman Nussle. Why do we not do that in writing?
    If you will put your question in writing, we will submit 
it, and he will put his answer in writing and we will make it 
part of the record.
    Mr. Scott. That will be fine.
    Chairman Nussle. Thank you, Mr. Scott.
    With that, we will start with Mr. Bollinger and we will 
work across the witness table in that order, and we will 
proceed with your testimony.

                 STATEMENT OF JOHN C. BOLLINGER

    Mr. Bollinger. Good afternoon.
    Chairman Nussle, Mr. Spratt, and members of the committee, 
my name is John Bollinger.
    I am with the Paralyzed Veterans of America, and I would 
really like to thank you for this opportunity to present our 
views and concerns about the VA's fiscal year 2005 budget 
today.
    This is the 18th year that our four organizations have come 
together to produce the Independent Budget. It is a policy and 
budget document which we believe best represents the true needs 
of the Department of Veterans Affairs.
    We use commonly accepted estimates on inflation, health 
care costs, and health care demand to reach our recommended 
levels. This year, the document is endorsed by 32 veterans 
service organizations and medical and health care advocacy 
groups, representing millions of veterans and their families.
    Each one of our organizations is responsible for one of the 
four main components of the VA budget: health care, benefits, 
construction and the cemetery service. I will focus my comments 
this afternoon on the health care section.
    And I apologize. It has been a long day for all of you, I 
am sure, and some of what I say will be redundant, but please 
bear with me.
    As our current veteran population ages, and as young men 
and women return from Iraq, Afghanistan, and other dangerous 
places in the world, our government's ability and its 
willingness to provide quality, accessible health care is more 
important than ever. Unfortunately, the administration's budget 
for fiscal year 2005 falls woefully short of providing an 
adequate funding level in real dollars for sick and disabled 
veterans.
    You only have to listen to the VA's leadership to gain a 
partial understanding of how far short that will be.
    Secretary Principi, who--quite frankly, we are very 
fortunate to have him at the helm; he is a very strong advocate 
for veterans. But he has been denied $1.2 billion in critical 
health care funds that he asked for, for fiscal year 2005, and 
I believe that he knows he needs.
    The Under Secretary for Health has stated that VA needs 
somewhere between 12 and 14 percent just to maintain current 
services and keep their heads above water, yet the 
administration has provided less than 2 percent, the lowest 
increase in almost a decade, and I understand that the--you 
know, over the years, we have seen the charts with all the 
increases, and those are wonderful things, but it is thanks to 
you on Capitol Hill, here in Congress, that we have gotten 
those increases. And I recognize that the administration's 
budget is a starting point, but hopefully, from this day 
forward, we will be able to correct many of the inadequacies in 
the health care budget.
    The budget as it stands will be devastating for veterans, 
as well as for the 200,000 existing doctors and nurses and 
support staff that work for the VA. Without help from Congress 
this year, the administration's budget will take a heavy toll 
on the entire system of care.
    As you know, we are faced with an administration request 
that relies heavily on user fees, copayments, and collections 
to pay the costs of caring for disabled vets. If these fees are 
rejected again this year by the Congress, which we strongly 
hope they will be, VA will be in yet an even more precarious 
situation. Copayments and charges will not only unrealistically 
swell revenue projections; they will deter veterans from 
seeking their care at VA medical facilities.
    Imagine the effects of those additional costs on those who 
have no choice but to receive their care from VA.
    VA oftentimes is the only game in town for veterans. We are 
not, in the case of category 8, talking about wealthy people 
for the most part, and these people will have to get their 
health care elsewhere, or they will not get it at all. Or they 
will go someplace where it will be more expensive and, 
ultimately, society will pay the increased cost for their care.
    Mr. Chairman, the budget contains significant detail on the 
recommendations on which it is based. We recommend a medical 
care account of $29.8 billion, which is $3.2 billion over the 
amount provided for fiscal year 2004.
    The IB also includes resources to begin funding the VA's 
critical fourth mission, to back up the Department of Defense, 
their health care system, and to be there in the event of a 
national disaster or in the event of a terrorist attack.
    Make no mistake, the VA will be spending money to comply 
with its responsibilities in this area; and if specific funding 
is not included, then, these dollars will have to come directly 
from resources intended for sick and disabled veterans.
    For medical and prosthetics research, such a critical 
account, the Independent Budget recommends a total of $460 
million, which is a $54 million increase over fiscal year 2004.
    Sadly, the administration has proposed actually cutting 
research by, approximately, $22 million. Accepting that 
recommendation would set the research program back 6 years, to 
1998 and 1999 levels, and also, it would cost the VA, we 
understand, 500 FTE. These are doctors and nurses that not only 
do research, but provide clinical care to veterans to provide 
hands-on care, so we would be losing these people if this 
budget gets reduced the way the administration wants it to.
    VA can be very proud of their accomplishments in research 
over the years, and I can tell you just from their work in 
spinal cord injury, the VA has given hope to all Americans with 
paralysis, that a cure for paralysis is on the horizon, and it 
is disheartening that the administration would reduce these 
critical resource dollars at a time when we so desperately need 
them.
    In closing, on the health care section, the VA health care 
system faces two chronic problems. One is chronic underfunding, 
which I have addressed; and the second is the lack of 
consistent funding, and although it is outside the immediate 
control of you on the Budget Committee, we have become 
increasingly troubled over the years by delays in enacting the 
VA appropriation, and this year is a good example. It is 4 
months late, so from October until January of 2004, VA operated 
on last year's money.
    Every year we labor under the uncertainty of not only how 
much money they will get, but when the VA will actually receive 
desperate health care dollars.
    We strongly encourage all of Congress to approve 
legislation removing VA health care from the discretionary side 
of the budget process and make annual VA health care budgets 
mandatory.
    Thank you, sir.
    Chairman Nussle. I thank you.
    [The prepared statement of Mr. Bollinger follows:]

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

    Mr. Chairman and members of the committee, as one of the four 
veterans services organizations publishing the Independent Budget, 
Paralyzed Veterans of America (PVA) is pleased to present the views of 
the Independent Budget regarding the funding requirements for the 
Department of Veterans Affairs (VA) health care system for fiscal year 
2005.
    This is the eighteenth year, PVA, along with AMVETS, Disabled 
American Veterans and Veterans of Foreign Wars have presented the 
Independent Budget, a policy and budget document that represents the 
true funding needs of the Department of Veterans Affairs. The 
Independent Budget uses commonly accepted estimates of inflation, 
health care costs and health care demand to reach its recommended 
levels. This year, the document is endorsed by 32 veterans service 
organizations, and medical and health care advocacy groups.
    Although outside the immediate control of this committee, we are 
becoming increasingly troubled by the delays in enacting VA 
appropriations. In fiscal year 2000, VA appropriations were not enacted 
until October 20, in fiscal year 2001 October 27, in fiscal year 2002 
November 26, in fiscal year 2003 February 20, and this year, January 
23. For the past 2 years alone, the VA has had to struggle under the 
already inadequate funding levels established for the prior year fully 
one-third of the way through the new fiscal year. These delays directly 
affect the health care received by veterans, and have severe 
consequences upon the VA's ability to adequately plan for providing 
this care. This deplorable state further points to the importance of a 
mandatory funding mechanism for VA health care. But until that happens, 
we ask that this Congress move expeditiously to put the necessary 
funding levels in place by the start of fiscal year 2005.
    This year, as we did last year, the Independent Budget is presented 
in the traditional account format. The VA is once again presenting its 
budget in the format it unveiled last year, a format that did not find 
wide acceptance. Last year, the House Appropriations Committee adopted 
its own format, a format which, in modified form, is found in the 
enacted Omnibus spending bill. Until this format dispute is settled, 
and until we have adequate data in which to analyze the VA health care 
system under whichever format is adopted, we will continue to utilize 
the traditional account structure. It can become confusing amid the din 
of competing dollar amounts based upon these different formats, but we 
ask you to compare oranges to oranges and to bear in mind that 
attractive numbers may not exactly match reality.
    The administration's budget request for health care is a shocking 
one, providing once again a woefully inadequate funding level for sick 
and disabled veterans. Calling for only a $310-million increase in 
appropriated dollars, a mere 1.2-percent increase over fiscal year 
2004, this is the smallest health care appropriation request of any 
administration in nearly a decade. Indeed, the VA Under Secretary for 
Health testified just last year that the VA requires a 13 to 14-percent 
increase just to keep its head above water.
    Once again, we are faced by a request that relies far too heavily 
on budgetary gimmicks and accounting sleight of hand rather than on 
real dollars that veterans need. The administration is again 
resurrecting its enrollment fee and increased copayment schemes, 
proposals soundly rejected by both the Senate and the House of 
Representatives. And once again we see unrealistic ``management 
efficiencies'' utilized to mask how truly inadequate this budget is. 
The VA must be accorded real dollars in order to care for real 
veterans. Shifting costs onto the back of other veterans is not the way 
to meet this Federal responsibility. Punitive copayments and charges 
are designed not so much to swell projected budget increases as they 
are to deter veterans from seeking their care at VA medical facilities. 
Imagine the effect of these additional costs on those who have no other 
choice but to get care at VA.
    For fiscal year 2005, the Independent Budget recommends a medical 
care amount of $29.791 billion. This figure does not include funds 
attributed to MCCF, which we believe should be used to augment a 
sufficient appropriated level of funding. This amount represents an 
increase of $3.2 billion over the amount provided in fiscal year 2004. 
This recommendation does not rely upon phantom ``management 
efficiencies,'' nor does it require veterans to pay more in order for 
other veterans to receive care. Overall, for discretionary spending, we 
are recommending $33.596 billion, $3.8 billion above the 
administration's discretionary spending proposal.
    The Independent Budget recommendation is a conservative one. The VA 
health care system, in order to fully meet all of its demands and to 
ameliorate the effects of chronic under-funding, could use many more 
dollars. The Independent Budget recommendation provides for the impact 
of inflation on the provision of health care, and mandated salary 
increases of health care personnel. It provides resources to begin 
funding the VA's critical fourth mission to back up the Department of 
Defense health care system. Make no mistake about it, the VA will be 
spending money to comply with its new responsibilities in this area, 
and if specific funding is not included, then these resources will have 
to come directly from dollars used to care for sick veterans. It 
provides increased prosthetics funding and long-term care funding, and 
provides enough resources, we believe, to enroll priority 8 veterans. 
With the VA's decision to cease enrolling priority 8 veterans, 
undertaken only because of the lack of resources, we are losing an 
entire class of veterans, veterans who are an integral part of the VA 
health care system.
    Of course, these recommendations are only estimates, and our 
crystal ball is often cloudy. Health care inflation may be higher, or 
lower than we have estimated. Demand may increase, or decrease. The 
implications, as they pertain to VA health care funding estimates, of 
the 2-year grant of health care eligibility to recently discharged or 
released active duty personnel as provided in P.L. 105-363, are 
difficult to account for. But what we must account for, and provide 
for, are the necessary resources for the VA to meet its 
responsibilities, and this Nation's responsibilities, to sick and 
disabled veterans. These resources must be provided in hard dollars, 
and not dollars magically realized out of the thin air of ``management 
efficiencies'' and other budgetary gimmicks.
    Although much is inherently uncertain, we are certain that the VA 
cannot continue to provide adequate health care for veterans if it 
receives the meager $310-million increase in appropriated dollars 
recommended by the President. Indeed, the Secretary of Veterans Affairs 
last week during budget testimony before the Committee on Veterans' 
Affairs stated that the VA's budget submission was $1.2 billion below 
what the Department requested from the administration.
    For medical and prosthetic research, the Independent Budget is 
recommending $460 million. This represents a $54 million increase over 
the fiscal year 2004 amount. Sadly, the administration has proposed 
cutting research by approximately $21 million. Accepting this level of 
$385 million would set the research grant program back 6 years to 
fiscal year 1999 funding levels. This program is a vital part of 
veterans' health care, and an essential mission for our national health 
care system. We must provide additional dollars for VA research as we 
provide additional funding for our other national research endeavors. 
Over the course of 5 years, the budget for the National Institutes of 
Health was doubled. We should seek a similar commitment for VA 
research.
    In closing, the VA health care system faces two chronic problems. 
The first is underfunding which I have already outlined. The second is 
a lack of consistent funding. The budget and appropriations process 
over the last number of years demonstrates conclusively how the VA 
labors under the uncertainty of not only how much money it is going to 
get, but, equally important, when it is going to get it. No Secretary 
of Veterans Affairs, no VA hospital director, and no doctor running an 
outpatient clinic knows how to plan for and provide care on a daily 
basis without the knowledge that the dollars needed to operate those 
programs are going to be available when they are needed.
    The only solution we can see is for this Congress to approve 
legislation removing VA health care from the discretionary side of the 
budget process and making annual VA budgets mandatory. The health care 
system can only operate properly when it knows how much it is going to 
get and when it is going to get it.
    We ask that this committee provide the resources necessary in the 
fiscal year 2005 budget resolution to provide our recommended funding 
level of $29.8 billion for veterans' health care.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

