[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
        INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              


                        THURSDAY, MARCH 13, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:22 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Christopher S. Bond (chairman) 
presiding.
    Present: Senators Bond and Mikulski.

                     DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF ANTHONY J. PRINCIPI, SECRETARY OF VETERANS 
            AFFAIRS
ACCOMPANIED BY:
        ROBERT H. ROSWELL, M.D., UNDER SECRETARY FOR HEALTH
        VICE ADMIRAL DANIEL L. COOPER (USN RET.), UNDER SECRETARY FOR 
            BENEFITS
        ERIC BENSON, ACTING UNDER SECRETARY FOR MEMORIAL AFFAIRS
        WILLIAM H. CAMPBELL, ASSISTANT SECRETARY FOR MANAGEMENT
        RICHARD GRIFFIN, INSPECTOR GENERAL

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. The subcommittee will come to order. Thank 
you very much for waiting for us. Senator Mikulski and I had a 
vote, and she is over here very engaged in preparations, and 
she suggested I go ahead and begin. We apologize for the delay, 
but those of you who have dealt with the schedule of the Senate 
know that Murphy was an optimist in drafting Murphy's Law.
    This morning, the VA, HUD, and Independent Agencies 
Subcommittee will conduct its budget hearing on the fiscal year 
2004 budget for the Department of Veterans Affairs. It is a 
pleasure to welcome back Secretary Tony Principi to our 
subcommittee, and his colleagues. Mr. Secretary, I am very 
pleased to have you here today to discuss your Department's 
fiscal 2004 budget. Before I launch into the budget, I join 
with my many, many colleagues in expressing our deep gratitude 
and appreciation for the hard work you and your team are doing 
and the time you put into responding to the needs of our 
Nation's veterans, and for my part most especially, to the 
needs of some 566,000 veterans in my home State of Missouri.
    Mr. Secretary, when you entered office 2 years ago you were 
faced with some of the most difficult challenges of any Cabinet 
head. However, I can say unequivocally that you have met those 
challenges head on with strong leadership, decisiveness, 
compassion, and persistence.
    I congratulate you on the tremendous progress you have made 
in correcting some of VA's longstanding problems. We are 
impressed by your accomplishments, and look forward to 
continuing to work with you in meeting the needs of our 
Nation's veterans. Nevertheless, VA continues to face some 
extremely difficult challenges, most notably in the area of 
providing quality and accessible health care to our Nation's 
veterans.
    Addressing the health care needs of our veterans is even 
more sensitive to all of us because of the great uncertainties 
of what perils lie in the seeming inevitability of war against 
Iraq. It is unfortunate we are in this position, and I know 
that all of us, including the President, believe that war 
should only be used as a last resort. History, however, has 
demonstrated that military force must be used on occasion to 
preserve the peace and prevent even greater death and 
destruction.
    Nevertheless, our hearts and prayers go out to the 240,000 
men and women of our Armed Forces who are currently in the 
Persian Gulf region and to those forces of the other allied 
nations. Mr. Secretary, I know you personally know all too well 
the horrors and tragedies of war, and it is that perspective 
that I know influences and helps guide your actions in thinking 
and helping our Nation's veterans.
    Last year when you appeared before the committee, we talked 
a great deal about the growing health care crisis facing VA. 
Unfortunately, despite significant funding increases and 
regulatory actions taken by the VA, access to the health care 
system continues to be a major problem.
    Today's problems with the VA health care system can be 
traced back through the history of the VA. The veterans medical 
care system was originally created to provide needed care to 
veterans injured or ill from wartime service, veterans with 
service-connected disabilities. Over the time, the system has 
become a safety net for veterans with service-connected 
disabilities, veterans with specialized service needs, and 
lower-income veterans. These three groups are the VA's core 
constituents. VA's first and foremost mission is to assist 
these veterans.
    Up until 1996, VA served its core constituents. However, 
eligibility reform enacted in 1996 expanded VA medical care 
services to veterans not previously served. These veterans do 
not have service-connected disabilities, and have comparably 
higher incomes than those of VA's core constituents. The 
Veterans Health Care Eligibility Reform Act of 1996 required VA 
to create priority categories for enrollment to manage access 
in relation to available resources. Therefore, a higher 
priority for enrollment was provided to veterans with service-
connected disabilities, lower incomes, or specialized service 
needs.
    These higher priority enrollees are ranked in priority 
order from 1 through 6. Veterans without service-connected 
disabilities and with relatively higher incomes are ranked 
priorities 7 and 8. While the act requires the creation of 
these priorities, all priorities were provided equal access to 
health care services. In other words, the act created a first-
come, first-served system.
    The 1996 act predicted that the new requirements and 
expansion of services to previously unserved veterans would 
have no net funding impact to the Federal Government. In other 
words, it would be budget-neutral, because there would be few 
new enrollees.
    The committee report stated that the view of VA being 
besieged by a large wave of new enrollees for VA care is 
unrealistic. In case you missed it, let me restate that 
statement. The committee report said the view of VA being 
besieged by a large wave of new enrollees for VA care is 
unrealistic, close quote.
    The report also quotes testimony about Paralyzed Veterans 
of America. They found VA's best potential market is those who 
have the most familiarity with the system, that is, those 
currently using the system, close quote. Even data from the 
VA's 1995 national survey of veterans indicated a large 
proportion of veterans would rather go to a non-VA facility for 
their medical care if given a choice, close quotes. In other 
words, neither the authors nor the veterans service 
organization believed that VA would attract new veterans into 
the system. Amazing. What a bad guess.
    In 1999, Congress further expanded health care benefits for 
veterans by passing the Millennium Health Care Act. This act 
provides additional benefits such as long-term care and 
emergency services. Further, Congress encouraged and funded 
hundreds of new VA community based outpatient clinics to 
increase access delivery points for veterans living in areas 
far from in-patient centers. The creation of new CBOC's 
verified the truth behind the old saying, if you build it, they 
will come, and they did.
    Since 1996, the fastest-growing segment of the VA health 
care system has been those veterans without service-connected 
disabilities and with higher incomes. Many of these veterans 
have other health insurance options compared to VA's core 
constituents, and they have other health care options, but the 
view of VA being besieged by a large new wave of enrollees for 
VA care is not unrealistic, it is a fact. VA now serves 2 
million more veterans than it did prior to the implementation 
of the 1996 act.
    Further, VA cannot provide generous health care benefits 
for all veterans and expect to maintain quality and timely 
health care service delivery. VA cannot be everything to 
everybody. The uncontrollable demand of veterans seeking VA 
health care benefits has resulted in a waiting list of over 
200,000 veterans. These veterans have been told that they 
cannot get an appointment for at least 6 months--6 months. In 
some cases, veterans have been told to wait 1 to 2 years.
    That is unacceptable. We cannot ignore the many medical 
needs that require immediate attention. Moreover, many of these 
veterans on the waiting list are VA's core constituents, those 
with service-connected disabilities, lower income, or with 
specialized service needs.
    Mr. Secretary, I read with great interest about the Gordon 
Mansfield experiment, when you sent out your Assistant 
Secretary for Legislative Affairs to eight VA clinics. I was 
appalled to learn that Mr. Mansfield, who is a service-
connected disabled veteran who served with distinction in the 
Vietnam conflict, was wait-listed at six of those clinics. It 
is unconscionable that veterans in the position of Mr. 
Mansfield are in this situation.
    In addition, the sad fact is that more veterans like Mr. 
Mansfield will face this situation if we do not act. The 
outyear projections of even more non-core patients coming into 
the VA system are staggering. The convergence of these factors, 
combined with a lack of a Medicare prescription drug benefit, 
an aging veteran population, and the greatly improved quality 
of care provided by VA clinics, created the current dilemma we 
are facing today. The system is in crisis, a storm that we 
could call the perfect storm.
    Mr. Secretary, you are in the eye of the storm, and to 
bring our core constituent veterans out of it you made some 
difficult decisions. Last year, VA began requiring health 
centers to provide priority access for service-connected 
veterans rated 50 percent or greater. This past January, the 
Secretary exercised legislative authority to suspend new 
enrollments of priority 8 veterans.
    The decision to suspend priority 8 enrollments was not 
popular, but it was consistent with the Eligibility Reform Act 
of 1996, which provided the authority to suspend enrollments. 
As the committee report states, the VA may not enroll or 
otherwise attempt to treat so many patients as to result either 
in diminishing the quality of care to an unacceptable level or 
unreasonably delaying the timeliness of VA care delivery.
    Mr. Secretary, you did the right thing. It was not popular, 
but doing something popular is not always right, and doing 
something right is not always popular. I support your 
decisions, and you did what the law expected you to do, because 
we cannot compromise health care quality and access for our 
core constituents. These men and women rely on VA's health care 
system. They have nowhere else to go. We cannot and must not 
leave these men and women behind.
    Despite the huge waiting list and the growing demand for 
VA's health care services, I am optimistic that we can resolve 
this crisis. You have my personal commitment that I will work 
with you to solve the crisis fully. The record demonstrates 
this committee in a bipartisan manner has viewed medical care 
funding as its top priority and, as chairman, I will continue 
to keep that as our top priority. It has always been my belief 
that our goal should be to fund fully the health care needs of 
the core constituency priorities 1 through 6. The record shows 
that we have, in fact, accomplished that goal, but we have not 
achieved the results.
    Part of the solution is resolving the crisis in funding. In 
terms of the fiscal 2004 budget, the President proposed $62.8 
billion for VA. It includes $30.1 billion for discretionary 
programs, and $32.7 billion for mandatory. The discretionary 
funding request is $2.1 billion, 7.5 percent more than the 
fiscal year 2003 enacted level.
    The most notable item is $25.4 billion for medical care, a 
$1.5 billion increase over fiscal year 2003. We increased the 
2003 medical care budget by more than $2.5 billion over 2002. 
These funding increases are not only a cry of need, but a cry 
for help. I regard the budget request for medical care as a 
floor, but there is a ceiling due to our other compelling needs 
such as affordable housing, environmental protection, 
scientific research, and the Space Shuttle and its safety.
    Further, it is clear that the funding level for VA medical 
care cannot be sustained without reform of the system. 
Nevertheless, under any budget climate this is a good budget. 
This is the largest dollar increase ever submitted by any 
administration, and would provide VA almost $9 billion more 
funds for medical care than provided in fiscal 1996.
    The request also contains a number of policy initiatives to 
refocus health care on the core constituents. I think they are 
worthy of further discussion. They appear to be reasonable, and 
I think the $250 annual enrollment fee, an increase in co-pays 
deserve a fair and full examination.
    It also provides in the budget a down payment of $225 
million for the CARES program, which is a positive step, and I 
fully support CARES, because we cannot pour resources into 
half-empty hospitals or exist primarily to serve research and 
financial interests of medical schools. VA's first and foremost 
mission is to care for our Nation's veterans. CARES is an 
integral part of assuring that we focus on that and align our 
expenditures to those needs.
    I am committed to funding the health care needs, but it is 
more than a funding matter. There is much more to be done in 
the management area, and greater accountability in performance 
and consistency are required throughout the VHA. Third party 
collections of the VHA are projected to collect $524 million 
this year compared to last year at a time when the GA has found 
that VA has improved collections, but suggests that VA could 
have collected hundreds of millions more.
    The VAIG report estimated that it could have collected $500 
million more. Due to the operational limitations of VA, 
however, VA lacks a reliable estimate of uncollected dollars 
and therefore does not have the ability to assess the 
operational effectiveness.
    Collections continue to be a problem, but one of the most 
infuriating problems I have seen recently is the time and 
attendance controls for VA-paid part-time physicians. The 
Inspector General audit of the Lexington, Kentucky Veterans 
Affairs Medical Center found that VA was paying for part-time 
physicians who are not actually treating veterans. They were 
from medical schools, performing research or other duties 
outside VA.
    The IG said that some time and attendance cards were 
falsified. These actions resulted in $1.15 million in annual 
salary costs for physicians not performing their duties at the 
VA hospital. That jeopardizes patient safety. Ward nurses did 
not have the resources to deal with matters like patient 
restraint and medication changes. This is appalling and 
unacceptable, and I will follow up with some questions for Dr. 
Roswell on this.
    The last point I should touch on is a variance in the 
network. Veterans from Missouri and across the Nation have told 
me about the wide performance variance among the 21 divisions. 
Some veterans have complained that specialized services have 
gotten the short end of the stick. I supported Dr. Kaiser's 
reorganization of VHA, but I believe it has gone too far, and 
we cannot afford to have the networks operated as 21 fiefdoms. 
Veterans in Missouri are very, very pleased to have such good 
service but why should a veteran in Missouri receive better 
care than a veteran in Kansas? I think it is time to review the 
structure of the 21 networks.
    Finally, Mr. Secretary, let me restate my appreciation for 
your hard work and the great leadership you provided. Your work 
on improving claims processing has been outstanding. I commend 
you on your efforts for CARES. I am gratified by your visits to 
Missouri, and responsiveness in addressing some horrible 
sanitary problems at the Kansas City VA Medical Center after 
they have been ignored for years. I look forward to our 
continued working relationship in addressing the needs, and I 
will turn now to my colleague, Senator Mikulski, for her 
statement.

                STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning, Mr. Secretary, and to all 
the people of the VA team. Mr. Secretary, we want to thank you 
for visiting the Baltimore VA medical facility earlier this 
week, and bringing Secretary Thompson to the VA in Baltimore to 
show how we have been using technology to provide more 
efficient care in acute care, and to be able to provide better 
care when that patient returns to the primary care situation.
    I thought it was fascinating that it showed that the best 
way to provide technology for patient care was not to treat it 
as a billing system, as we were advised, but to treat it as a 
patient management system. You can bill off of it, but you 
cannot manage patients off of a billing system, but you can 
bill off of a management system.
    I thought it was great that Tom Scully was there. He was 
there, because the issues that we are seeing in VA and that are 
grappled with not only in Baltimore but throughout the VA 
system are models for what we need to do in private sector 
care, so we were honored to have you, and I know the staff 
appreciated your coming and I know you, like I, were very proud 
of what they are doing there.
    And I think Secretary Thompson got an eyeful and his staff 
got an earful, because he kept saying, why can we not do that, 
why can we not do that now?
    We are glad that the VA is a model.
    We know that the VA medical system is under a tremendous 
stress, with the passing of the World War II generation and 
their very unique and often multiple needs, the coming ever-
increasing numbers of the Korean War veterans, as well as the 
Vietnam veterans, so just in terms of the sheer population, we 
know that VA faces a number of challenges, and we also know 
that VA will be a significant back-up as we go to war, to be 
able to deal with the possibility of significant casualties, 
and we also know that the VA medical system stands in support 
of our war against terrorism, where our major metropolitan 
areas could face mass casualties.
    But as we look at the VA budget, first of all we appreciate 
the President's increase in veterans' medical care. We also 
appreciate the fact that you are focusing on those four areas, 
and we want to work with you. You are a Vietnam vet. You have 
served your country in war, and you continue to serve it as the 
Secretary of VA, but when I looked at the VA budget, I had two 
things in mind. First, we have got to keep the promises, keep 
the promises we made to our veterans, and second, that the 
budget needs to make highest and best use of taxpayers' dollars 
so that both the Veterans' Administration and the veterans 
themselves get a bang for the buck.
    What I am concerned about, though, is that in this year's 
budget we place toll charges on veterans. This means there is 
now an entrance fee to get VA medical care if you are category 
7 or if you have been grandfathered into category 8, and also 
that there will be higher co-pays.
    I am also concerned that there are now waiting lines to get 
medical care, waiting lines for medical care. I have had a 
longstanding work--going back when you worked for President 
Bush's dad as Deputy, we have been concerned about the claims-
processing time, and to me, if you are a veteran and you are 
coming for medical care, there should be no waiting lines, and 
as we understand it there are almost one-quarter million 
veterans who now have a waiting time issue, and we want to talk 
with you about that. I am concerned that the budget OMB gave VA 
does not really help you, or help you address those needs.
    When we look at the priority 8 veterans and even the 
priority 7 veterans, we see that from both the IG's report and 
the GAO report, and I believe your own analysis that we 
discussed with you last year, they are primarily coming to VA 
because of a prescription drug benefit, not only because of the 
changes in the law, as Senator Bond has articulated, but they 
are coming for a prescription drug benefit.
    I note that the GAO report says that we spent $418 million 
on outpatient pharmacy benefits for priority 7 last year, and 
that priority 7 use of pharmacy benefits have increased 
rapidly. Also, they say for those in categories 1 through 6, 
they have increased, but given the nature of their wounds and 
their age, we would expect that, but it would seem to me that 
the category 7s, based on GAO reports--and I can go over the 
figures. You know the figures.
    Well, we went from 107,000 veterans to 827,000 veterans. 
That is the budget-buster, but the question is, why are they 
coming? Well, first of all, there is good care, but I also 
believe they are coming because of the failure in public 
policy. I believe they are coming because there is no reliable 
prescription drug benefit that many of them have access to in 
the private sector.
    When you look at the Inspector General's report, you also 
see that veterans in those categories are coming not only for a 
prescription drug benefit, but in many instances they have been 
written by their own physician, but they are coming to you to 
be their drugstore because of the prescription drug benefit. 
These are real challenges, and I want to discuss them, and I 
believe that the way that you are trying to meet them is by the 
$250 entrance fee, and also the increase in copayments.
    Now, I want to get why you think that is going to work, is 
that the way to do it, do we need a prescription drug benefit 
that really addresses those needs, because I believe it is 
going to be worse. I believe that many of the veterans who are 
coming are either people--primarily men, though some women--who 
work, who have no health insurance. They are either self-
employed or they work in small business. They might have names 
like Hank or Buck, and they work in home improvement and so on. 
They need you. You are the safety net for them.
    But I also know that with the downturn in manufacturing, 
the collapse of 300,000 jobs in our economy, where many had 
worked for companies, whether it is steel industries, like 
Pennsylvania, and my home State of Maryland, Beth Steel, the 
airline industry, the collapse of those industries that 
normally had a defined benefit plan and the collapse of their 
health insurance means that they are diverting themselves to 
VA.
    I do not fault them. This, I believe, is a matter of fact. 
This is not a matter of fault, but we are either going to have 
to have a national policy to address those needs, or it is 
going to continue to fall on VA, and you are going to 
continually invent mechanisms that put you in a prickly 
position with veterans, and we have got to get at how to deal 
with this, and I wonder if you agree with my analysis when we 
do this.
    I could go on, but I feel that this is one of the number 
one challenges, the lack of health insurance for many, and then 
a lack of prescription drug benefit for even more as the 
population gets older.
    Now, I am really proud of what you are doing in medical 
research, and I am proud of our research community. People are 
alive longer and live better because of the research that is 
being done both by VA to help the veterans that then moves into 
the common medical practices, but as a result, people are 
living longer with chronic conditions. Those chronic conditions 
are managed by prescription drugs, access to primary care, and 
then ancillary services like physical therapy and chiropractic 
and other care.
    So we have got to get a handle not only on the budget, but 
recognize the needs of the population and see why they are 
coming. We could keep building it, and they are going to keep 
coming, and then that will take us to how we are going to deal 
with the waiting lists, how we are going to deal with the 
clients' processing times, and how we are going to work on 
those issues, so these are not only budget issues and 
appropriations issues, I believe they are some of the most 
significant challenges.
    Now, just as the VA has led the way in technology, and I 
have seen it in my own home town--Senator Bond, you would be 
pleased, the technology that we did there for patient 
management has made the use of physicians' and nurses' time 
more efficient, reduced medical errors, and actually improved 
patient outcomes, and we had the data to show it, but we did 
not go for some big megasystem where we ended up with a 
boondoggle. We ended up with a patient management system that 
has improved management. Just as we are the leader in that 
area, I think we now have to be a leader in how we are going to 
deal with prescription drugs.
    So there are many other issues on research and others that 
I would like to raise.
    The other thing is, I am glad you are taking up the 
cemetery issue. The World War II generation is passing on. We 
need to retire them with honors. Yesterday, we laid to rest my 
uncle, Florian Mikulski. He fought at the Battle of the Bulge. 
He was a Purple Heart guy, he was a Bronze Star guy, so there 
was an honor guard at the funeral, which meant a lot to our 
family.
    He went to a private Catholic cemetery, but when you look 
at him he was an ordinary guy. He helped run our fabulous 
Mikulski's baker's shop. He went off to war. He was a hero, and 
came back with a steel plate and all the permanent things, went 
to work, never said another word about it, and we have got to 
look out for those guys. We have got to look out for them in 
their medical care, and when they pass on, to do it in a place 
that has as much dignity as they deserve, so thank you for 
taking that up, and I look forward to your testimony.