    Chairman Nussle. Mr. Surratt, welcome and we are pleased to 
receive your testimony.

                   STATEMENT OF RICK SURRATT

    Mr. Surratt. Mr. Chairman and members of the committee, 
good afternoon.
    I am Rick Surratt with the Disabled American Veterans.
    I am pleased to appear on behalf of the DAV and the 
Independent Budget to discuss budget priorities for veterans 
programs.
    Those special few who fight our wars and serve in our armed 
forces do so at great risk to their own health and life and 
make extraordinary sacrifices for the citizens of our country. 
Only because of their willingness to serve and sacrifice do we 
enjoy the fruits of living in the greatest democracy in history 
and the strongest, most prosperous nation on Earth.
    Veterans benefits are a continuing cost of war and national 
defense, but a cost the citizens of our grateful Nation are 
fully willing to bear as their own contribution to the common 
defense.
    Veterans today want benefits appropriate to their special 
needs, with fairness in the way the benefits relate to their 
individual service and sacrifices. They want a fair, 
responsive, and effective system for delivering those benefits.
    Among the range of recommendations we make in the 
Independent Budget toward achieving those goals, I want to 
discuss two here. Out of the millions that serve their country, 
some choose to make the military a career. When they serve the 
requisite period of 20 or more years, they have every right to 
expect the retired pay they earned and were promised for 
providing that service. Veterans who incur permanent 
disabilities during military service have every right to expect 
compensation for the effects of those disabilities in civilian 
life following service, regardless of whether they served 1 
year or 30 years.
    Disabled veterans who serve less than 20 years receive 
their disability compensation. Disabled veterans who serve 20 
or more years receive their disability compensation, but only 
if they forfeit an equal amount of their retired pay, which, in 
effect, means they receive nothing for the disability. 
Naturally, these veterans do not think that is fair. Last year, 
Congress agreed and removed the injustice for certain of these 
veterans, but left it in place for all others. Naturally, all 
the others, feel even more slighted.
    Admittedly, fully repealing the prohibition against 
concurrent receipt of military retired pay and disability 
compensation has a substantial cost, but Congress spends equal 
and greater amounts on other things all the time. Our 
obligation to disabled veterans is a fundamental national 
obligation and should be a priority.
    Moreover, when the Defense Department sets aside money to 
recover retired pay, it should do so without reducing that 
amount based on the expectation of escaping some of its 
obligation as a result of service members' being wounded and 
disabled. The DAV, the Independent Budget, and virtually all 
veterans and military organizations, continue to press for 
legislation to remedy this injustice.
    We have been spending more money on defense. We cannot 
neglect the most important element of national defense, our men 
and women in uniform, whose retired pay and disability benefits 
are a part of the cost of national defense.
    Let me now turn to the delivery of veterans benefits.
    The Department of Veterans Affairs has struggled for years 
to correct serious deficiencies in its benefits delivery 
system. With reforms by management and increased resources from 
Congress, VA has made some improvements in the proficiency of 
its adjudicators and, thus, the accuracy and timeliness of its 
claims decisions.
    It still faces difficult challenges and the even greater 
numbers of claims from veterans. Yet the President's budget 
would substantially reduce the number of employees in VA's 
Veterans Benefits Administration. With such a reduction in 
personnel in the face of increasing work loads, we believe VA 
can neither continue to make gains nor the improvements it has 
struggled to make in the last 2 or 3 years.
    Veterans will suffer the consequences, but the system will 
suffer the adverse effects that will be even harder to recover 
from and that will cost even more to correct in the long-term. 
This proposal in the President's budget clearly represents 
misplaced priorities. Hopefully, the views and estimates from 
the Veterans' Affairs Committee will echo our call for higher 
staffing levels in VBA.
    Mr. Chairman, I want to thank the committee for allowing us 
to testify and for considering our views and concerns. I will 
be very happy to answer any questions the committee may have.
    Chairman Nussle. You are very welcome. Thank you.
    [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 1.5 
million members of the Disabled American Veterans (DAV) and its 
Auxiliary, I am pleased to appear before you along with the DAV's three 
partners in the Independent Budget (IB)-AMVETS, the Paralyzed Veterans 
of America (PVA), and the Veterans of Foreign Wars of the United States 
(VFW)--to discuss our budget priorities for veterans' programs for 
fiscal year 2005.
    Since 1987, the DAV has joined with these three other major 
veterans' organizations to assess the functioning and the resource 
needs of veterans' programs and to present our recommendations for 
funding and program improvements as an alternative to the President's 
budget submission. Rather than each organization testifying on the 
entire range of programs, each limits its testimony predominantly to 
the areas of the IB for which it is the principal author. Accordingly, 
I will focus on the benefit programs for veterans and their associated 
administrative costs, although I want to join with my colleagues in 
stressing the importance of one other issue, the funding of veterans' 
medical care.
    Unlike the President's budget submission, where requests for 
legislation or funding to improve the benefits or their delivery system 
have become sparse in recent years, the IB is not constrained by a mix 
of political priorities and therefore includes several recommendations 
to correct identified shortcomings. To us, veterans' programs are a 
continuing cost of national defense and must always remain a priority 
for funding by Congress.
    Among our recommendations, the one with a high level of veteran 
interest and with perhaps the largest requirement of budgetary 
resources is our recommendation to remove entirely the offset between 
military retired pay and veterans' disability compensation. Last year, 
Congress enacted legislation to relieve some veterans from the 
injustice, but it left the injustice in place for all other military 
retirees who must forfeit the retired pay they earned in return for 20 
or more years of military service to receive the compensation they are 
due for the effects of service-connected disabilities. Removal of this 
injustice entirely continues to be a top priority of the IB and all 
major veterans' and military organizations.
    We do have other compelling issues that would not require the same 
levels of spending as repealing the prohibition against concurrent 
receipt of military retired pay and disability compensation. Within the 
range of benefits provided to veterans for various purposes, benefits 
for service-connected disabilities are the core veterans' programs. For 
the same reasons that it is important to adjust compensation rates 
regularly to prevent the purchasing power of this benefit from 
decreasing with increases in the cost of living, it is necessary to 
regularly adjust the rates of other disability benefits to maintain 
their value in the face of increasing costs. Congress has neglected 
doing this for benefit programs established to assist some of our most 
severely disabled veterans.
    Service-connected disabilities result in functional impairments 
that not only adversely impact upon veterans' ability to perform job 
functions but also adversely impact upon their ability to perform the 
everyday activities of living. For veterans suffering from service-
connected disabilities that require special fixtures and modifications 
to allow them mobility and independence within the home, the Department 
of Veterans Affairs (VA) provides grants for the purchase or 
construction of specially adapted housing. For veterans with service-
connected disabilities that interfere with their ability to operate 
motor vehicles, VA provides grants for the purchase and special 
modification of automobiles. Unlike compensation and other government 
benefits that are adjusted each year for the increase in the cost of 
living, these benefits have been raised infrequently, although, like 
the price of other consumer goods, the costs of homes and vehicles 
increase with regularity. With long periods between adjustments, the 
value of these benefits has fallen substantially behind rising costs. 
Congress increased these grants last year, but the increase did not 
equal their cumulative loss in value and therefore did not fully 
restore them to the value they had when first established.
    For example, the grant for the purchase or construction of 
specially adapted housing is currently $50,000. Obviously, that will 
not begin to cover the costs of a home with modifications such as 
wheelchair ramps and handicap-accessible bathrooms.
    When first established, the automobile grant was set at an amount 
sufficient to cover the full costs of a moderately priced new vehicle. 
Later, the grant was fixed at 80 percent of the average cost of new 
automobiles. Based on the 2003 average price of a new automobile, which 
was $26,163, the current $11,000 automobile allowance covers only about 
42 percent of the cost. To restore the comparability between the cost 
of an automobile and the allowance, the allowance, based on 80 percent 
of the average new vehicle cost, would be $20,930.
    To remedy these deficiencies and to provide a mechanism for regular 
adjustment, we recommend in the IB that Congress enact legislation to 
increase the amount of the grants for specially adapted housing and the 
automobile grant, and to provide for automatic annual adjustments for 
increased costs.
    Because of service-connected disabilities, disabled veterans have 
difficulty getting or are charged higher premiums for life insurance on 
the commercial market. VA therefore offers disabled veterans life 
insurance at standard rates under the Service Disabled Veterans' 
Insurance (SDVI) program. When this program began in 1951, its rates, 
based on mortality tables then in use, were competitive with commercial 
insurance. Commercial rates have since been lowered to reflect improved 
life expectancy shown by current mortality tables. VA continues to base 
its rates on mortality tables from 1941, however. Consequently, SDVI 
premiums are no longer competitive with commercial insurance, and SDVI 
therefore no longer provides the intended benefit for eligible 
veterans. The IB therefore recommends legislation to authorize VA to 
use modern mortality tables instead of 1941 mortality tables to 
determine life expectancy for purposes of computing premiums for SDVI.
    When life insurance for veterans had its beginnings in the War Risk 
Insurance program first made available to members of the armed forces 
in October 1917, coverage was limited to $10,000. A $10,000 life 
insurance policy provided sufficiently for the loss of income from the 
death of an insured in 1917. Today, some 87 years later, maximum 
coverage under the base SDVI policy is still $10,000. Given that the 
annual cost of living is many times what it was in 1917, the same 
maximum coverage, well over three quarters of a century later, clearly 
does not provide meaningful income replacement for the survivors of 
service-disabled veterans. The IB recommends legislation to increase 
the maximum protection available under the base policy of SDVI from 
$10,000 to $50,000.
    Similarly, the maximum coverage under the Veterans' Mortgage Life 
Insurance (VMLI) program has fallen behind current needs. The maximum 
VMLI coverage was last increased in 1992. Since then, housing costs 
have risen substantially. Because of the great geographic differentials 
in the costs associated with accessible housing, many veterans have 
mortgages that exceed the maximum face value of VMLI. Thus, the current 
maximum coverage amount does not cover many catastrophically disabled 
veterans' outstanding mortgages. Moreover, severely disabled veterans 
may not have the option of purchasing extra life insurance coverage 
from commercial insurers at affordable premiums. The IB recommends 
legislation to increase the maximum coverage under VMLI from $90,000 to 
$150,000.
    Though they need fine tuning from time to time, the benefit 
programs have been carefully crafted by Congress to alleviate the 
disadvantages veterans suffer as a result of disabilities and as a 
result of educational and vocational opportunities forgone by young men 
and women who chose to serve their country before personal advancement. 
These programs are effective only to the extent the benefits and 
services are delivered to entitled veterans when they need them. 
Efficiently and proficiently administering this broad range of programs 
for millions of veterans naturally and unquestionably presents 
formidable management challenges. Small mistakes can have major 
consequences for large numbers of veterans. Management and process 
deficiencies, and insufficient resources, have consequences that are 
directly revealed through poor service to veterans.
    Although such poor service frustrates veterans who must deal with a 
massive and complex bureaucracy, it causes more than mere 
inconveniences. Incorrect decisions deprive entitled veterans of the 
benefits they need, and long delays due to incorrect decisions and 
insufficient resources deprive entitled veterans of the benefits they 
need when they most need them. Of course, the correct and timely 
payment of disability compensation is imperative for veterans who must 
rely on compensation for food and shelter.
    In fulfilling its mission of effective management of the benefit 
programs and effective delivery of benefits and services, VA's Veterans 
Benefits Administration (VBA) has a checkered history, especially in 
accurate and timely delivery of the core veterans' benefit, disability 
compensation. Some of the failures were self-inflicted and the product 
of a wrong-headed institutional mindset, others were due to more 
innocent mistakes, and many were caused or compounded by insufficient 
resources or other factors beyond VA's control.
    With a focus and decisive action directed to real reforms and 
improvement, current management has made some headway in overcoming 
systemic deficiencies in the delivery of benefits. Congress has helped 
by providing additional resources to bring the workforce and technology 
to the capacity required. To continue on the course of restoring VBA to 
acceptable levels of performance and service to veterans--indeed, to 
avoid losing the gains made thus far--VBA must continue to devote its 
full energies to the process, and Congress must continue to provide the 
resources required to get the job done. The IB makes specific 
recommendations in both of these areas, but I will only address here 
our recommendations that involve the discretionary appropriations for 
the administrative expenses of VA's benefits delivery system.
    The President's budget submission for VA clearly does not remain 
fixed on the objective of strengthening VBA to make it better able to 
fulfill its responsibilities to veterans. Due to the war in Iraq and 
the many hostilities in which our armed forces are engaged today, we 
can only expect an influx of new veterans needing VA benefits and 
services. Logically, more resources will be needed in some areas just 
to stay even with the workload. However, the President's budget 
proposes major reductions in resources for the delivery of benefits and 
services to veterans. For VBA, the President's budget requests 829 
fewer full-time employees (FTE) for fiscal year 2005 than authorized at 
the end of the fiscal year we have just finished, fiscal year 2003. The 
request is 540-FTE below the fiscal year 2004 level. We note, 
incidentally, that the difference between the fiscal year 2003 and 
fiscal year 2005 FTE for VBA is apparently greater than the 829 
employees indicated by the budget submission because, at the beginning 
of fiscal year 2004, the responsibilities and the 31 FTE of the 
Evidence Development Unit of the Board of Veterans' Appeals (BVA) were 
reassigned from BVA to VBA, without any corresponding request to 
increase VBA's authorized FTE by an equal amount.
    Under the President's budget request, every benefit line except 
insurance service would lose employees. Even with all-out efforts, 
VBA's progress in reducing the backlog of work and the waiting times 
for benefits has been gradual and fairly slow-paced, representative of 
deliberate efforts within the limits of its abilities under the 
resource levels available in the past few years. We seriously doubt 
that VBA can suddenly accelerate and achieve enough productivity 
improvements to offset such a substantial loss of resources, especially 
against the weight of added work.
    The President's budget proposes 7,270 FTE, or 487 fewer direct 
program FTE for VA's Compensation and Pension service (C&P) in fiscal 
year 2005 than in fiscal year 2003. In addition, the President's budget 
requests 185 fewer FTE for fiscal year 2005 than it had in fiscal year 
2003 for management direction and support and information technology in 
C&P service. We also understand that the additional FTE for the 
Evidence Development Unit assumed by VBA from BVA are charged to C&P 
service. With those FTE absorbed by C&P and without any equal increase 
in the FTE requested for C&P, that number of employees must be 
calculated as an additional net reduction of FTE for C&P service when 
comparing the fiscal year 2003 staffing with the request for fiscal 
year 2005.
    We recommend in the IB that C&P service be authorized 7,757 FTE for 
fiscal year 2005. VA had projected that its workload would allow it to 
draw down its FTE in fiscal year 2005 by approximately 268 below its 
staffing level of 7,757 FTE at the end of fiscal year 2003. However, 
those projections did not take into account additional work VA now 
expects incident to legislation that expanded eligibility for Combat 
Related Special Compensation and authorized concurrent receipt of 
military retired pay and disability compensation for certain veterans. 
VA projects that this legislation will generate 391,000 new claims and 
52,869 appellate cases over the next 5 years. In addition, VA projects 
it will have to rework approximately 48,000 claims to meet the 
requirements of a court decision invalidating VA procedures that placed 
unlawful requirements upon veterans. Though most of that work should be 
done during fiscal year 2004, this additional volume will likely delay 
work on some of C&P's inventory and carry some extra caseload over into 
fiscal year 2005. This additional workload requires that VA, at least, 
have approximately the same direct program staffing levels for fiscal 
year 2005 that it had at the end of fiscal year 2003.
    As with C&P service, VBA's Vocational Rehabilitation and Employment 
Service (VR&E) faces major challenges in meeting its responsibilities 
to disabled veterans under circumstances of heavy workloads and limited 
resources. The impact of the worldwide war on terrorism, hazardous duty 
in other locations around the world, and major combat operations in 
Iraq and Afghanistan, will undoubtedly be felt by VR&E when these 
veterans begin pouring into the system with the need for rehabilitation 
training and employment suitable to their service-connected 
disabilities. To sustain current levels of performance with its 
projected workload, VR&E needs to retain the staffing strength it had 
at the end of fiscal year 2003. In addition, the VA Secretary's VR&E 
task team has made a number of recommendations to improve vocational 
rehabilitation and employment services for veterans. It is projected 
that approximately 200 additional FTE will be needed to implement these 
substantial reforms in the programs, organization, and work processes 
of the VR&E program. At the end of fiscal year 2003, VR&E direct 
program staffing was 931 FTE. The IB therefore recommends that Congress 
authorize 1,131 direct program FTE for VR&E in fiscal year 2005. The 
President's budget requests only 876 FTE for fiscal year 2005, and 
seeks 21 fewer FTE for management direction and support and information 
technology than VR&E had in fiscal year 2003.
    Similarly, VBA's Education Service expects some increase in its 
workload, due to legislation last year that expanded coverage of the 
program to include additional types of training. VA is striving to 
provide more timely and efficient service to claimants seeking 
education benefits. Education Service reports gains in these areas 
during fiscal year 2003. To continue on the course of improvement and 
to meet the added workload projected, Education Service must at least 
maintain its fiscal year 2004 staffing level. In fiscal year 2004, 
Education Service had 766 direct program FTE authorized. The 
President's budget proposes 737 FTE, or 29 fewer, for fiscal year 2005. 
The IB recommends that Congress authorize 766 FTE for Education Service 
in fiscal year 2005.
    Finally, I want to reiterate a point made by our IB witness who is 
covering veterans' medical care in this hearing. That point regards the 
paramount importance of putting a mechanism in place to end what has 
unquestionably proven to be an inadequate process for funding veterans' 
medical care. Year after year, the President's budget request falls 
well below the minimum needed to maintain medical services for sick and 
disabled veterans seeking those services from the medical care system 
established to serve them. Year after year, we must fight an uphill 
battle to get more realistic appropriations, and that annual battle is 
getting ever more difficult despite the strong advocacy from the 
members of the Veterans' Affairs Committee, who know what resources VA 
really needs. To get funding to continue operation of their medical 
programs, veterans should not have to compete with all the many other 
interests who seek part of the limited discretionary dollars. Veterans 
and VA should not have to face the yearly uncertainty of whether there 
will be sufficient funding provided to continue essential medical care 
services for disabled veterans. Veterans should not have to wait months 
to be treated for their illnesses. VA should not have to continue 
operating the largest medical care system in this country on the 
shoestring of annual appropriations and without any means to plan 
strategically for long-term efficiencies. We have thoroughly tested the 
discretionary appropriations process whereby political will, rather 
than actual resource needs, determines how much funding veterans' 
medical care receives each year. With consistent experience that 
funding veterans' medical care under that process has repeatedly 
failed, and will only continue to be unsatisfactory, the remedy is to 
guarantee adequate and stable funding through a permanent authorization 
that uses a reliable formula to project resource needs.
    This is an issue a special coalition of nine veterans' 
organizations will be pressing with the authorizing committees in both 
chambers, but we will also be taking our case to the entire Congress. 
If we are successful in getting this legislation enacted, it will have 
budgetary implications.
    Though we recognize that your work on the budget is to establish a 
broad blueprint for revenue and spending in the upcoming fiscal year, 
your totals must, of course, take into account the constituent elements 
of spending, and much of what we hope to accomplish for the veterans of 
our Nation does unquestionably depend on the support of this committee. 
Let me therefore express the DAV's sincere appreciation to the 
committee for affording us the opportunity to discuss with you some of 
our more important legislative and funding issues, involving the most 
meritorious of Federal benefit programs.

    Chairman Nussle. Mr. Hayden, welcome. We are pleased to 
receive your testimony at this time.