                           PREPARED STATEMENT

    Senator Bond. Thank you very much, Senator Mikulski. 
Senator Johnson submitted a statement which he would like to 
have included in the record.
    [The statement follows:]
               Prepared Statement of Senator Tim Johnson
    Mr. Chairman, I thank you and Ranking Member Mikulski for calling 
today's hearing to talk about the fiscal year 2004 budget for the 
Veterans Administration (VA). Your commitment to caring for our 
nation's veterans and your leadership on this Subcommittee is greatly 
appreciated by me and the veterans of South Dakota.
    I would also like to thank Secretary Principi for appearing before 
the Subcommittee. You have a very difficult job and I thank you for 
your continued willingness to serve our nation.
    At a time in which we are asking so much of the men and women 
serving in our Armed Forces, I believe it is essential that we send a 
clear signal of our commitment to care for our military personnel both 
on active duty and as veterans. For decades, the men and women who 
joined the military were promised educational benefits and lifetime 
health care for themselves and their families. Those promises have too 
often not been kept.
    Mr. Chairman, several weeks ago I had the opportunity to visit VA 
facilities in South Dakota. This gave me the chance to meet with 
veterans and to listen to their thoughts. By far, the issue of greatest 
concern to them is health care. These veterans rely on the VA for their 
health care, they see a continued erosion in their benefits, and they 
are deeply troubled about the long-term viability of the VA health 
system. They want assurances that they will be able to access quality 
care in the future.
    Unfortunately, years of inadequate funding for VA health care have 
pushed the system to the brink of crisis. I am concerned that the 
quality of care is starting to suffer. Let me be clear, this has 
nothing to do with the men and women who work in the VA health care 
system. They are dedicated professionals who care about the veterans 
they serve, but they are being asked to do too much with too few 
resources.
    Instead, I believe the problems in the VA health care system stem 
for the administration's failure to ask for adequate funding. While the 
number of veterans in the United States has decreased over the years, 
the number of veterans utilizing the VA health care system has 
increased exponentially. This is due in large part to the availability 
of Community-Based Outpatient Clinics and the prescription drug 
benefits available through the VA. According to the VA, the number of 
veterans enrolled in the health care system has increased from 3.8 
million in 1996 to 6.8 million in 2002.
    While the VA has become the health care system of choice for many 
veterans, the system is simply not equipped to handle this kind of 
patient influx at the current funding level. The strain on the system 
is evident in that the VA estimates over 200,000 veterans are waiting 
for appointments--half of them will end up waiting six months or more. 
In Sioux Falls, a veteran can wait up to twelve months to get an 
appointment at the VA.
    The VA tells us these problems stem from having to operate with 
``limited resources.'' Based on this explanation, one would think 
Congress has been providing the VA with less funding than requested by 
the President. Nothing could be further from the truth. In fact, the 
VA-HUD Appropriations Subcommittee, under the leadership of Senators 
Mikulski and Bond, has provided funding for veterans health care in 
excess of the VA's request for the past several years.
    In fiscal year 2001, Congress provided a $1.4 billion increase in 
veterans health care funding over the Administration's initial request. 
In fiscal year 2002, we succeeded in adding $1.1 billion during 
consideration of the VA-HUD Appropriations bill. In addition, as a part 
of the fiscal year 2002 Emergency Supplemental Appropriations bill, 
Congress included another $417 million for veterans health care. Even 
though Secretary Principi argued the VA needed all of this additional 
funding, the President refused to spend $275 million that was earmarked 
for veterans medical care.
    In fiscal year 2003, the President requested just $22.7 billion for 
the VA health system, far less than what was needed. Congress, once 
again, was forced to step in and appropriate an additional $1.2 
billion.
    Mr. Chairman, this pattern of the President underestimating the 
VA's needs and then relying on Congress to make up the difference is 
simply unsustainable over the long-term. And as I look at the 
President's request for fiscal year 2004, I fear we find ourselves once 
again in the same situation. The good news is the President has 
requested an additional $1.3 billion in appropriated funds for VA 
health care over what Congress provided in fiscal year 2003. This is a 
step in the right direction.
    However, the bad news is this is still not enough money to fund the 
needs of the VA health system. According to the Independent Budget--an 
independent analysis of the VA budget prepared by AMVETS, the Disabled 
American Veterans, the Paralyzed Veterans of America, and the Veterans 
of Foreign Wars--the President's request shortchanges the VA by about 
$2 billion. The failure to provide sufficient funding will have real 
consequences for veterans. It will mean veterans will continue to have 
to wait up to twelve months to get an appointment, it will mean the VA 
will not be able to hire additional health care professionals, and it 
will mean there will be a further decline in the quality of care 
provided for our veterans.
    Rather than addressing the problem and providing the needed 
funding, the President apparently has decided his solution is to turn 
veterans away from the system. The President's budget includes a 
proposal to carry-out the VA's recent decision to deny enrollment of 
future Category 8 veterans, which will leave at least 360,000 veterans 
without access to care. In addition, he is seeking authority for a $250 
enrollment fee for certain veterans. According to the VA's own 
estimation, this will force 1.3 million veterans to leave the system. 
Finally, the President has proposed significant increases in co-
payments for pharmacy and primary care benefits, thus shifting an even 
larger financial burden to our veterans.
    Rather than contracting and restricting VA medical care, I believe 
we need to look for ways to improve access and quality of care so that 
we can fulfill our past promises to our veterans.
    Mr. Chairman, for me, fully funding the VA is a national security 
issue. Veterans are our most effective recruiters. However, inadequate 
benefits and poor health care options make it difficult for these men 
and women to encourage the younger generation to serve in today's 
voluntary military. Although we once again face difficult budgetary 
decisions, the only question is whether veterans health care should be 
a priority or an afterthought.
    Every time I have the opportunity to meet with veterans, I am 
reminded of the tremendous sacrifices they have made on behalf of our 
country. We owe each of them a debt of gratitude that can never be 
fully repaid. One of the things we can--and must--do for our veterans 
is to honor the promises we have made to them. This starts with 
providing those veterans with access to the quality health care they 
deserve.
    As we begin consideration of the fiscal year 2004 VA-HUD 
Appropriations bill, I look forward to working with my colleagues on 
the Subcommittee to ensure full funding for the VA.
    Once again, I thank Secretary Principi for taking the time to 
appear before the Subcommittee this morning. I look forward to hearing 
your thoughts on the many issues of importance to South Dakota's 
veterans.

    Senator Bond. Now, Mr. Secretary, if you would proceed, 
please.

                FISCAL YEAR 2004 BUDGET REQUEST SUMMARY

    Secretary Principi. Thank you very, very much, Mr. 
Chairman, Senator Mikulski. Of course, I thank you for the 
opportunity to present and discuss our proposed budget for 
fiscal year 2004, but perhaps more importantly, I thank you for 
your tremendous support for my Department and the people we 
serve. I believe the budget we have this year is eloquent 
testimony to that support, and I assure you we will do 
everything in our power to achieve the goals that we share and 
use that money wisely.
    Our budget sets forth clear priorities. However, priorities 
necessarily call for choices, and where difficult choices are 
necessary, our budget identifies and acknowledges them and, as 
you have both so eloquently stated, we do have enormous 
challenges that lie ahead, but I am confident that by working 
together we can get there.
    This is a good budget in absolute terms, in percentage 
terms, and in comparative terms. In absolute terms, the 
President requests a total of $63.6 billion, $33.4 billion for 
entitlement programs and $30.2 billion for discretionary 
spending. In comparative terms, the President is asking for a 
greater percentage increase for VA than for any other 
Department of Government, and in percentage terms, this 
represents an increase of 7.7 percent over this year, and a 
21.4 percent increase over the past 2 years. I am proud of the 
work of our leadership team who are here with me today and 
their efforts with OMB in fashioning and helping us get this 
budget to present to you.
    The budget the President submitted to Congress will fund 
the Veterans Benefits Administration's--Admiral Dan Cooper, our 
Under Secretary is with us--continued progress towards 
achieving my goal of benefits decisions in 100 days with no 
more than 250,000 cases in our working inventory.
    This budget also funds the activation of four new national 
cemeteries--Acting Under Secretary Benson is with us--advanced 
planning on a fifth for activation in 2005, and will allow us 
to make continued progress toward our commitment to maintain 
our cemeteries as national shrines.
    For health care--Dr. Roswell, our Under Secretary is to my 
left--the program that dominates our discretionary budget--the 
President asks the Congress to commit an additional $2.1 
billion to treat veterans' illnesses and disabilities. 
Approximately $500 million will come from increased collections 
or copayments, and $1.5 billion, as you indicated, will come 
from increased appropriations of taxpayers' dollars.
    In addition, the budget directs VA to identify 
approximately $950 million through management efficiencies. I 
am acutely aware that every dollar unnecessarily expended is a 
dollar unavailable to provide health care to sick veterans. I 
know that $950 million is a lot of money, and it sounds like a 
lot of money, but I would point out that in this country in 
2002 the annual increase in productivity across the Nation in 
the business sector, business productivity, manufacturing 
productivity has increased by 4.7 percent, and this increased 
efficiency of $950 million represents only 3.4 percent, so I 
think it is achievable. It is aggressive, but I believe we can 
do it.
    I established a Business Oversight Board, directed 
construction of information technology enterprise architecture, 
chartered a procurement reform task force, and placed a high 
priority on improving our collection of copayments and 
insurance payments, an issue that has been of great concern to 
you and to this committee. Our progress leaves me comfortable 
with an aggressive but achievable goal for management 
efficiencies.
    I will not hide from the fact that this budget assumes that 
VA will sharpen its focus of our care on those veterans 
identified by Congress as having the highest priority, our 
service-disabled, those who have few options for health care in 
this country, as some of the issues that Senator Mikulski 
highlighted in her statement, the lower-income people, and 
those who need our specialized programs, such as spinal cord 
injury, mental health, blind rehabilitation.
    We project that we will treat 167,000 more of these 
veterans in 2004, but as you well know, our projections have 
not been very accurate for the very reasons, again highlighted 
by you, that we have an open enrollment policy with the 
exception of category 8, and changes in the economy, no 
prescription drug benefit, has caused more and more veterans to 
come to us seeking care.
    Last year, we enrolled almost 900,000 new veterans in the 
VA health care system. We have grown from about 2.9 million 
enrolled in 1998 to 6.8 million enrolled today. Overall, we 
enrolled almost 200,000 more than we expected, 70,000 more 
users than we expected last year, again for some of the reasons 
that you highlighted that they are coming to us, and it has 
clearly stretched our system to the breaking point.
    There is no question that we face enormous challenges in 
providing care with a fixed budget for this ever-increasing 
number of veterans who come to us for treatment and 
pharmaceuticals. When demand for care exceeds our capacity, 
veterans have to wait longer for that care. On behalf of those 
veterans and the VA health care professionals who will treat 
them, I thank you for the $2.5 billion increase that you gave 
us this year.
    Those funds, combined with management actions I have 
directed, should allow us--and I made it a very high priority--
to eliminate this backlog of veterans waiting for care, waiting 
more than 30 days to see a primary care physician, by the end 
of this fiscal year. All of our energies and those of my Under 
Secretary for Health and all of our people around the country 
are focused on using that $2.5 billion to increase our 
treatment capability to bring that backlog down.