                  STATEMENT OF PAUL A. HAYDEN

    Mr. Hayden. Thank you, Mr. Chairman, Ranking Member Spratt, 
members of the committee.
    On behalf of the 2.7 million men and women of the Veterans 
of Foreign Wars, United States, and our Ladies' Auxiliary, I 
would like to take this opportunity to thank you for being 
included in today's important hearing regarding the Veterans' 
Affairs budget. The VFW is responsible for the construction 
portion of the VA budget, so I will limit my testimony to that 
area.
    The President's fiscal year 2005 budget indicates that 
along with gross funding deficiencies in practically every VA 
account, VA construction is to be dramatically and most 
detrimentally shortchanged as well; in fact, as you just heard 
the Secretary allude, since 1993, VA construction funding has 
been in steady decline.
    The fiscal year 1993 combined major and minor construction 
total was $600 million, and the fiscal year 2005 proposal is 
only $200 million. VA's history of low construction budgets the 
last 12 years is an explicit indication of poor stewardship of 
the system's facility capital assets. It also flies in the face 
of statutory mandates to provide for the short- and long-term 
care needs of our most seriously service-connected veterans.
    Once again, the administration is proposing counting State 
nursing home beds as part of its long-term care capacity. We 
view this as an attempt to circumvent both the letter and the 
intent of the law, with a number of our deserving and most 
vulnerable veterans suffering as a consequence.
    Further, there appears to be a major resistance to fund an 
adequate construction budget before the CARES process has been 
completed. We have been supportive of the CARES process from 
the beginning, as long as the primary emphasis is on the ES, 
Enhanced Services. However, we believe that it is poor policy 
to defer all VA construction needs until the CARES process is 
complete.
    We agree with the findings of the President's task force to 
approve health care delivery for our veterans, but the VA must 
accomplish three key objectives: invest adequately in the 
necessary infrastructure to ensure safe, functional 
environments for health care delivery; No. 2, right-size their 
respective infrastructure to meet projected demands for 
inpatient, ambulatory, mental health, and long-term care 
requirements; and finally, trade responsibilities to respond to 
a rapidly changing environment, using strategic and master 
planning to expedite new construction and renovation efforts.
    In order to accomplish these objectives, we recommend that 
Congress budget $571 million to the major construction account 
for fiscal year 2005, not the totally inadequate $97 million 
asked for by the administration. This is needed for seismic 
construction, clinical and environmental improvements, National 
Cemetery Administration construction and land acquisition. We 
also call for the Congress to budget $545 million to the minor 
construction account for fiscal year 2005, while rejecting the 
administration proposal of $69 million.
    These funds contribute to construction projects costing 
less than $7 million while providing for inpatient and 
outpatient support, infrastructure, physical plant, and 
historic preservation projects.
    Mr. Chairman, this concludes my testimony, and I will be 
happy to respond to any questions you may have.
    Chairman Nussle. Thank you very much.
    [The prepared statement of Mr. Hayden follows:]

    Prepared Statement of Paul A. Hayden, Deputy Director, National 
   Legislative Service, Veterans of Foreign Wars of the United States

    Mr. Chairman and members of the committee: On behalf of the 2.7 
million men and women of the Veterans of Foreign Wars of the United 
States (VFW) and our Ladies Auxiliary, I would like to take this 
opportunity to thank you for being included in today's important 
hearing regarding the Department of Veterans Affairs (VA) budget. As a 
member of the Independent Budget for VA, the VFW is responsible for the 
Construction portion of the VA budget, so I will limit my testimony to 
that area.
    The VA construction budget includes major construction, minor 
construction, grants for construction of State extended care 
facilities, grants for State veterans' cemeteries and the parking 
garage revolving fund.
    The President's fiscal year 2005 budget indicates that, along with 
gross funding deficiencies in practically every VA account, VA 
construction is to be dramatically and most detrimentally short-changed 
as well. In fact, since 1993, VA construction funding has been in 
steady decline. The fiscal year 1993 combined total was $600 million 
and the fiscal year 2005 proposal is only $200 million once the Capitol 
Asset Realignment for Enhanced Services (CARES) is backed out. VA's 
history of low construction budgets the last 12 years is an explicit 
indication of poor stewardship of the system's facility capital assets. 
It also flies in the face of moral as well as statutory mandates to 
provide for the short and long-term care needs of our most seriously 
service connected veterans. Once again, the administration is proposing 
counting State Nursing Home Beds as part of its own long-term capacity. 
We view this as an attempt to circumvent both the letter and intent of 
the law with a number of our most deserving and vulnerable veterans 
suffering as a consequence.
    Further, there continues to be major resistance to fund an adequate 
construction budget before the CARES process has been completed. We 
have been supportive of the CARES process from the beginning, as long 
as the primary emphasis is on the ``ES-enhanced'' services; however, we 
believe that it is poor policy to defer all VA construction needs until 
CARES is complete.
    Currently, most VA medical centers, with an average age of 54 
years, are in critical need of repair. Sadly, the prospect of system-
wide capital asset realignment through the CARES process has been used 
as an excuse to hold all construction projects hostage. These projects 
are essential to patient safety; moreover, they will eventually pay for 
themselves through future savings as a result of modernization. The 
ongoing reconfiguration of the system through CARES must not distract 
VA from its obligation to protect its current assets by postponing 
needed funding for the construction, maintenance and renovations of VA 
facilities.
    While we still believe the CARES process should proceed, we 
perceive a need for further data to support various recommendations 
that would close or change missions of certain VA long-term care and 
small size facilities. These data should include such items as a cost 
analysis associated with these changes to include the costs of 
transferring patients and staff; the cost associated with contracting 
for care in the community; the cost related to shutting down and 
disposing of property to include asbestos removal; the cost to build or 
lease new facilities like community-based clinics and patient bed 
towers to include associated site elements to make the building 
functional, such as equipment, relocation, and activation costs; and 
updating facility infrastructures to handle additional patient 
workloads while maintaining privacy and safety requirements.
    We acknowledge that the VA Office of Facilities Management has 
assembled construction cost data for various functional building types; 
however, the inclusion of the aforementioned cost could provide the 
rationale for reconsidering some decisions.
    In addition, the assumption that Congress will adequately fund all 
CARES proposed changes must be questioned. The VFW and other 
Independent Budget Veterans Service Organizations (IBVSO) are concerned 
that when CARES implementation costs are factored into the 
appropriations process, Congress will not fully fund the VA system, 
further exacerbating the current obstacles impeding veterans' access to 
quality health care in a timely manner. It is our opinion that VA 
should not proceed with CARES changes until sufficient funding is 
appropriated for the construction of new facilities and renovation of 
existing hospitals is approved.
    We recommend that Congress appropriate $571 million to the Major 
Construction Account for fiscal year 2005, not the totally inadequate 
$97 million asked for by the administration. This amount is needed for 
seismic correction, clinical environment improvements, National 
Cemetery Administration construction, land acquisition, and claims. 
Allocated as follows:

    Seismic Improvements--$285,000
    Clinical Improvements--$25,000
    Patient Environment--$10,000
    Research Infrastructure Upgrade and Replacement--$50,000
    Advance Planning Fund--$60,000
    Asbestos Abatement--$60,000
    National Cemetery Administration--$81,000
    IB Recommended fiscal year 2005 Appropriation--$571,000

    We also call for the Congress to appropriate $545 million to the 
Minor Construction Account for fiscal year 2005 while rejecting the 
administration proposal of $69 million. These funds contribute to 
construction projects costing less than $7 million. This appropriation 
also provides for a regional office account, National Cemetery 
Administration account, improvements and renovation in VA's research 
facilities, a staff office account, and an emergency fund account. 
Increases provide for inpatient and outpatient care and support, 
infrastructure, physical plant, and historic preservation projects. 
Allocated as follows:

    Inpatient Care Support--$130,000
    Outpatient Care and Support--$100,000
    Infrastructure and Physical Plant--$150,000
    Historic Preservation Grant Program--$25,000
    Other--$25,000
    VBA Regional Office Program--$35,000
    National Cemetery Program--$35,000
    VA Research Facility Improvement and Renovation--$ 45,000
    IB Recommendation fiscal year 2005 Appropriation--$545,000