                             WAITING LISTS

    I would note that most of the veterans who were on last 
year's waiting lists have now been seen, only to be replaced by 
additional veterans who have sought care since then. The 
existence of waiting lists illustrates the tension between 
fixed resources and potentially unlimited demand for care. The 
Congress clearly anticipated this tension when it both enacted 
the statutory requirement for me to make an annual enrollment 
decision and designated priority groups for constraining 
enrollment when necessary, priority groups 1 through 8.
    Last year's waiting lists were symptoms of an imbalance 
and, as I am required to do, I took action to bring veterans 
health care back into balance. I directed the VHA to continue 
informing veterans about their benefits, to be part of the 
community but to cease actively recruiting new patients until 
we can get a handle on this backlog.
    I suspended enrollment of additional higher-income priority 
8 nonservice-connected veterans and, as part of the budget 
before you today, I proposed policy to strengthen VA's focus on 
veterans in the higher-priority groups established by Congress, 
eliminated the copayments for the poorest of the poor.
    Currently, we collect copayments from any veteran who has 
an income of $9,000 or more. I proposed to eliminate the 
copayment for any veteran who has an income of $16,000 or less, 
but I have also proposed, for those who can most afford to 
share a little of the cost of their care and who have other 
options, to have a slightly increased copayment and to make an 
annual enrollment fee premium of $250, which is very consistent 
with the military's TRICARE Prime program, where any military 
retiree who is entitled to health care must make an annual 
enrollment payment.

                  SUSPENSION OF PRIORITY 8 ENROLLMENT

    I acknowledge that my recent decision to suspend additional 
enrollment of veterans in the priority 8 group has put us on a 
course through uncharted waters, and I will monitor our 
outcomes. I will monitor our growth in workload very carefully 
to ensure that we do not overshoot the mark, because I want to 
make sure that we see as many veterans as possible who seek 
care from the VA as long as we can do it in a timely and 
quality manner, and I will not hesitate to act to right the 
course, to reopen enrollment if I believe we can care for 
veterans in priority group 8. However, failure to address a 
continuing imbalance would inevitably result in longer waiting 
lists, poorer quality of care, and perhaps even actual 
disenrollment of priority 8 veterans, a decision that I would 
be loath to make.
    I have to emphasize that the tension between resources and 
demand for care is not a 1-year issue. A decision to reject 
demand management initiatives this year would only compound the 
problem for us in future years, because veterans who are 
enrolled today may not seek to use the health care system 
today, but next year or the year after, so the costs grow 
exponentially as veterans become older and sicker.
    My enrollment decision does not mean that VA believes 
higher-income veterans are unimportant. They are very, very 
important. We are working with HHS, and I am so pleased that 
Secretary Thompson and I visited Baltimore to begin to break 
down the barriers and the walls that have all too often existed 
in this city between agencies of Government who have similar 
missions. In health care, it is VA, it is HHS, and DOD.