    Annually, the VHA submits a list of top 20 priority major medical 
construction projects to Congress, which identifies the major medical 
construction projects that have the highest priority within VA. This 
list includes buildings that have been deemed at ``significant'' 
seismic risk and buildings that are at ``exceptionally high risk'' of 
catastrophic collapse or major damage. Currently, 890 of VA's 5,300 
buildings have been classified as significant seismic risk, and 73 VHA 
buildings are at exceptionally high risk.
    The IBVSOs believe, as we have indicated in the past, that there is 
ill-advised resistance to funding any major construction projects 
before the CARES process has been completed, and this includes 
correcting seismic deficiencies in VHA facilities. Regardless of the 
recommendations of the CARES program on facility realignments, it is 
our contention that VA must maintain and improve its existing 
facilities to support the delivery of health-care services in a risk-
free environment for veterans and VA employees alike.
    Most seismic correction projects should include patient-care 
enhancements as part of their total scope. Also, consideration must be 
given to enhanced service recommendations provided for in CARES. Due to 
the lengthy and widespread disruption to ongoing hospital operations 
that are associated with most seismic projects, it would be prudent to 
make qualitative medical care upgrades at the same time.
    We contend that Congress should appropriate $285 million to correct 
seismic deficiencies. Further, VA should schedule facility improvement 
projects and CARES recommendations concurrently with seismic 
corrections.
    In the Independent Budget for fiscal year 2004, we cited the 
recommendations of the interim report of the President's ``Task Force 
to Improve Health-Care Delivery for Our Nation's Veterans'' (PTF). That 
report was made final in May 2003. To underscore the importance of this 
issue, we will cite the recommendation of the PTF again this year.
    VA's health-care facility major and minor construction over the 
1996 to 2001 period averaged only $246 million annually, a 
recapitalization rate of 0.64 percent of the $38.3 billion total plant 
replacement value. At this rate, VA will recapitalize its 
infrastructure every 155 years. When maintenance and restoration are 
considered with major construction, VA invests less than 2 percent of 
plant replacement value for its entire facility infrastructure. A 
minimum of 5 percent to 8-percent investment of plant replacement value 
is necessary to maintain a healthy infrastructure. If not improved, 
veterans could be receiving care in potentially unsafe, dysfunctional 
settings. Improvements in the delivery of health care to veterans 
require that VA and DOD adequately create, sustain, and renew physical 
infrastructure to ensure safe and functional facilities.
    It was also recommended by the PTF that ``an important priority is 
to increase infrastructure funding for construction, maintenance, 
repair, and renewal from current levels. The importance of this 
initiative is that the physical infrastructure must be maintained at 
acceptable levels to avoid deterioration and failure.''
    The PTF also indicated that ``Within VA, areas needing improvement 
include developing systematic and programmatic linkage between major 
construction and other lifecycle components of maintenance and 
restoration. VA does not have a strategic facility focus, but instead 
submits an annual top 20 facility construction list to Congress. Within 
the current statutory and business rules, VA can bring new facilities 
online within 4 years. However, VA facilities are constrained by 
reprogramming authority, inadequate investment, and lack of a strategic 
capital-planning program.''
    The PTF believes that VA must accomplish three key objectives:
     Invest adequately in the necessary infrastructure to 
ensure safe, functional environments for healthcare delivery;
     Right-size their respective infrastructures to meet 
projected demands for inpatient, ambulatory, mental health, and long-
term care requirements; and
     Create abilities to respond to a rapidly changing 
environment using strategic and master planning to expedite new 
construction and renovation efforts.
    Additionally, it was recommended by the PTF that ``an important 
priority is to increase infrastructure funding for construction, 
maintenance, repair, and renewal from current levels.''
    In a study completed in 1998, Price Waterhouse was asked to 
determine the spending level required to ensure that the Veterans 
Health Administration's (VHA) investment in facility assets would be 
adequately protected against adverse deterioration and to keep the 
average condition of facilities at an appropriate level. Price 
Waterhouse concluded that the VHA was significantly under funding its 
construction spending, and based on their observations across the 
industry, appropriate annual spending should be between 2 percent and 4 
percent of the plant replacement value (PRV) on reinvestment to replace 
aging facilities. Price Waterhouse considered reinvestment to be 
improvements funded from the major and minor construction 
appropriations. PRV for the VHA is approximately $35 billion. The 2 
percent to 4 percent range would therefore equate to annual funding of 
$700 million to $1.4 billion.
    The VFW supports the Price Waterhouse recommendation that VA spend 
at least 2 percent of the value of its buildings or $700 million 
annually on upkeep. Together with the IBVSOs, we believe that $400 
million should be appropriated in fiscal year 2005 with continued 
increases in the following years until an appropriate level of funding 
that will forestall the continued deterioration of VA properties is 
achieved.
    Congress should appropriate no less than $400 million for 
nonrecurring maintenance in fiscal year 2005 to provide for adequate 
building maintenance. VA should direct no less than $400 million for 
nonrecurring maintenance in fiscal year 2005. VA should also make 
annual increments in nonrecurring maintenance in the future until 2 
percent of the value of its buildings is budgeted and utilized for 
nonrecurring maintenance.
    Good stewardship demands that VA facility assets be protected 
against deterioration and that an appropriate level of building 
services be maintained. Given VA's construction needs, such as seismic 
correction, compliance with the Americans with Disabilities Act (ADA) 
and Joint Commission of Accreditation of Healthcare Organization 
(JCAHO) standards, replacing aging physical plant equipment, and CARES, 
VA's construction budget continues to be inadequate.
    In addition, it has been suggested that the VA medical system has 
vast quantities of empty space that can be cost effectively reused for 
medical services. It has also been suggested that unused space at one 
medical center may help address a deficiency that exists at another. 
Although the space inventories may be accurate, the basic assumption 
regarding viability of space reuse is not.
    Medical facility planning is a complex task because of the 
intricate relationships that must be provided between functional 
elements and the demanding technical requirements of the sophisticated 
equipment that must be accommodated. For these reasons, space in 
medical facilities is rarely interchangeable-except at a prohibitive 
cost. Unoccupied rooms located on a hospital's eighth floor, for 
example, cannot offset a space deficiency in a second floor surgery 
because there is no functional adjacency. Medical space has very 
critical inter- and intra-departmental adjacencies that must be 
maintained for efficient and hygienic patient care. In order to 
maintain these adjacencies, departmental expansions or relocations 
usually trigger extensive ``domino'' impacts on the surrounding space. 
These secondary impacts greatly increase construction costs and patient 
care disruption.
    Some permanent features of medical space, such as floor-to-floor 
heights, column-bay spacing, natural light, and structural floor 
loading, cannot be altered. Different medical functions have different 
technical requirements based on these permanent characteristics.
    Laboratory or clinical space, for example, is not interchangeable 
with patient ward space because of the need for different column 
spacing and perimeter configuration. Patient rooms need natural light 
and column locations that are compatible with patient room layouts. 
Laboratories should have long structural bays and function best without 
windows. If the ``shell'' space is not appropriate for its purpose, 
renovation plans will be larger and more inefficient and therefore cost 
more.
    Using renovated space rather than new construction yields only 
marginal cost savings. Build out of a ``gut'' renovation to accommodate 
medical functions usually costs approximately 85 percent of the cost of 
similar new construction. If the renovation plan is less efficient, or 
the ``domino'' impact costs are greater, the small potential savings 
are easily lost. Renovation projects often cost more and produce a less 
satisfactory result. Renovations are sometimes appropriate to achieve 
desirable functional adjacencies, but they are rarely economical.
    Early VA medical centers used flexible campus-type site plans with 
separate buildings serving different functions. Since World War II, 
however, most main hospitals have been consolidated into large, tall 
``modern'' structures. Over time, these central medical towers have 
become surrounded by radiating wings and connecting corridors leading 
to secondary structures. Many current VA medical centers are built 
around prototypical ``Bradley buildings.'' These structures were 
rapidly constructed in the 1940s and 1950s for returning World War II 
veterans.
    Fifty years ago, these brick facilities were easily site-adapted 
and inexpensive to build, but today they provide a very poor chassis 
for a modern hospital. Because most Bradley buildings were designed 
before the advent of air conditioning, for example, the floor-to-floor 
heights are very low. This makes it almost impossible to retrofit 
modern mechanical systems. The older hospital's wings are long and 
narrow (in order to provide operable windows) and therefore provide 
inefficient room layouts by contemporary standards. The Bradley 
hospital's central service core with a few small elevator shafts is 
inadequate for the vertical distribution of modern medical services.
    In addition, much of the currently vacant space is not situated in 
prime locations. If the space were, it would have been previously 
renovated or demolished to clear the way for new additions. Unused 
space is typically located in outlying buildings or on upper floor 
levels. Its permanent characteristics often make it unsuitable for 
modern medical functions.
    VA should perform a comprehensive analysis of its excess space and 
deal with it appropriately. Some of this space is located in historic 
structures that must be preserved and protected. Some space may be 
appropriate for enhanced use. Some may be appropriate for demolition. 
While it is tempting to focus on unused space, it should not be a major 
determinant in CARES realignments. Each medical center should develop a 
plan to find appropriate uses for its vacant properties.
    Mr. Chairman and members of this committee, this concludes my 
statement and I will be happy to respond to any questions you may have.

    Chairman Nussle. Mr. Jones, welcome. We are pleased to 
receive your testimony at this time.

              STATEMENT OF RICHARD ``RICK'' JONES

    Mr. Jones. Thank you, sir.
    Mr. Chairman, Ranking Member Spratt, and members of the 
House Budget Committee, I am honored to be here today before 
you to express AMVETS views on providing a strong fiscal year 
2005 budget.
    I would like to note as an appreciation your strong 
leadership in this committee, for what you have done to support 
veterans under your leadership, this committee gave us the 
budgetary headroom we needed for making a dramatic turn in the 
policy of concurrent receipt. We have made great strides in 
closing that injustice, and it was the policy position that you 
took that helped us get the first foothold, get some traction 
on that issue.
    We thank you for that.
    In addition, your personal action, Mr. Chairman, I would 
like to note that you voted the right way on last year's 
appropriations bill.
    We appreciate that. We applaud your standup and standout 
defense of veterans. Thank you, sir.
    As a coauthor of the Independent Budget, AMVETS supports 
the testimony of our Independent Budget partners, and we will 
now give you our best view of what is needed for a responsible 
National Cemetery Administration budget.
    As you know, the National Cemetery Administration maintains 
more than 2.6 million grave sites on approximately 14,000 acres 
of cemetery. They do an outstanding job and they serve to give 
interments of over 100,000 veterans annually.
    VA has opened a new cemetery in Oklahoma and is scheduled 
to open five new cemeteries in the coming year, or thereabouts, 
in Pittsburgh and Detroit, Atlanta, Miami, and Sacramento. 
Under legislation passed last year, VA is directed to design 
and to construct cemeteries at six additional sites, in 
Philadelphia, PA; in Birmingham, AL; Jacksonville, FL; 
Bakersfield, CA; Greenville, SC; and Sarasota, FL. The strong 
commitment of Congress is necessary to complete the job, and 
when done, burial space for millions of veterans and their 
eligible dependents will be available.
    While we attend to the rising interment rate with 
accelerated construction and new facilities, there remains the 
need to repair and upgrade national cemeteries. The study on 
improvements to veterans cemeteries submitted to Congress in 
2002 identified nearly $300 million and more than 900 projects 
for grave site renovations, repairs, and upgrades.
    We trust and recommend that Congress and VA will work 
together to establish a time frame for funding these projects 
based on the severity of the problems.
    The members of the Independent Budget recommend Congress 
provide $175 million in fiscal year 2005 for the operational 
requirements of the National Cemetery Administration, the 
National Shrine initiative, and the backlog of repairs. We 
recommend your support for a budget that is consistent with the 
National Cemetery Administration's growing demands and in 
concert with the respect due every man and woman who wears the 
uniform of the armed forces. This is an increase of $30 million 
over current funding.
    The State Cemetery Grants Program is a secondary program 
but yet an important program at the National Cemetery 
Administration. It is a vital program, it has greatly assisted 
the States to increase burial services to veterans, especially 
those living in less densely populated areas.
    The Independent Budget recommends a funding level of $37 
million for the Cemetery Grants Program. I might give you a 
couple of examples of what is happening in the State grants 
program and what we expect to happen in the new year: The 
States--in Boise, ID; in Wakeeny, KS, and also Winchendon, MA, 
will be opening State cemeteries. We also note that in Suffolk, 
VA, in the Tidewater area--approximately 200,000 veterans will 
be served with a new State cemetery. So we would note that this 
is important also to the policies and programs that VA 
operates.
    In closing, Mr. Chairman, I would just like to note and ask 
you to take a look at this Independent Budget and notice on the 
cover in the bottom right-hand corner is a photograph of one of 
our disabled veterans with his family. He has returned from 
Iraq. Interestingly enough, in the photo above, he is with 
another family. You will see the same man, second from the 
left, with his Marine squad while they were in Iraq, serving in 
Iraq. We know that he has been replaced by someone, because we 
do not have victory without someone coming in to serve behind 
those who have been injured, and we hope through that service 
we will have victory.
    And we also hope that that individual will return to 
America as a priority 8 veteran. We hope that he will be given 
the full benefits that he has earned. He may be a priority 8 
veteran, but that does not diminish the hazards that he faced 
and the service that he gave to his country, and we hope that 
you will recognize those in the budget that you recommend this 
year.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Jones follows:]

  Prepared Statement of Richard ``Rick'' Jones, National Legislative 
                            Director, AMVETS