                           PREPARED STATEMENT

    Oftentimes we get caught up on turf and jurisdiction, and 
we do not see the benefits of working together collaboratively 
to provide the health care that veterans, that military 
retirees and that Medicare-eligible citizens receive, and I 
think that by working together across the spectrum of health 
care, in research, in prescription benefits, and in health care 
in general, I think we can do a lot more by working together, 
and I think this visit demonstrated a willingness on Secretary 
Thompson's part for doing that. I thank you, Senator Mikulski, 
for joining with us on that important visit.
    Mr. Chairman, Senator Mikulski, and really all the members 
of the committee who cannot be here today, I appreciate your 
advocacy and support for veterans, and we are prepared to 
answer your questions.
    [The statement follows:]
        Prepared Statement of the Honorable Anthony J. Principi
    Mr. Chairman and members of the Committee, good morning. I am 
pleased to be here today to present the President's 2004 budget 
proposal for the Department of Veterans Affairs (VA). The centerpiece 
of this budget is our strategy to bring balance back to our health care 
system priorities. I have by my decisions and by my actions focused VA 
health care on veterans in the highest statutory priority groups--the 
service-connected, the lower income, and those veterans who need our 
specialized services. This budget reflects those priorities.
    The President's 2004 budget request totals $63.6 billion--$33.4 
billion for entitlement programs and $30.2 billion for discretionary 
programs. This represents an increase of $3.3 billion, which includes a 
7.7 percent rise in discretionary funding, over the enacted level for 
2003, and supports my three highest priorities:
  --sharpen the focus of our health care system to achieve primary care 
        access standards that complement our quality standards;
  --meet the timeliness goal in claims processing;
  --ensure the burial needs of veterans are met, and maintain national 
        cemeteries as shrines.
    Virtually all of the growth in discretionary resources will be 
devoted to VA's health care system. Including medical care collections, 
funding for medical programs rises by $2.1 billion. As a key component 
of our medical care budget, we are requesting $225 million to begin the 
restructuring of our infrastructure as part of the implementation of 
the Capital Asset Realignment for Enhanced Services (CARES) program.
    We are presenting our 2004 request using a new budget account 
structure that more readily presents the funding for each of the 
benefits 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.
                              medical care
    The President's 2004 budget includes $27.5 billion for medical 
care, including $2.1 billion in collections, and represents an 8.0 
percent increase over the enacted level for 2003. These resources will 
ensure we can provide health care for over 4.8 million unique patients 
in 2004.
    The primary reason VA exists is to care for service-connected 
disabled veterans. They have made enormous sacrifices to help preserve 
freedom, and many continue to live with physical and psychological 
scars directly resulting from their military service to this Nation. 
Every action we take must focus first and foremost on their needs. In 
addition, our primary constituency includes veterans with lower incomes 
and those who have special health care needs. By sharpening the focus 
of our health care system on these core groups, we will be positioned 
to achieve our primary care access standards.
    The demand for VA health care has risen dramatically in recent 
years. From 1996 to 2002, the number of patients to whom we provided 
health care grew by 54 percent. Among veterans in Priority Groups 7 and 
8 alone, the number treated in 2002 was about 11 times greater than it 
was in 1996. The combined effect of several factors has resulted in 
this large increase in the demand for VA health care services.
    First, the Veterans Health Care Eligibility Reform Act of 1996 and 
the Veterans Millennium Health Care Act of 1999 opened the door to 
comprehensive health care services to all veterans. Second, the 
national reputation and public perception of VA as a leader in the 
delivery of quality health care services has steadily risen, due in 
part to widespread acknowledgement of our major advances in quality and 
patient safety. Third, access to health care has greatly improved with 
the opening of hundreds of community-based outpatient clinics. Fourth, 
our patient population is growing older and this has led to an increase 
in veterans' need for health care services. Fifth, VA has favorable 
pharmacy benefits compared to other health care providers, especially 
Medicare, and this has attracted many veterans to our system. And 
finally, some feel that public disenchantment with Health Maintenance 
Organizations, along with their economic failure, may have caused many 
patients to seek out established and traditional sources of health care 
such as VA. All of these factors have put a severe strain on our 
ability to continue to provide timely, high-quality health care, 
especially for those veterans who are our core mission.
    Through a combination of proposed regulatory and legislative 
changes, as well as a request for additional resources, our 2004 budget 
will help restore balance to our health care system priorities and 
ensure we continue to provide the best care possible to our highest 
priority veterans. The most significant changes presented in this 
budget are to:
  --assess an annual enrollment fee of $250 for nonservice-connected 
        Priority 7 veterans and all Priority 8 veterans;
  --increase co-payments for Priority 7 and 8 veterans--for outpatient 
        primary care from $15 to $20 and for pharmacy benefits from $7 
        to $15;
  --eliminate the pharmacy co-payment for Priority 2-5 veterans whose 
        income is below the pension aid and attendance level of 
        $16,169;
  --expand non-institutional long-term care with reductions in 
        institutional care in recognition of patient preferences and 
        the improved quality of life possible in non-institutional 
        settings.
    Revolutionary advances in medicine moved acute medical care out of 
institutional beds and rendered obsolete ``bed count'' as a measure of 
health care capacity. The same process is underway in long-term care 
and this budget proposes to focus VA's long-term care efforts on 
increased access to long-term care for veterans, rather than counting 
institutional beds. This budget focuses long-term care on the patient 
and his or her needs. Our policies expand access to non-institutional 
care programs that will allow veterans to live and be cared for in the 
comfort and familiar setting of their home surrounded by their family.
    While we will shift our emphasis to non-institutional forms of 
long-term care, we will continue to provide institutional long-term 
care to veterans who need it the most--veterans with service-connected 
disabilities rated 70 percent or greater and those who require 
transitional, post-acute care. Coupled with this, our budget continues 
strong support for grants for state nursing homes.
    In addition, we are working 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 
a new ``VA+Choice Medicare'' plan. This would allow for these veterans 
to be able 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. The ``VA+Choice Medicare'' plan will become effective later 
this year as the two Departments finalize the details of the plan.
    Coupled with my recent decision on enrollment, these proposed 
regulatory and legislative changes would help ensure that sufficient 
resources will be available to provide timely, high-quality health care 
services to our highest priority veterans. If these new initiatives are 
implemented, veterans comprising our core mission population will 
account for 75 percent of all unique patients in 2004, a share 
noticeably higher than the 67 percent they held in 2002. During 2004, 
we will treat 167,000 more veterans in Priority Groups 1-6 (those with 
service-connected disabilities, lower-income veterans, and those 
needing specialized care).
    In return for the resources we are requesting for the medical care 
program, we will be able to build upon our noteworthy performance 
achievements during the past 2 years. During 2002, VA received national 
recognition for its delivery of high-quality health care from the 
Institute of Medicine in the report titled ``Leadership by Example.'' 
In addition, the Department received the Pinnacle Award from the 
American Pharmaceutical Association Foundation in June 2002 for its 
creation of a bar code medication administration system. This important 
patient safety initiative ensures that the correct medication is 
administered to the correct patient at the proper time. Patient 
satisfaction rose significantly last year, as 7 of every 10 inpatients 
and outpatients rated VA health care service as very good or excellent.
    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 will employ this approach most extensively in the 
management of chronic disease and in disease prevention. For 16 of the 
18 quality of care indicators for which comparable data from managed 
care organizations are available, VA is the benchmark exceeding the 
best competitor's performance.
    Mr. Chairman, one of our most important focus areas in our 2004 
budget is to significantly reduce waiting times, particularly for 
patients who are using our health care system for the first time. As we 
begin to rebalance our health care system with a heightened emphasis on 
our core service population, we will drive down waiting times. By 2004, 
VA will achieve our objective of 30 days for the average waiting time 
for new patients seeking an appointment at a primary care clinic. In 
addition, we have set a performance goal of 30 days for the average 
waiting time for an appointment in a specialty clinic. With this budget 
and the enacted funding level for 2003, we will eliminate the waiting 
list by the end of 2003.
    We remain firmly committed to managing our medical care resources 
with increasing efficiency each year. The 2004 budget includes 
management savings of $950 million. These savings will partially offset 
the need for additional funds to care for an aging patient population 
that will require an ever-increasing degree of health care service, and 
rising costs associated with a sharply growing reliance on 
pharmaceuticals necessary to treat patients with complex, chronic 
conditions. We will achieve these management savings by implementing a 
rigorous competitive sourcing plan, reforming the health care 
procurement process, increasing employee productivity, increasing VA/
DOD sharing, continuing to shift from inpatient care to outpatient 
care, and reducing requirements for supplies and employee travel.
    Our projection of medical care collections for 2004 is $2.1 
billion. This total is 32 percent above our estimated collections for 
2003 and will nearly triple our 2001 collections. By implementing a 
series of aggressive steps identified in our revenue cycle improvement 
plan, we are already making great strides towards maximizing the 
availability of health care resources. For example, we have mandated 
that all medical facilities establish patient pre-registration to 
include the use of software that assists in gathering and updating 
information on patient insurance. We are in the midst of a series of 
pilot projects at four Veterans Integrated Service Networks to test the 
implementation of a new business plan that calls for reconfiguration of 
the revenue collection program by using both in-house and contract 
models. In addition, the Department will award the Patient Financial 
Services System this spring to Network 10 (Ohio) which will acquire and 
deploy a commercial system of this type. This project involves 
comprehensive implementation of standard business practices and 
information technology improvements.
    As you 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. 
Over the past year, our two Departments have undertaken unprecedented 
efforts to improve cooperation and sharing in a variety of areas 
through a Joint Executive Council (JEC). To expand the scope of 
interdepartmental cooperation, a benefits committee has been added to 
complement the longstanding Health Executive Council. The VA and DOD 
Benefits Executive Council is exploring improved transfer and access to 
military personnel records and a pilot project for a joint physical 
examination to improve the claims process for military personnel. The 
JEC provides overarching policy direction, sets strategic vision and 
priorities for the health and benefits committees, and serves as a 
forum for senior leaders to oversee coordination of initiatives. To 
address some of the remaining challenges, the Departments have 
identified numerous high-priority items for improved coordination such 
as the joint strategic mission and planning process, computerized 
patient medical records, eligibility and enrollment systems, joint 
separation physicals and compensation and pension examinations, and a 
joint consolidated mail-out pharmacy pilot.
        capital asset realignment for enhanced services (cares)
    The 2004 budget includes $225 million of capital funding to move 
forward with the Capital Asset Realignment for Enhanced Services 
(CARES) initiative. This program addresses the needed infrastructure 
realignment for the health care delivery system and will allow the 
Department to provide veterans with the right care, at the right place, 
and at the right time. 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.
    As demonstrated in Veterans Integrated Service Network 12, 
restructuring will require significant investment to achieve a system 
that is appropriately sized for our future. Our preliminary estimate 
for resources that can be redirected to medical care between now and 
2010 as a result of the appropriate alignment of assets and health care 
services, and the sale or enhanced-use leasing of underutilized or non-
performing assets, is $6.8 billion. It is extremely important to have 
funding in 2004 to begin the multiyear effort to restructure. Given the 
timing associated with identifying CARES projects, we will be working 
with your committee on the authorization process in order not to delay 
the start of these projects.
                    medical and prosthetic research
    Mr. Chairman, we are requesting $822 million in funding for VA's 
clinical research program, an increase of 2.6 percent from the 2003 
level. For the first time, our request includes funds in the form of 
salary support for clinical researchers, resources that previously were 
a component of the Medical Care request. This approach provides a more 
complete picture of VA's resources devoted to this program. In addition 
to the Department's funding request, nearly $700 million in funding 
support comes from other federal agencies such as DOD and the National 
Institutes of Health, as well as universities and other private 
institutions.
    This $1.5 billion will support more than 2,700 high-priority 
research projects to expand knowledge in areas critical to veterans' 
health care needs--Gulf War illnesses, diabetes, heart disease, chronic 
viral diseases, Parkinson's disease, spinal cord injury, prostate 
cancer, depression, environmental hazards, women's health care 
concerns, and rehabilitation programs.
                           veterans' benefits
    The Department's 2004 budget request includes $33.7 billion for the 
entitlement and discretionary costs supporting the six business lines 
administered by the Veterans Benefits Administration (VBA). Within this 
total, $1.17 billion is included for the management of these programs--
compensation; pension; education; vocational rehabilitation and 
employment; housing; and insurance.
    Improving the timeliness and accuracy of claims processing is a 
Presidential priority, and during the last year we have made excellent 
progress toward achieving this goal. A year ago, I testified that I had 
set a performance goal of processing compensation and pension claims in 
an average of 100 days by the summer of 2003. I am pleased to report 
that we are on target to meet that goal and we will maintain that 
improved timeliness standard for 2004. When we reach this goal, we will 
have reduced the time it takes to process claims by more than 50 
percent from the 2002 level.
    At the same time that we are improving timeliness, we will be 
increasing the accuracy of our claims processing. The 2004 performance 
goal for the national accuracy rate is 90 percent, a figure 10 
percentage points higher than last year's level of performance, and 
markedly above the accuracy rate of 59 percent in 2000.
    The driving force that will allow us to make this kind of progress 
with only a slight budget increase continues to be the initiatives we 
are implementing from the Claims Processing Task Force I established in 
2001. Located at the Cleveland Regional Office, our Tiger Team has been 
working over the last year to eliminate the backlog of claims pending 
over 1 year, especially for veterans 70 years of age or older. This 
aggressive effort of reducing the backlog and improving timeliness is 
underway at all of our regional offices. VBA has established 
specialized processing teams, such as triage, pre-determination, 
rating, post-determination, appeals, and public contact. Other Task 
Force initiatives, such as changing the procedure for remands, revising 
the time requirements for gathering evidence, and consolidating the 
maintenance of pension processing at three sites, have allowed us to 
free up resources to work on direct processing at the regional offices.
    This budget includes additional staff and resources for new and 
ongoing information technology projects to support improved claims 
processing. We are requesting $6.7 million for the Virtual VA project 
that will replace the current paper-based claims folder with electronic 
images and data that can be accessed and transferred electronically 
through a web-based solution. We are seeking $3.8 million for the 
Compensation and Pension Evaluation Redesign, a project that will 
result in a more consistent claims examination process. In addition, we 
are requesting $2.6 million in 2004 for the Training and Performance 
Support Systems, a multi-year initiative to implement five 
comprehensive training and performance support systems for positions 
critical to the processing of claims.
    In support of the education program, the budget proposes $7.4 
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 2004 performance 
goal of reducing the average time it takes to process claims for 
original and supplemental education benefits to 27 days and 12 days, 
respectively.
    VA is requesting $13.2 million for the One-VA Telephone Access 
project, an initiative that will support all of VBA's benefits 
programs. This initiative will result in the development of a Virtual 
Information Center that forms a single telecommunications network among 
several regional offices. This technology will allow us to answer calls 
at any place and at any time without complex call routing devices.
    All of these information technology projects are consistent with 
the Department's Enterprise Architecture and will be supported by 
improved project administration from our Chief Information Officer.
                                 burial
    The President's 2004 budget includes $428 million for VA's burial 
program, which includes operating and capital funding for the National 
Cemetery Administration (NCA), the burial benefits program administered 
by VBA, and the State Cemetery Grant program. This total is $17 
million, or 4.2 percent, over the 2003 level.
    This budget request includes $4.3 million for the activation and 
operation of five new national cemeteries in 2004. NCA plans to open 
fast-track sections for interments at four new national cemeteries 
planned for Atlanta, South Florida, Pittsburgh, and Detroit. Fort Sill 
National Cemetery opened a small, fast-track section for interments in 
November 2001, and Phase 1 construction of this cemetery should be 
complete by June 2003. In addition to resources for these five new 
cemeteries, this budget request also includes resources to prepare for 
the future opening of a fast-track section of an additional national 
cemetery near Sacramento. The locations of these national cemeteries 
were identified in a May 2000 report to Congress as the six areas most 
in need of a new national cemetery.
    With the opening of these new cemeteries, VA will increase the 
proportion of veterans served by a burial option within 75 miles of 
their residence to nearly 82 percent.
    The $108.9 million in construction funding for the burial program 
in 2004 includes resources for Phase 1 development of the Detroit 
cemetery, expansion and improvements at cemeteries in Fort Snelling, 
Minnesota and Barrancas, Florida, as well as $32 million for the State 
Cemetery Grant program.
    The budget request includes $10 million to support the Department's 
commitment to ensuring that the appearance of national cemeteries is 
maintained in a manner befitting a national shrine. One of the key 
performance goals for the burial program is that 98 percent of survey 
respondents rate the appearance of national cemeteries as excellent.
    A new performance measure established for NCA is marking graves in 
a timely manner after interment. We have established a 2004 performance 
goal of marking 75 percent of graves in national cemeteries within 60 
days of interment. When we achieve this goal, it will represent a 
dramatic improvement over the 2002 level of 49 percent.
                        management improvements
    Mr. Chairman, we have made excellent progress during the last year 
in implementing, or developing, several management initiatives that 
address our goal of applying sound business principles to all of the 
Department's operations. We are particularly pleased with our 
accomplishments in addressing the President's Management Agenda that 
focuses on strategies to improve the management of the Federal 
government in five areas--human capital; competitive sourcing; 
financial performance; electronic government; and budget and 
performance integration.
    We have developed a sound workforce and succession plan that 
includes strategies VA will pursue to implement a more corporate 
approach to human capital management, and a workforce analysis of 
several of the Department's critical positions--physicians, nurses, and 
compensation and pension veterans service representatives. We are 
moving forward with a competitive sourcing study of our laundry 
service, and other studies will be conducted of our pathology and 
laboratory services, and facilities management and operations. With 
regard to financial performance, we achieved an unqualified audit 
opinion for the fourth consecutive year. During 2003 and 2004, we will 
be involved in 10 electronic government studies. And finally, we 
continue to progress in our efforts to better integrate resources with 
results. One major accomplishment in this area is the restructuring of 
our budget accounts. This new account structure is presented in our 
2004 budget and will lead to a more complete understanding of the full 
cost of each of our programs.
    VA has a variety of other management improvement efforts underway 
that will lead to greater efficiency and will be accomplished largely 
through centralization of several of our major business processes. I am 
committed to reforming the way we conduct our information technology 
(IT) business, and to help the Department meet this objective, we have 
aggressively pursued new approaches to accomplishing our IT goals. We 
have developed a One-VA enterprise strategy, embarked on a nationwide 
telecommunications modernization program, and laid a solid foundation 
for a Departmental cyber security program. In order to facilitate and 
enhance these efforts, I recently centralized the IT program, including 
authority, personnel, and funding, in the office of the Chief 
Information Officer. This realignment will serve to strengthen the IT 
program overall and ensure that our efforts remain focused on building 
the infrastructure needed to better serve our Nation's veterans.
    This budget includes $10.1 million to continue the development of 
the One VA Enterprise Architecture and to integrate this effort into 
key Departmental processes such as capital planning, budgeting, and 
project management oversight. Our request also includes $26.5 million 
for cyber security initiatives to protect our IT assets nationwide. 
These initiatives aim to establish and maintain a secure Department-
wide IT framework upon which VA business processes can reliably deliver 
high-quality services to veterans.
    The 2004 budget includes funds to continue the CoreFLS project to 
replace VA's existing core financial management and logistics systems--
and many of the legacy systems interfacing with them--with an 
integrated, commercial off-the-shelf package. CoreFLS will help VA 
address and correct management and financial weaknesses in the areas of 
effective integration of financial transactions from VA systems, 
necessary financial support for credit reform initiatives, and improved 
automated analytical and reconciliation tools. Testing of CoreFLS is 
underway, with full implementation scheduled for 2006.
    We are developing a realignment proposal for finance, acquisition, 
and capital asset functions in the Department. A major aspect of this 
effort centers on instituting much clearer delegations of authority and 
improved lines of accountability. This plan would establish a business 
office concept across the Department and would enhance corporate 
discipline that will lead to uniformity in operations and greater 
accountability, and will make the transition to the new financial and 
logistics system much easier to implement. A component of the plan 
under review and consideration will result in a consolidated business 
approach for all finance, acquisition, and capital asset management 
activities.
                                closing
    Mr. Chairman, I am proud of our achievements during the last year. 
However, we still have a great deal of work to do in order to 
accomplish the goals I established nearly 2 years ago. I feel very 
confident that the President's 2004 budget request for VA will position 
us to reach our goals and to continue to provide timely, high-quality 
benefits and services to those who have served this Nation with honor.
    That concludes my formal remarks. My staff and I would be pleased 
to answer any questions.