    Mr. Chairman, Ranking Member Spratt, and members of the committee:
    AMVETS is honored to join fellow veterans service organizations at 
this hearing on the VA's budget request for fiscal year 2005. We are 
pleased to provide you our best estimates on the resources necessary to 
carry out a responsible budget for the fiscal year 2005 programs of the 
Department of Veterans Affairs. AMVETS testifies before you today as a 
coauthor of the Independent Budget.
    This is the 18th year 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. Indeed, 
we are proud that over 30 veteran, military, and medical service 
organizations endorse these recommendations. In whole, these 
recommendations provide decision-makers with a rational, rigorous, and 
sound review of the budget required to support authorized 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 
health care. Veterans must be guaranteed access to a full continuum of 
healthcare services, including long-term care. And, veterans must be 
assured burial in a 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, the budget must recognize 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 Veterans Health Administration is the most cost 
effective application of Federal healthcare dollars, providing benefits 
and services 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.
    Noting the mission of the VA, it is important to understand the 
areas where VA funding must be increased. The VA budget must address 
the pending wage increases for VA employees. It must address the 
continuing backlog in veterans waiting for health care and it must 
address, as well, VA's benefits 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 
addressed and corrected.
    As we look to fiscal year 2005, we watch a live lesson about the 
challenges inherent to inadequate funding. Due to a lack of resources, 
VA took action on January 17, 2003, to ban healthcare access to 164,000 
veterans who could have enrolled last year. This ban remains in force, 
despite substantial increases in healthcare funding over the past 2 
years. It is remarkable that after blocking entry to these so-called 
``high income'' veterans, VA issued a healthcare directive (VHA 
Directive 2003-003, January 17, 2003) telling workers to send banned 
veterans to Community Social Work for assistance.
    It is hoped that recently passed provisions contained in the fiscal 
year 2004 appropriations bill, which aim to overcome VHA Directive 
2003-003, will remedy this breach of faith. When an individual commits 
to the defense of the rest of us, undertakes training that is 
inherently more dangerous than the typical civilian occupation, and 
stands ready to go into harm's way so that others need not, this 
country's gratitude should not be demonstrated with a simple referral, 
however courteous and sincere, to the welfare line.
    Looking to the new year, the Independent Budget recommends Congress 
provide $29.8 billion to fund VA medical care for fiscal year 2005, an 
increase of nearly $3.1 above fiscal year 2004. We ask Congress to 
recognize that the VA healthcare system is an excellent investment for 
America. It can only bring quality health care, however, if it receives 
adequate funding.
    We also ask Congress to understand that there are other potential 
challenges regarding veterans health care especially in regard to a new 
generation of veterans returning from Iraq, Afghanistan and the war on 
terrorism. By last year's count, more than 80,000 veterans who returned 
from the war have sought VA health care. And, it is likely the demand 
will remain strong for the foreseeable future. To facilitate their 
care, it is important that Congress work with the administration to 
accelerate the development of a seamless, transferable lifetime medical 
record between the DOD and VA.
    It is also important to clearly state that AMVETS along with its IB 
partners strongly support shifting VA healthcare funding from 
discretionary funding to mandatory. Mandatory funding would give some 
certainty to healthcare services. VA facilities would not have to deal 
with the uncertainty of discretionary funding, which has proven 
inconsistent and inadequate. Mandatory funding would provide a 
comprehensive solution to the current funding problem. Once healthcare 
funding matched the actual average cost of care for veterans enrolled 
in the system, the VA can fulfill its mission.
                  the national cemetery administration
    Before I address budget recommendations for the National Cemetery 
Administration, I would like members of the committee to know that 
AMVETS fully appreciates the strong leadership and continuing support 
demonstrated by members of the House Budget Committee. AMVETS is truly 
grateful to those who serve on this important committee. Through your 
work, you have distinguished yourselves as willing to lead the country 
in addressing issues important to veterans and their families.
    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.
    Currently, the National Cemetery Administration maintains more than 
2.6 million gravesites on approximately 14,000 acres of cemetery land, 
while providing nearly 90,000 interments annually.
    VA is scheduled to open new cemeteries in Atlanta, GA; Oklahoma 
City, OK; Pittsburgh, PA; Detroit, MI; Miami, FL; and Sacramento, CA. 
Also under legislation passed last year (P.L. 108-109), VA is directed 
to design and construct cemeteries at six new national locations in 
Philadelphia, PA; Birmingham, AL; Jacksonville, FL; Bakersfield, CA; 
Greenville, SC; and Sarasota County, FL.
    The strong effort to build new cemeteries recognizes the dramatic 
increases in the interment rate of veterans. NCA requires increases in 
funding if it is to carry out its statutory mandates. Without the firm 
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 urge Congress and the 
administration to significantly boost NCA resources for fiscal year 
2005. It should be recognized that not only is the interment rate 
increasing and the construction of new facilities accelerating, but 
also there are repair and upgrades needed. ``The Study on Improvements 
to Veterans Cemeteries,'' a comprehensive report submitted in 2002 by 
VA to Congress on conditions at each cemetery, identified nearly $300 
million in over 900 projects for gravesite renovation, repair, upgrade, 
and maintenance.
    As any public facilities manager knows, failure to correct 
identified deficiencies in a timely fashion results in continued, often 
more rapid, deterioration of facilities and increasing costs related to 
necessary repair. The IBVSOs agree with this assessment and believe 
that Congress needs to carefully consider this report to address the 
condition of NCA cemeteries and ensure they remain respectful settings 
for deceased veterans and visitors. We recommend that Congress and VA 
work together to establish a timeline for funding these projects based 
on the severity of the problems.
    Volume 3 of the Study describes veterans cemeteries as national 
shrines saying that one of the most important elements of veterans 
cemeteries is honoring the memory of America's brave men and women who 
served in the armed forces. ``The commitment of the nation,'' the 
report says, ``as expressed by law, is to create and maintain national 
shrines, transcending the provisions of benefits to the individual even 
long after the visits of families and loved ones.''
    Indeed, Congress formally recognized veterans cemeteries as 
national shrines in 1973 stating, ``All national and other veterans 
cemeteries?shall be considered national shrines as a tribute to our 
gallant dead.'' (P.L. 93-43) Moreover, many of the individual 
cemeteries within the system are steeped in history and the monuments, 
markers, grounds, and related memorial tributes represent the very 
foundation of these United States. With this understanding, the 
grounds, including monuments and individual sites of interment, 
represent a national treasure that deserves to be protected and 
nurtured.
    Unfortunately, despite NCA continued high standards of service and 
despite a true need to protect and nurture this national treasure, the 
system has and continues to be seriously challenged. The current and 
future needs of NCA require continued adequate funding to ensure that 
NCA remains a world-class, quality operation to honor veterans and 
recognize their contribution and service to the Nation.
    The members of the Independent Budget recommend that Congress 
provide $175 million in fiscal year 2005 for the operational 
requirements of NCA, the national Shrine initiative, and the backlog of 
repairs. We recommend your support for a budget consistent with NCA's 
growing demands and in concert with the respect due every man and woman 
who wears the uniform of the U.S. Armed Forces. This is an increase of 
nearly $30 million over current year funding.
    Clearly, the aging veteran population has created great demands on 
NCA operations. Nearly 655,000 veterans deaths are estimated in 2005 
with the death rate peaking at 690,000 in 2009; of these, it is 
expected that 109,000 will seek burial in a national cemetery. As 
veteran deaths accelerate, it is obvious the demand for veterans' 
burial benefits will increase.
                   the state cemetery grants program
    For funding the State Cemetery Grants Program, the members of the 
Independent Budget recommend $37 million for the new fiscal year. The 
intent of the State Cemetery Grants Program is to develop a true 
complement to, not a replacement for, our Federal system of national 
cemeteries.
    With enactment of the Veterans Programs Enhancement Act of 1998, 
the NCA has been able to strengthen its partnership with States and 
increase burial service to veterans; especially those living in less 
densely populated areas not currently served by a national cemetery.
    During fiscal year 2004, the IBVSOs anticipate fast-track openings 
at new cemeteries under construction: Boise, ID (the last State in the 
United States without a veterans cemetery); Wakeeny, KS (300 miles east 
of Denver and west of Kansas City, serving rural areas in western 
Kansas); Winchendon, MS (serving the densely populated northern part of 
the State); and Suffolk, VA (serving 200,000 veterans in the Tidewater 
area).
    To augment support for veterans who desire burial in State 
facilities, members of the Independent Budget support increasing the 
plot allowance to $725 from the current level of $300. The plot 
allowance now covers less than 6 percent of funeral costs. Increasing 
the burial benefit to $725 would make the amount nearly proportional 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 Independent Budget veterans service organizations (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 $4,000. Prior to action in the last Congress, increasing 
the amount $2,000, 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 $1,225, 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 also recommend that Congress enact legislation to index 
these burial benefits for inflation to avoid their future erosion.
    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 Nussle. I thank you and I want to appreciate all 
of your testimony, particularly the last statement. Certainly, 
we recognize that.
    We hope and pray that we do not have to send men and women 
into that kind of a situation in defense of our country or 
freedom, but we know it happens and we do stand ready to make 
those tough choices.
    I did not really have a question, as much as I wanted to 
make a statement or give you an explanation, by way of--
particularly since you complimented me on one vote. That 
probably makes me 1 for 30, I do not know, maybe, on the 
scorecard. I am not sure. But I do appreciate when you do--I 
was going to give you another 5 minutes, too; you know, we know 
how to show appreciation.
    No, what I wanted to say was, last year I came up with an 
awkward and less than perfect, I will put it that way, method 
to try and outline waste, fraud, and abuse within the budget, 
all budgets, because, as the Secretary said and others have 
said, we do not want to waste any dollars, whether it is for 
veterans or seniors or school kids or people who might be 
homeless or hungry or whoever it might be.
    It was a less than perfect assumption that we could 
probably find about a penny on the dollar, and as the Secretary 
said, he has already found close to $3 billion of savings that 
he has been able to plow back into improved benefits and 
services. And as we move forward, he said that that was 
probably only scratching the surface.
    All I will tell you is that even though we found a less 
than perfect way of trying to highlight that, it is still 
something in my heart that I believe we can do and still serve 
our veterans. And I stand ready to work with you, even though 
we will probably still come up with less than perfect ways of 
doing it, and probably less than perfect budgets for that 
matter, too.
    But I wanted to, since you gave me a compliment, do a 
little bit by way of explanation at least of what we tried to 
do last year, at least with a heart toward making improvements 
that work in the future as opposed to just coming in with a 
meat axe, so to speak, and trying to find savings that way.
    It was less than perfect, but we want to work with you, all 
of you, as we move forward, making sure we do not waste any 
money as we try and provide services for veterans.
    That is the statement I wanted to make. It is not really 
much of a question, but with that, I turn to Mr. Spratt for any 
questions or comments he would like to make.
    Mr. Spratt. Thank you, Mr. Chairman.
    Let me thank each one of you not just for testifying, but 
for being there and understanding the complexities of all these 
accounts. You represent your constituency as well as any in 
this town, and you do a good job of helping us understand in 
our interaction what really is needed.
    As I understand what the administration is proposing, 
basically, all of the increase between 2004 and 2005 is going 
to come from veterans themselves, or at least from third-party 
payers, insurance companies who insure these veterans.
    There is an increase in anticipated collections of about 
$700 million which accounts for most of the nominal increase in 
their budget, even a bit more than that.
    No. 1, is that realistic and, No. 2, is this something we 
can expand; and in particular, what is the potential for using 
Medicare as a third-party payer or to meet some of the unmet 
needs in the Veterans Administration?
    I think we called it subvention years ago. We do not talk 
about it much now but it was a hot idea several years ago. Is 
it still a viable idea?
    Mr. Bollinger. Well, as I understand it, Medicare is pretty 
much off the table. I know the Secretary is talking with the 
Secretary of HHS about some sort of reimbursement from them for 
certain veterans, but I do believe that that is pretty much off 
the table.
    I will say, too, in regards to collections and insurance 
and all of that, this is all well and good. I believe that, 
hopefully, the VA will improve in this regard. But we do not 
believe and we strongly encourage the Congress not to let this 
kind of money substitute hard dollar appropriations that the VA 
needs to spend on veterans, because if you look at the history, 
throughout the years ever since VA has started this, there has 
been difficulty, year after year. They have gotten better, but 
they are a long way from being able to collect money that they 
really need; and all of us strongly encourage that this doesn't 
substitute appropriations.
    Mr. Jones. You are right, sir, on the user fee making up a 
very large component of the prospective increase in VA funding. 
The increase is said to be $1.2 billion, it's important to 
note, however, that $800 million of the increase comes exactly 
from a user fee.
    Those user fees may be more designed to add moneys and to 
drive veterans away. Some 200,000 veterans will not come back 
to the system if they are charged a user fee. That figure was 
reported to us, and it is part of the administration's budget. 
It was reported to us in the VA briefing that we received on 
this budget earlier this year.
    With regard to Medicare, it is the Nation's larger 
insurance company. Veterans do pay into it, but when they 
choose veterans assistance in health care, there is no 
compensation to VA, so VA subsidizes, in some part, Medicare.
    We had always hoped that there would be some sort of third-
party payment to VA for the health care given to priority 8s 
and other veterans. We thought that Medicare would be a part of 
this package and we thought that HMOs would as well.
    VA reports a problem receiving payments from insurance 
companies or HMOs; which is why their medical cost recovery 
system is lower than what it could be.
    Mr. Spratt. On another subject, you were saying in your 
Independent Budget that next year, 2005, at least $3.8 billion 
more than has been requested is needed to meet the levels that 
you regard as adequate for veterans health care.
    Let me show you chart No. 2, please, on the screen. This is 
a simple bar graph that shows, No. 1, in the blue bars, current 
services out over a 5-year period of time; and No. 2, in the 
red bars, the level of funding proposed for next year; and then 
in the computer run for each subsequent year, which actually 
goes down in 2006, 2007, 2008, and 2009.
    Each year, the discrepancy between current services gets to 
be larger and larger. In the fifth year--fourth year, really--
the amount appropriated is about half of what current services 
would call for.
    What happens if we track the red bars instead of the blue 
bars in funding?
    Mr. Jones. Well, quickly, what happens is a diminished 
number of veterans would find health care access. There would 
be a precipitous drop in health care provided to veterans were 
we to follow the red lines; I mean, the red lines indicate how 
much money would be available.
    Mr. Spratt. In other words, these are not simply marginal 
changes, these are changes that would have a dramatic effect on 
the delivery of health care for veterans.
    Mr. Jones. They would, should that be the course; and 
Congress in the past years has not shown that to be the course. 
They have been generous. In fact, they have been generous to 
the fact where VA now has a very large carryover from last 
year. Last year, it was $600 million and they have in this 
budget an estimated carryover of some $800 million from fiscal 
2004 into the fiscal 2005 budget.
    At the same time, they are denying care to veterans, based 
on a lack of resources. We find this to raise a question. How 
does it happen that we have such a large rollover of money and 
a lack of resources available to care for priority 8 veterans 
who would like to have access.
    Noting the carryover, if I could just make one more point 
to budget minds, VA says the average care for priority 8 
veterans is $2,500, thereabouts. If you have an $800 million 
carryover and you divide that $2,000 care into 800,000, well, 
you have enough money to care for nearly 350,000 veterans. That 
is not the number of veterans coming to VA. The number coming 
to VA is around 167,000 per year, which would require 
approximately $400 million, just FYI.
    Mr. Spratt. Yes.
    Mr. Surratt. Mr. Spratt, I wanted to respond to an earlier 
question you had that I didn't get an opportunity to respond 
to. You were talking about the copays, and I would like to 
remind the committee, it has not been too long ago that 
veterans benefits were entirely a repayment for their service. 
There were no user fees, there were no copayments, and if you 
recall, from this committee we got copayments and user fees as 
a temporary budget reconciliation measure set to expire. Those 
kept being extended and became a regular feature of VA benefits 
and continued for the short time that we had a budget surplus.
    And so each year now we see the administration proposing to 
shift more of the burden of health care away from the budgets 
and onto veterans through these user fees and increased copays; 
and I think that is why you see so much resistance to that 
concept. It really fundamentally departs from the principle of 
veterans benefits when you start making veterans pay for their 
own benefits.
    Mr. Spratt. I was talking about third-party benefits and, 
in particular, tapping Medicare to pay for some of their 
patients in VA facilities.
    Mr. Surratt. And what happens on that is, where we identify 
a funding source from somewhere else, OMB, it has a zero sum 
game. They just merely ask for less to the same extent, so the 
system does not gain anything to enhance services. It reduces 
the amount of appropriations they ask for by an equal amount.
    Mr. Jones. In fact, Mr. Spratt, I think we asked for a 
proposal that we would ask for Medicare repayment less than 
dollar for dollar. I think it was 90 percent or 80 percent of 
the Medicare funds back to VA, and that ended up on the cutting 
room floor.
    Mr. Spratt. One final question: The Montgomery GI bill. I 
was surprised to see this language in the performance survey. 
It is such bureaucratese, I cannot figure out what it is.
    Do they claim that the benefits are too lucrative, too 
generous?
    Mr. Surratt. I believe that is just the results from 
program evaluation done under the government's Performance and 
Results Act.
    Mr. Spratt. It struck me as odd that anybody even put it in 
here, ``The VA should create a program outcome measure''--I do 
not know what that means--``readjustment to civilian life, and 
reinstate a cost-effectiveness measure.''
    I guess you go figure out whether or not the education that 
people got under the GI bill actually benefited their future, 
but I think history will tell us it is one of the best 
investments this country ever made.
    Mr. Surratt. Well, I think you are right. And I would like 
to make a point on that, also, and it is the same thing as the 
user fees.
    While the Montgomery GI bill is a great thing, the GI bill 
for World War II veterans paid the full cost of any educational 
institution you wanted to go to in this country, Princeton or 
whatever, and whatever that cost was, it paid it, and it was 
completely free.
    Today, those service members contribute so much of their 
own pay to the GI bill, and today, as generous as that is and 
as much as it has been raised in the last few years, it 
probably still does not pay the full cost of education to many 
of the institutions in this country. And I am not knocking the 
GI bill, but I am just saying when we look at what we have in 
veterans benefits today, in many ways we have better benefits 
and in other ways we have lost ground.
    Mr. Spratt. Yes. Thank you for your testimony.
    Mr. Bollinger.
    Mr. Bollinger. Yes, I wanted to comment on your testimony 
that included the chart.
    The figure you used was the total discretionary 
recommendation that we made, and in looking at that in the 
outyears, if that were allowed to persist the way it is, not 
only would all veterans be adversely affected, but I do fear 
that even the core veterans, those in need of specialized 
services--blind rehab, spinal cord injury, mental health and 
others--would be adversely affected by that kind of funding 
level. So we would be--we would be shocked if that continued 
over the years.
    Chairman Nussle. Mr. Schrock, do you have questions.
    Mr. Schrock. Thank you, Mr. Chairman.
    Thank you all for being here. Let me start by talking about 
education. Education costs have so skyrocketed that there is no 
way that the Montgomery bill could pay for all of that, and 
that is unfortunate. I understand that.
    This is a subject that has been of interest to me. I served 
24 years in the Navy, and since then, I have been interested--
even when I was in the State senate, people came to me thinking 
I could help with their veterans benefits so I got a little 
taste of it then, and frankly, I think as a country we have to 
take care of our veterans, especially like those that you see 
on the front page of this booklet here.
    I think we have a moral obligation to do that, there is no 
question about that; and hopefully we have made some--as you 
heard me say when the Secretary was here, we have made some 
progress. There is obviously a ways to go, and this is just 
going to take some time to do that, but I appreciate the things 
you have said.
    Let me ask Mr. Bollinger and Mr. Surratt: Secretary 
Principi outlined proposals to focus resources on the 
Department's core mission, namely, to ensure treating veterans 
with disabilities, low incomes and special needs is given the 
highest priority.
    In your opinion, do you think that is the appropriate way 
to go, and is it appropriate or should include more than that.
    Mr. Bollinger. I think it is very noble, and I applaud the 
Secretary for doing that.
    I would throw out one word of caution and that is for 
veterans with catastrophic injuries, whether you are service 
connected or nonservice connected, just the most minor thing. 
And I will speak about spinal cord injury, because I know that 
disability very well. What may appear as a very slight 
disability, if not seen on an emergency basis or seen promptly, 
right away, that individual could end up in the hospital for 
literally three months taking care of a pressure sore.
    So I think what the Secretary did was noble, I understand 
his reasoning, but I think it is very important when you ask, 
should there be more people included?
    I think you have to look carefully at catastrophically 
disabled veterans.
    Mr. Schrock. Ditto.
    Mr. Surratt. VA's the expert on the health care part of the 
IB, so I will defer to Mr. Bollinger on that.
    Mr. Schrock. Clearly, health care costs have gone out of 
control. For 37 years I heard about it almost every day. Little 
did I realize I married into a family of all doctors, and I 
hear it all the time. So I know what health care costs are, and 
having survived cancer myself, I know what that can cost.
    Can you all suggest ways that the skyrocketing cost of 
health care, especially in the VA system, can be brought under 
control? And are there particular recommendations for cross-
control in the VA care system that you could make?
    Clearly, there has been, you know, probably--I do not want 
to use--waste, fraud, and abuse gets thrown around too much, 
but there is probably a lot of waste in any organization; I do 
not care what it is. In my office there probably is, too. But 
are there areas that you think they could tighten up, that they 
could better save money so that more people could be looked at?
    That is a question for all of you.
    Mr. Bollinger. If I may.
    Mr. Schrock. Sure.
    Mr. Bollinger. I think there are certainly ways that 
management efficiencies play into this.
    Let me answer your question this way: I believe that the 
money spent on research, on assistive technology and that whole 
side of the equation would do more in both the--well, probably 
more in the long run than the short run, because research 
requires years to sort of manifest itself and get a payoff.
    But I think if research is done correctly, if they look 
into new ways of doing assistive technology, prosthetic 
research and rehab, that will probably save the VA more money 
over the long haul than any management efficiencies would.
    Mr. Schrock. Is not that done by commercial civilian 
companies, private companies?
    Mr. Bollinger. Some of it is, but the VA has--you know, 
over the years, been a leader.
    Mr. Schrock. In that.
    Mr. Bollinger. Surely.
    Christopher Reeve has benefited from VA research, and so--
--
    Mr. Schrock. Because the VA had the clientele that needed 
it the most.
    Mr. Bollinger. Absolutely.
    Mr. Schrock. Yes.
    Mr. Surratt. As the single largest health care provider in 
this country, with any system of a large nature, you can find 
economies of scale and so forth; and I do not know what those 
would be, but I would mention that the cost of health care 
provided by the VA--and I haven't seen the figures lately--is a 
fraction of what it is in the private sector or even Medicare. 
They are so much more efficient.
    So they have to be commended for doing that well, and there 
is a point at which they cannot wring out enough savings to 
justify large budget cuts on the projection of efficiencies.
    Mr. Schrock. One positive is, the VA probably cannot be 
sued by a bunch of lawyers like the civilian sector is, thank 
God for that; or am I wrong?
    Mr. Surratt. No. The VA is subject to the Federal Tort 
Claims Act.
    Mr. Schrock. Oh.
    Mr. Surratt. And they have malpractice suits.
    Mr. Schrock. Oh, oh, you just shattered me. I did not know 
that. Boy, the lawyers are going to get you one way or the 
other, are not they?
    Mr. Jones. May I just say one thing about efficiencies.