    Senator Bond. Thank you very much, Mr. Secretary. Senator 
Mikulski has been summoned to a very important meeting, so I am 
going to let her ask questions as long as she wishes, as long 
as she needs, and then I will finish up with what is left.
    Senator Mikulski. I thank the chairman for his courtesy. I 
am part of a bipartisan special project task force under 
Senator Frist and have to leave shortly, but let me get right 
to my questions, Mr. Secretary, and it goes to the issues 
related to the management of the number of veterans coming in 
for prescription drugs.
    Let me go right to the IG report. In the IG report, they 
discussed in great detail about priority 7. They said 90 
percent of those who come had either access to private non-VA 
health care, they had health insurance to see a doctor, but 
they did not have health insurance to get their prescription 
drugs. The IG recommended a change--and they were coming to VA 
to get their prescription filled, but it was not written by a 
VA doctor.
    The IG recommended a change in the law so that veterans 
could have privately written prescriptions filled by the VA, 
and it was the original estimate by the IG that VA could save 
$1 billion a year by doing this. Now, this seems like a 
solution that would deal with, where you are not going being 
overwhelmed in the primary care department, and yet also meet 
those needs.
    Could you tell me, Mr. Secretary, or your team, Dr. 
Roswell, have you looked at this, and what do you think about 
the IG's recommendation, and would it be good patient care, and 
would it be good stewardship over our financial resources?
    Secretary Principi. Let me begin, because it is a very 
timely issue and one we are seriously grappling with. I do not 
say that lightly. I have been spending a lot of time, we spent 
a lot of time on this issue yesterday, and it is one of concern 
to us, and I will let Dr. Roswell follow up, but I think the 
concern, Senator Mikulski, is if we go down this road and 
basically just fill prescriptions, we do not know where it will 
lead.
    Although the growth in the VA workload has increased 
dramatically, as we all talked about here earlier, we are still 
seeing a microcosm of the 25 million veterans, and there are a 
lot more Medicare-eligible veterans out there, and if we became 
something akin to a drugstore, although I do not care for that 
term, we do not know what kind of influx we would have and how 
we could possibly support financially that increased workload 
of just filling prescription drugs.
    We are already stretched kind of to the limit, moved so 
much of our resources into primary care. If we had an influx 
of, let us say, 1 million or 2 million Medicare-eligible 
veterans who have never sought their care from the VA, how 
would we fund that?
    I think that is the only real disagreement. Perhaps it is a 
projection issue with the IG. I commend them for their report, 
but it is something that we are looking at at least right now 
to deal with the backlog issue, veterans who are currently on 
the backlog, to see if there is something we could do there, to 
fill their prescriptions.
    Senator Mikulski. But if I could just jump in, because the 
time is ticking here, you say you are worried that you will be 
overwhelmed by more people. The IG says, though, by doing this 
you are going to save $1 billion. That is a big bucket of 
change, and also has an impact on the number of primary care 
visits.
    Dr. Roswell, first would it save money, and second, would 
it help you with the staffing, and if not, why, because the IG 
usually has some pretty good recommendations.
    Dr. Roswell. The IG made a very astute observation. In 
fact, based on the unprecedented and unpredictable demand for 
care the IG is currently in the process of amending their 
recommendations and, in fact, the savings may exceed $2 billion 
a year.
    The savings come from replication of physical examination 
services and primary care services that have been provided by 
non-VA providers in the community, that now by law must be 
provided by the VA again before we can issue prescription drug 
benefits, and while we do not argue with the savings that the 
IG talks about in his study, it is important to point out that 
those are savings associated with replicated or duplicated 
physical examination and patient care services, but it does not 
reflect the incremental cost to our medical care appropriation 
for the additional pharmaceutical product that would be 
consumed by those people once prescriptions are issued by the 
VA.
    Last year, a typical patient in priority 7 or 8 received 
over $750 in prescription products. Now, seeing a patient once 
or twice a year, which would be necessary to evaluate them and 
rewrite the prescriptions written by their non-VA provider, 
would conservatively cost between $150 and $200 a year, but if 
we save $150 or $250 a year and then turn around and spend an 
additional $750 on pharmaceutical product, the impact on the 
appropriated dollar is phenomenal, so the savings are really 
more than offset by the additional cost of the drugs.
    Senator Mikulski. Well, first of all, from what I could 
see, any change would require statutory and regulatory change. 
Before we embark upon that, though, I think we need some 
recommendations that are consistent from both the VA itself and 
the VA IG, because I think we are onto something, but we want 
to be sure that the something leads to good care and to cost 
savings that do not reduce care, therefore maximizing the role 
that private insurance plays in our system.
    You already have a consistent problem collecting money from 
private insurance.
    Secretary Principi. Yes.
    Senator Mikulski. They always kind of dance us around.
    Secretary Principi. That is correct.
    Senator Mikulski. However, if you are going to your primary 
care doctor with whom you have a relationship and that primary 
care doctor also has a relationship with your spouse, that is a 
good place for the veteran to be, because it is holistic, it is 
family-oriented, they probably have known that vet since he or 
she came back home so we just need to see, then, how we can 
maximize this, and do that.
    I really think this could be a very important tool as we 
get to our appropriations, while we are then working for a 
national program, so I would like us to take a look at it. I am 
not committed to this method, but I am committed to us 
examining this recommendation and coming up with perhaps, not a 
compromise, but a balanced approach where you all feel very 
good about it.

                             ENROLLMENT FEE

    Let me go on, then, to another issue, which goes to the 
$250 enrollment fee. How did you arrive at $250? It is 
essentially like a deductible. How did you arrive at it, and 
why do we need it?
    Secretary Principi. Well, again I think we looked at, in 
assessing what would be an appropriate enrollment premium for 
the higher income, I think we looked at the potential savings 
from those who may have some other options, who may have 
insurance, but may use the VA on a periodic basis. We looked at 
the TRICARE program. We looked at what the assessment is for 
military retirees who spend 20 or 30 years in uniform to be 
enrolled in the TRICARE Prime program.
    Senator Mikulski. They have to pay an enrollment fee?
    Secretary Principi. Yes. Yes, they do.
    Senator Mikulski. How much is that?
    Secretary Principi. It is $456 a year for a married couple 
and I believe it is probably around $250 for a military retiree 
who has no spouse, but usually it is a family. It is a $456 a 
year payment, so here on the one hand we have a military 
retiree with 20 or 30 years of service is required to make a 
payment, and we thought that it would be reasonable, just for 
this, again the nondisabled, higher-income, those who may have 
spent 2 years or 4 years on active duty, to make a payment of 
$250, so that is how we reached it.
    We looked at the potential revenues, the savings that you 
allow us to keep at the VA medical center where it is collected 
so that we can provide more health care, and we looked at what 
was comparable in other Federal sectors.
    Senator Mikulski. Well, this is going to be a little 
touchy, but did the VA decide on an enrollment for cost 
reasons, or did you also think by an enrollment, it would also 
be a deterrent for those people to come to you?
    Secretary Principi. No, clearly I think there is some 
suppression, Senator Mikulski. For people who have no option, 
$250 is the greatest deal in the world, even in America. When 
the average cost is about $4,000 a year, for that individual to 
pay $250 is a very, very small percentage, and for a very rich 
benefit as well, I might add.
    But for those who do have other options, are insured by 
Blue Cross or Blue Shield, or have TRICARE coverage through the 
military, they might say, well, it does not pay for me to spend 
$250 a year. I can just go ahead and stick with my current 
insurance program. So, indeed, there is a suppression.
    Senator Mikulski. It would give a pause.
    Secretary Principi. I'm sorry.
    Senator Mikulski. It would give a pause, an analysis.
    Secretary Principi. Yes.
    Senator Mikulski. Well, I know that these are other issues 
the chairman will ask about as well. I have other questions I 
would like to submit to the record, but let me go to the last 
question, and it goes, first, what are we doing for gulf war 
veterans, and second, tell me what the VA is doing as we look 
at what we are about to face in Iraq and what we continually 
face here in the war on terrorism.