    Mr. Schrock. Yes.
    Mr. Jones. The Presidential Task Force to Improve Health 
Care Delivery for our Nation's Veterans, established by the 
President, concluded and reported last year. In their report 
they said, Based on our findings, we recognize that even if VA 
were operating at maximum efficiency, it would not be able to 
meet its obligations to enrolled veterans with its current 
level of funding. That was in fiscal year 2003.
    Mr. Schrock. Mr. Jones came to Virginia Beach for the 
Veterans Day parade, and I think he was probably surprised by 
the outpouring of affection for the military, and I think he 
was shocked at how many people were there.
    Mr. Jones. It was a sunny day.
    Mr. Schrock. I represent more military, retired military, 
than anybody in America, and when we have a Veterans Day 
parade, we have a Veterans Day parade.
    The three of you are invited as well.
    Chairman Nussle. Well, that ends the commercial for 
Virginia for at least about 2 more seconds, because I will 
recognize Mr. Scott of Virginia.
    Mr. Scott. I was going to point out that southeast Virginia 
is the only support for the chairman that we have at the 
committee right now; and I thank the gentleman, my colleague 
from Virginia, and I think it points out the interest that we 
have on this issue.
    We have in southeast Virginia a lot of military bases and a 
lot of military retirees, and this is an issue. We have one of 
the VA hospitals and other military hospitals in the area.
    This chart, the blue line showed what it would take to keep 
the present level of services. I guess my question to whoever 
can answer is: How much of the Independent Budget is keeping up 
with present services and how much of it is new services?
    Mr. Bollinger. I am going to have to respond to you in 
writing because the chart I have in front of me does not show 
it.
    Mr. Scott. OK. The reason I say that is because people keep 
saying we are spending more and more on VA, but if you look, 
you need to spend substantially more each year just to maintain 
the present levels so that each veteran can expect the same 
levels of service he has been expecting in the past. And 
veterans are getting older and sicker. You need more money just 
to keep up with the present level of services.
    So say you are paying a little more but not enough to 
maintain present services, you can call that more money, but I 
think the veterans would think that they do not get services, 
the waiting periods are longer, it is not a good thing.
    Mr. Jones. The point is well taken, sir. I think 60 percent 
of the VA budget is personnel. Health care requires staff. And 
one of the interesting things is that when the President makes 
his budget projection, for example, last year's budget, the 
projection is based on a certain COLA. Last year's COLA was I 
think 1.35, 1.5 percent, in that area. When Congress lifted 
that to a 4 percent COLA, when that happens, the money does not 
expand; the employees have to be reduced or there are fewer new 
employees coming into the system, because the money remains the 
same but it is disbursed differently. So when you have a larger 
COLA taken from a lower COLA budget, you lose employees and you 
lose service despite the fact that discretionary spending goes 
up.
    Mr. Scott. Mr. Bollinger, you mentioned the fact that some 
people, if they have copays, will not access the services. The 
Secretary will be giving updated answers to that question.
    Can you tell me why people would not access VA if there is 
a copay?
    Mr. Bollinger. Sure. First of all----
    Mr. Scott. And how many people might be involved?
    Mr. Bollinger. Please understand that the individuals that 
use these VA hospitals--in many cases our hospitals, the 
outpatient clinics and so are--are not what we would call 
wealthy people. When they are hit with increased fees, copays, 
user fees, all that type of thing, they may very well look 
elsewhere. Not all of them, but certainly a significant number 
of them. We believe it is somewhere around 200,000 people, and 
that is a fact of life. They will either not get their health 
care, they will go someplace else that may in fact cost more, 
and all of us--society in general--is going to end up picking 
up that tab.
    Somewhere, somehow, health care costs have got to be paid. 
And if they do not use the VA system, if they choose not to 
because they perceive these copays or increased fees is more 
than they want to spend, they will not go there.
    Mr. Scott. Let me ask one other question while I have a 
couple of seconds left, and that is the Allen decision on how 
you compensate veterans with substance abuse problems. What 
should be the response to the Allen decision? Should we just 
comply with it or should we try to overturn that?
    Mr. Surratt. I would like to respond to that. The DAV 
represented Mr. Allen and we told VA they were misinterpreting 
the law, and we had to go to court to prove it to them.
    I think the argument of the government is deceptively 
simple on Allen. There is a great distinction between a person 
who uses alcohol for its pleasurable intoxicating effects and a 
former POW who has a psychiatric disorder that is so 
distressing that he or she uses alcohol to escape. And I think 
VA also inflates the amount of money that they would save by 
repealing that.
    What the law says now is if you have a service-connected 
disability and that symptomatology is made somewhat worse 
because of the secondary use of alcohol, you take the whole 
symptomatology into account, you don't try to sever out the 
symptoms of alcohol. And my experience with VA rating 
decisions, not many of them are compensating veterans due to 
alcohol use, but Congress recognized that distinction when they 
passed the law.
    The law is good the way it is. It is good public policy 
despite the arguments to the contrary. I have to respectfully 
disagree with the Secretary, and we would urge Congress to 
leave that as it is.
    Mr. Jones. AMVETS agrees with the Secretary. We do not 
support self-medicated disability.
    Mr. Scott. Thank you.
    Mr. Surratt. I would remind you, though, that is the 
position of the Independent Budget, we do have that, in the 
Independent Budget, opposing changing the law.
    Mr. Scott. Thank you Mr. Chairman.
    Chairman Nussle. Yes, my last--I just have one other thing 
I wanted to ask, just because I did not ask any questions, and 
one of the other colleagues, you had mentioned on the front 
cover of yours--and I should ask: Do you know his name?
    Mr. Jones. Yes, sir.
    Jason--his name is Jason Wittling, W-I-T-T-L-I-N-G, and he 
is a new member of the Paralyzed Veterans.
    Mr. Bollinger. He was here on Veterans Day, Mr. Chairman.
    Chairman Nussle. Is that right?
    Mr. Bollinger. And we took him to the amphitheater for a 
service and brought him to our reception, he and his family; 
and he, unfortunately, there are too many of those people 
today.
    Chairman Nussle. Right. And there is nothing, without being 
disrespectful to your budget any more than I would want to be 
disrespectful to my budget, there is nothing in here that can 
give him back what he lost in service to his country.
    Having said that, I need to ask a question, and that is: 
What would Jason not receive under the Bush budget that he 
would receive under the Independent Budget that you believe he 
deserves; in other words, what is missing in your opinion, in 
all four of your opinions, from the Bush budget that is not in 
there but is in here?
    Mr. Bollinger. In Jason's case, he would probably be able 
to access health care rapidly, depending on where he goes.
    There are differences across the country, there are 23 
spinal cord injury centers, some better than others.
    I would say probably one of the most significant impacts it 
would have on him over his lifetime, and I will go back to it 
again, is research. The VA is doing so much in the area of 
spinal cord injury research and paralysis, the promise is out 
there, it benefits all Americans, and it is a shame that the 
administration has chosen to reduce that funding.
    Chairman Nussle. Please--or anybody else would like to 
suggest from the areas you covered in your budget or in your 
presentation, something that Jason would not receive under the 
Bush budget that he deserves?
    Mr. Hayden. I will respond, Mr. Chairman, just from our 
portion, the construction portion of it, there is the potential 
that Jason would not have access to secure and safe facilities.
    You know, these buildings are old and some of them are 
falling down, so that is just from the construction portion.
    The Bush budget falls about $800 million short.
    Chairman Nussle. Are there any personal benefits that he is 
not receiving that he would receive under your budget that--
under the, I keep saying your budget--the Independent Budget, 
that he is not receiving under the Bush budget?
    Mr. Bollinger. You know, it is kind of a case-by-case 
thing, Mr. Chairman, but I would say one area----
    Chairman Nussle. And I am not trying to--I am really not 
trying to make it a trick question.
    Let me say, instead of Jason, the core group of veterans 
that are similar--although no one is exactly similar--similar 
to Jason's situation.
    Mr. Bollinger. Sure.
    Chairman Nussle. I do not mean just to single out Jason. 
You may not know exactly his specific situation.
    Mr. Bollinger. Sure.
    Let me say in addition to health care, there is another 
area we have not talked about today, and that is vocational 
training and employment. That could be a gem if it was properly 
funded and, again, VA under this administration budget is going 
to experience a cut there. Vocational rehabilitation and 
employment is the first benefit that veterans from Iraq and 
Afghanistan are exposed to when they come home. It is the 
benefit that gets people back into the mainstream, whether they 
choose to go back to college, whether they need independent 
living, or whether they need other ways to be integrated back 
into society.
    The vocational rehabilitation and employment program could 
conceivably hurt Jason if that program is not properly funded.
    Mr. Surratt. Mr. Chairman, I would like to speak on that 
also.
    In the Independent Budget, the Secretary has a task force 
to look at the vocational rehabilitation and employment 
program, and that task force is about to come out with a report 
that recommends many changes; and those changes, it is 
vocational rehabilitation and employment. VA doesn't really 
have many employees dedicated to employment, and that is one of 
the, I understand, recommended changes.
    Now, the President's budget recommends cutting the staffing 
of vocational rehabilitation and employment in 2005. We 
recommend 200 more employees than they had last year, there is 
a substantial difference. So that is what my testimony about 
the proposed cuts in VBA was all about; when we have these 
veterans returning from Iraq and other places, and they are 
putting greater demands on the system, and VA has been working 
very hard to improve all of its benefit lines, and this budget 
cuts the benefits back.
    In the '90s, they started having some problems with their 
claims adjudication system. Some of it was more claims, some of 
it was budget cuts, a combination of things. But this is not 
the time to be cutting the staff in vocational rehabilitation, 
employment compensation, or education, or any of those benefit 
lines.
    Chairman Nussle. Any of those witnesses want to respond to 
the personal side of the benefits at all or anything?
    Mr. Scott. Just one other question?
    Chairman Nussle. Certainly.
    Mr. Scott. Thank you, Mr. Chairman. I know you had the same 
complaints I do about the time it takes to process a disability 
claim.
    What does your budget do about reducing the time it takes 
to get an answer on a disability appeal?
    Mr. Surratt. Well, to repeat what I just said, the VA, this 
problem with disability claims got to the point that it was 
just intolerable. And when Secretary Principi came in--and that 
was one of his goals, to improve the claims processing. And 
they brought in Admiral Cooper and they started making some 
real reforms in their processes, and Congress gave VA some more 
money.
    The solution is better trained people who make the correct 
decisions the first time, so they do not have to rework the 
claims and overload the system and result in further delays. 
But part of it is information technology, that uses the best 
technology to reduce the transfer of paper and systems that 
have rules in them that prompt the adjudicator and achieve 
uniformity.
    In the Independent Budget, our proposal is to let C&P 
Service keep the same number of employees they had at the end 
of the year, 2003. We recommended more money than the 
President's budget recommends.
    In cutting back, that is some of the places they cut back. 
They cut back some money that is going to slow down the 
implementation of some of these very valuable technology 
systems and put off their deployment.
    Mr. Scott. How much more is in your budget than in the 
President's budget?
    Mr. Surratt. Oh, it is just a matter of, like, a half a 
million dollars for the information technology. But the FTE--
and I do not have a cost on that--we are recommending about, I 
think, 900 or some FTE employees, more than what the 
President's budget seeks to do this job.
    Mr. Scott. Did I understand that the President is cutting 
back on the full-time employees on disability benefits.
    Mr. Surratt. In fiscal year 2004 they had less FTE than 
2003, and the fiscal year 2005 calls for further cuts.
    Mr. Scott. Fewer people.
    Mr. Surratt. Fewer people.
    Chairman Nussle. Gentlemen, thank you very much for your 
testimony and waiting here today, and then for spending the 
rest of the afternoon with us.
    We appreciate your testimony. Your testimony will be part 
of the record, as will your budget, and we look forward to 
working with you in the future.
    Thank you very much.
    Mr. Bollinger. Thank you.
    Mr. Surratt. Thank you.
    Mr. Hayden. Thank you.
    Mr. Jones. Thank you.
    Chairman Nussle. And, with that, the hearing stands in 
recess, actually adjourned, and we will meet after the recess 
for additional hearings with regard to the budget.
    [Whereupon, at 4:08 p.m., the committee was adjourned.]

                                  
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