                            GULF WAR LESSON

    I am absolutely delighted about your collaboration with 
Secretary Thompson. I cannot encourage you more for both ideas, 
efficiencies, good policies, et cetera, but we are facing 
serious issues on bioterrorism and possibly chemical terrorism, 
possibly even something as repugnant as a dirty bomb. Where 
does the VA come in? So thinking about our gulf war veterans, 
what they were subjected to in that hot desert, they are going 
right back out there again. What are we doing for the ones 
here, what are we getting ready for, God forbid, if they come 
back sick, and second, what is the VA doing in the war against 
terrorism?
    Secretary Principi. Senator, I harken back to my days 
riding river boats in the Mekong Delta, Vietnam, and the whole 
issue of Agent Orange, so I get pretty personally sensitive to 
this issue, and when I came on board I said I just did not want 
to repeat the mistakes of the past with regard to the Persian 
Gulf, and so I think we have really taken a very fresh look at 
it, appointed a new advisory committee of people who sometimes 
think out of the box and explore unconventional theories. That 
is not to say I reject conventional theories.
    You know, I immediately service-connected when we had some 
evidence of veterans with Lou Gehrig's disease. One of my 
predecessors, my good friend, Jesse Brown, died of ALS, and we 
service-connected the veterans who served in the gulf between 
1990 and 1991 with ALS. I recently directed that we service-
connect veterans with chronic lymphocytic leukemia, and I just 
asked the Institute of Medicine to take a look at the Sarin gas 
that was exposed when we hit the Kamisiyah ammunition dump in 
Iraq and some Sarin gas was released into the atmosphere to see 
if there are long-term chronic effects.
    So we are continually, continually looking at this issue to 
see what caused these illnesses and to try to apply those 
lessons now to the Persian Gulf, Iraq II, and I will let Dr. 
Roswell talk about the things he is doing with the Department 
of Defense to make sure.
    Senator Mikulski. And I am also mindful of time, so if we 
could----
    Dr. Roswell. Very briefly, it is an excellent point. We are 
working with unprecedented collaboration not only with HHS, but 
with the Department of Defense. There is a Joint Executive 
Council and a Health Executive Council with the Deployment 
Health Group. It is managed between the two Departments. We 
have communicated clearly and consistently with DOD what we 
believe the needs are. They are fully supportive of those 
needs.
    Specifically, we are making a maximal effort to do 
predeployment surveys of all personnel going to the gulf who 
may be involved in a war with Iraq. That predeployment survey 
assesses premorbid conditions, health status at the time they 
are deployed.
    We also have an aggressive level of monitoring in theater, 
looking not only at incidents after they occur, but also doing 
proactive monitoring before an incident occurs. That 
information will be shared with VA as soon as it can be 
declassified and made available.
    We will be doing a post-deployment survey as well to assess 
their health at the time they are separated and redeployed back 
to the United States. There is also a serum repository in which 
virtually every military personnel deploying to the gulf 
theater will have a serum sample that is no more than 1 year 
old placed in that national serum repository, and that will be 
available for testing after a conflict in the gulf war should 
it be needed.
    So there is really an awful lot of collaboration.
    Senator Mikulski. What about the war on terrorism? There 
are 162 VA hospitals. Many of them are in high-threat areas. 
Are you participating with the CDC in terms of the national 
preparation for a possible biological attack on our citizens? 
Are the VA employees getting the vaccines? What is the role of 
the VA in being part of a network?
    Second, you are under the command and control of the United 
States of America. You are very different from any of the other 
health care, you are different from any other acute care 
facilities, because you are essentially, in terms of 
administration, management, and even national public directive, 
you are a one-stop shop.
    Dr. Roswell. We have a very high level of cooperation with 
the new Department of Homeland Security. We participate in the 
National Disaster Medical System. We have created new Federal 
partners: that was actually an innovation of Secretary Principi 
to work with other Departments in that response.
    VA has issued pharmaceutical caches at our critical 
locations.
    Senator Mikulski. Are you getting the smallpox vaccine?
    Dr. Roswell. We have smallpox vaccine.
    Senator Mikulski. Have the workers been vaccinated?
    Dr. Roswell. A very small number have been vaccinated.
    Senator Mikulski. In the event of a casualty, like in a 
city like Baltimore, or New York, or San Francisco, would the 
VA hospitals there be prepared to deal with the casualties, and 
are you part of the network that is going on in those 
individual towns?
    Dr. Roswell. We are a part of the network and we are taking 
appropriate steps to be prepared, with protective equipment, 
with decontamination equipment.
    Senator Mikulski. Well, I appreciate that, but right now at 
Johns Hopkins, the University of Maryland and other hospitals, 
they are getting vaccinated, and they are asking for volunteers 
to do it. It is a very complicated situation. I have my own 
flashing yellow lights about it, but is the VA as active as the 
local community hospitals?
    Dr. Roswell. VA personnel receive the smallpox vaccine in 
two different ways. We have actually requested our own supply 
of vaccine which HHS has promised to make available to us. We 
are also participating by the States--the CDC vaccination plan 
for smallpox, you may recall, is on a State-by-State----
    Senator Mikulski. Maybe I am asking this at the third 
paragraph. Are you going to be one of the hospitals that will 
be designated to be one of the primary facilities accepting 
this, or if there is a smallpox outbreak, are they going to go 
to community hospitals and VA is not going to be involved?
    Dr. Roswell. If the President activates the Federal 
Response Plan, the VA will be able to respond through the 
National Disaster Medical System.
    Senator Mikulski. What about the local medical system?
    Secretary Principi. Well, just as during 9/11, I made our 
facilities in New York City available to treat casualties, and 
I would do precisely the same thing if something should happen 
in Baltimore or Kansas City, or wherever disaster might hit. If 
the resources of the VA are needed to assist the community in 
responding, we will be prepared to do so.
    Senator Mikulski. Mr. Chairman, you have been more than 
generous. I think these are things that we need to continue to 
pursue.
    Thank you, and we look forward to working with you.
    Senator Bond. Thank you, Senator Mikulski. You raised many 
good questions.
    Going back to the prescription drug questions that Senator 
Mikulski asked, I have heard stories that large companies have 
sent out memoranda to huge numbers of their employees who might 
be veterans telling them that they are entitled to get 
prescription drugs from the VA. Now, this would not be illegal. 
As a matter of fact, this would be provided, but can you tell 
me, have you heard of such an example?
    Secretary Principi. Yes, Mr. Chairman, and I have received 
a copy of a memo that was prepared by an individual who manages 
the medical care prescription drug benefit for one of the 
Nation's largest and most prestigious Fortune 500 companies 
recommending to his superiors at this company that----
    Senator Bond. IBM, I believe.
    Secretary Principi (continuing). IBM, that there are 50,000 
employees of the company who are veterans, and that the 
corporation could save enormous health care costs, prescription 
drug costs if the employees used the VA health care system for 
that benefit, so I do not know if that memo was approved by the 
higher-ups at that company, but certainly it was of great 
concern to us, because we do not believe that that is what was 
intended by eligibility reform, but nonetheless, it is 
perfectly legal for employees of any corporation to go seek, 
get their health care from the VA, but it just points out the 
enormous demand that is being placed upon us.
    Senator Bond. Any company that has an opportunity to lessen 
health care costs, if it is within the law--I may not agree 
with it from a policy standpoint, but the law provides it, and 
that is why I think it is absolutely essential that we build 
into the law some protections for the core constituencies, 
those that do not have other prescription drug options, and so 
we do not have people with other, with higher incomes, no 
service-connected disabilities, crowding out the core 
constituents.
    Just to follow up another question, Dr. Roswell I think 
answered and raised some good points about the IG report, but 
if you were to consider the IG report as allowing only already-
enrolled priority 1 to 6 veterans to have their private 
physician phone in or direct their prescriptions to the VA 
pharmacy, would that save some time? Maybe those people are 
only getting their prescriptions from VA doctors, but is there 
a smaller potential savings in that group?
    Dr. Roswell. There is a potential savings. The concern I 
think I have is that if we made that benefit available to 
currently enrolled priority 1 through 6 veterans we would have 
no way to curtail the demand for new enrollment in those 
priorities that such a benefit might create, and again, I mean, 
as the Secretary said, this is an area where we are getting 
into uncharted waters. We simply do not know, but certainly we 
are actively exploring a number of options.
    Senator Bond. As my colleague from Maryland indicated, we 
obviously want to work with you. These are uncharted 
territories. It may be a good idea, it may not.
    Speaking of those ideas, I have heard from a number of 
health care policy gurus, when I have been involved in health 
care debates, that having an appropriate and affordable co-pay 
ensures responsible use of the prescriptions. In other words, 
if you have to put cash on the barrelhead, then you only get 
the prescriptions that you intend to use, and you take care of 
them and make sure you do not flush them, or drop them, or lose 
them, and that it has an impact on the responsibility of use. 
Do you believe this is a valid principle?
    Dr. Roswell. Mr. Chairman, I think you make an excellent 
point. It certainly is a valid principle, and we have tried to 
incorporate that in some of the policy recommendations in the 
2004 budget proposal.

                         RAISING OF COPAYMENTS

    Senator Bond. There have been some questions about raising 
the co-pay from $7 to $15. If you could not raise the 
copayment, or did not have the copayment, what impact would 
that have (a) on usage, the number of people using it, and (b) 
what would be the additional dollar cost without that co-pay?
    Dr. Roswell. Our estimates are that by increasing the 
prescription co-pay from $7 to $15 for priorities 7 and 8 that 
we would obviate the need for almost $250 million in 
appropriated medical care dollars in 2004, so it is fairly 
significant.
    Senator Bond. Do you happen to know how much of that is the 
fees actually collected, and how much of that results from what 
might euphemistically be characterized as suppression?
    Dr. Roswell. $181 million would be what you call 
suppression, decreased usage, $65 million would be increased 
collections, for a net offset of the appropriation of $246 
million, estimated.

                             WAITING LISTS

    Senator Bond. With respect to the waiting lists, some 
advocates have said that we need more staff for the VA, but 
looking at the GAO report, the GAO was rather critical, saying 
many of the delays, the waiting lists were the result of poor 
scheduling procedures and inefficient use of staff.
    Now, some of the clinics I think are apparently making good 
progress working with the Institute for Health Care Improvement 
to develop strategies to reduce waiting time. Can you describe 
what kind of actions you have taken and any response you have 
to the GAO report?
    Dr. Roswell. You are absolutely correct. In fact, I was in 
Boston the day before yesterday working with Don Berwick and 
the Institute for Health Care Improvement, where we have a 
major ongoing meeting on advanced clinic access. This is a 
series of actions to more effectively schedule care and better 
utilize the existing primary and specialty care capacity we 
have.
    We have got senior leadership from all over the Nation 
participating on this collaborative effort. It is an ongoing 
series, and we have really been able to achieve some remarkable 
results in improving panel size, in improving access to care 
using a very finite resource.
    Let me point out that since enrollment, as you pointed out 
in your opening remarks, we have doubled the number of veterans 
we are caring for and yet today our workforce is actually 
smaller than it was in 1986, so it is fairly remarkable that we 
only have 200,000 people on a waiting list. We are working with 
IHI and the advanced clinic access principles to improve that. 
We have a new electronic waiting list. We have a major 
physician and nursing recruitment initiative, coupled with the 
2004 budget that we plan to pursue as well.
    Senator Bond. Do you have an idea, in percentage terms, how 
much the new procedures, the IHI procedures could reduce the 
waiting list or improve efficiency, or is that still in the 
works?
    Dr. Roswell. I do not have it in actual percentage terms. 
Let me point out, though, that in July of last year, we had 
317,000 people on a waiting list. We were able to take over 
200,000 people off that waiting list during a period we were on 
a Continuing Resolution and we were operating on a fiscal year 
2002 funding level. I think that speaks to the potential of the 
advanced clinic access for improving our efficiency.
    Senator Bond. Mr. Secretary, I expressed my views on what 
apparently was found to be going on at Lexington, Kentucky VA 
med center. Can you briefly summarize your response to that 
audit, and can you discuss whether this practice exists at 
other VA facilities?
    Secretary Principi. Sure. Well, this is a very, very 
troubling issue for me, Mr. Chairman, and I am obviously deeply 
concerned by the preliminary findings in Lexington. I have not 
seen a final report by the IG, but obviously if the allegations 
are borne out then in and of itself at that facility it is a 
serious, serious problem, and it needs to be addressed, but 
based upon a national audit, that also has not been finalized--
I have a copy of the draft report on my desk--it really points 
out an institutional problem.
    I am very, very supportive of the affiliations. I think 
medical education and the VA have been able to make tremendous 
advances in health care delivery and research. However, I find 
it completely unacceptable to have doctors who are being paid 
by the VA with veteran dollars, taxpayer dollars who are not 
doing the work that they are being paid to do, and at the same 
time we have long waiting lists.
    This culture of subsidization to the medical schools simply 
has to stop, and all I ask for is equity, but as I intend to be 
held accountable, I intend to hold my leadership accountable to 
correct this problem once and for all, and we will be taking 
some decisive steps, hopefully in a very constructive way, to 
address this issue and ensure that all physicians, part-time, 
full-time, are devoting the time necessary to their 
responsibilities for which they are being paid by the American 
people.
    Senator Bond. I was stunned by the revelation. I do believe 
that the medical school collaboration has tremendous benefits. 
I know that you attract good quality physicians where they can 
work with a university in addition to serving patients, but I 
am appalled, as you were. I think that if this system is found 
to exist, I would think that the VA might ask for repayment of 
some of those reimbursements.
    Secretary Principi. Oh, I certainly will demand a repayment 
wherever it is found that the work was not performed.
    I would add, you know, I have traveled this country a great 
deal over the past 2 years, and we have been together in 
Missouri----
    Senator Bond. Sure.
    Secretary Principi (continuing). and the overwhelming 
number of our physicians are loyal, dedicated public servants. 
In many, many cases they do more than is expected of them, and 
it is a travesty that there is a certain percentage that are 
undermining the VA's great strengths, and it needs to end, and 
this culture needs to change, and again bring this situation 
back in balance and to get on with caring for veterans. That is 
our first and primary mission, patient treatment, treating 
veterans, and everything else is there to support it, to ensure 
that we have the right doctors, the most professional, highly 
skilled physicians, and so, it is an issue that I will report 
to you on, Mr. Chairman.
    Senator Bond. We appreciate that.
    Secretary Principi. Be assured that we take it very 
seriously.
    Senator Bond. When will the national audits be published? 
When will that come out?
    Secretary Principi. I expect quite soon, perhaps as early 
as next month. The IG is here, and he might be able to provide 
additional information. This is a report I asked for.
    Mr. Griffin. The report went to VHA about 3 weeks ago. The 
normal response time is 30 days. Sometimes that gets stretched 
out a little bit, but we would hope to issue the final within 
30 days.
    Senator Bond. Thank you very much. I hope, as you do, that 
this is an isolated problem, but it has got to end, and 
certainly I have seen the doctors who work and serve VA 
patients and also are serving in the medical schools, we cannot 
lose that, but this system has to stop.
    On the staffing question, Dr. Roswell, in 1991 the 
Institute of Medicine provided suggestions to VA on staffing 
standards, and in January of last year Congress enacted 
legislation requiring VA to establish staffing standards. It 
appears that has been delayed. I would like to know why. 
Without staffing standards, how do we know what type of 
physicians are needed where?
    Dr. Roswell. First of all, let me assure you that efforts 
to comply with the requirement are well underway. We expect the 
staffing standards to be reported back to us within the next 60 
days or so, so they are in progress.
    Staffing standards in health care, let me point out, is a 
very difficult subject, as even the IOM has pointed at in 
previous reports. We use a variety of ways to assess current 
staffing needs, but admittedly they are based on access-to-care 
issues, so where we have greater waits for clinics, where we 
have waits for procedures or types of specialty services is 
where we focus our staffing requirements. The staffing 
standards we hope will help us improve productivity, and we 
look forward to those, as do you.
    Senator Bond. Thank you, sir.
    Let us see, I am told that the DOD has staffing standards. 
Are you learning from them?
    Dr. Roswell. We have looked at DOD staffing standards, and 
maybe we should take a lesson. DOD does not use part-time 
physicians, which has all the attendant problems we just 
discussed, but sometimes the staffing standards that DOD uses 
do not translate to VA's pattern of health care delivery 
directly, but we certainly are looking at those.
    Senator Bond. Moving on to another subject I addressed 
about the inconsistency among VISNs, as I said, Mr. Secretary, 
I supported Dr. Kaiser's changes. I am concerned that 
decentralization has gone too far. There is inconsistent 
compliance with pharmaceutical policies. Is there too much 
freelancing going on among divisions? I hate to use the word 
fiefdoms, but that seems to come to mind.
    Secretary Principi. Well, I think there is always a little 
tension, if you will, between centralization and 
decentralization. Perhaps early on there was a move toward more 
decentralization, and it resulted in 21 or 22 network directors 
perhaps moving off in different directions, and not recognizing 
the importance of the whole, so to speak, and I recognize, too, 
that neither Dr. Roswell nor I can manage the VA health care 
system from Washington, D.C. You need strong leaders out in the 
field, closest to the patient, to the veteran, to make those 
day-to-day decisions.
    However, there needs to be one policy and one direction, 
and everybody needs to be marching in the same direction, and 
that was not the case. We have had 22 networks competing 
against one another, competing out there in enrollment drives 
so that this network would do better than the network next door 
in terms of the VERA allocation dollars, and lots of other 
areas as well, and I think we have strengthened the oversight, 
we have strengthened the direction, and that people understand 
that policy is made in Washington. We expect them to adhere to 
that policy, and within that, they are to manage the system.
    Senator Bond. I thought the policy of decentralization was 
great, and I think maybe you have hit the right note on that.
    I am going to finish up, because I know you have other 
commitments, and I know you would be disappointed if I did not 
submit some questions for the record so I will not give you a 
chance to answer all of them here. I would like to ask you what 
is the status of the CARES project? I really appreciate your 
request to jump-start CARES. What is your funding priority? How 
much do you think this could save in costs to be redirected to 
health care services for veterans?
    Secretary Principi. Well, I think it is one of the most 
important undertakings that the VA has embarked on in a long 
time. It is on track, Mr. Chairman. I expect to have a report 
on my desk in early October with the recommendations of the 
commission. I will make a decision based on that report shortly 
thereafter.
    I think the savings can be significant, savings that can be 
used, if you will, to truly expand the reach of health care and 
the manner in which health care is being delivered in America 
today, and it would probably take an investment up front to 
realign the system, if you will, to move us in the right 
direction. I do not have a dollar figure now, but I do believe 
that our request is a good down payment for the CARES process.
    I would only highlight, Mr. Chairman, I know your strong 
interest in this issue, and I would never spend money on a 
facility I know needs to change its mission, but we have an 
aging infrastructure out there, and it is beginning to 
deteriorate, and we need to get on with making some needed 
repairs in some areas.
    As you know, Kansas City was a good example of some of the 
things that we needed to do, so I am anxious to get this 
process completed and get a report up to you, and hopefully we 
can then find the dollars to make the necessary changes.
    Senator Bond. I certainly hope so.
    One last question. You have a decentralization problem. I 
have a decentralization problem. There are 50 different States 
represented in the Senate, and every single one of them needs a 
new cemetery. The VA recently completed the national shrine 
study. Can you tell me about the study, and the VA's process 
for prioritizing funding requests for the cemeteries?
    Secretary Principi. Well, certainly we have a very 
aggressive schedule of opening new cemeteries. We have four new 
cemeteries that are in the process, and a fifth one in the 
advanced planning stage. That is the Sacramento cemetery.
    The cemetery study did point out some deficiencies in a 
number of our cemeteries. The Acting Under Secretary is in the 
process now of prioritizing our needs, and deciding which ones 
are the most important, but there is a lot of maintenance and 
repair that needs to be made to many of our national 
cemeteries. The dollar figure is quite high. We have a small 
down payment towards that effort.
    Do you have anything to add, Eric, on the cemetery, the 
national shrine?
    Mr. Benson. Mr. Chairman, we have instituted a set of 
standards for operations and appearances in our national 
cemeteries which will include the new national cemeteries we 
are opening. We believe those standards will enable our 
employees, who are very dedicated, to bring cemetery 
appearances up to standard, as well as to provide us with the 
prioritization of cemeteries in the States that you mentioned.
    Senator Bond. Well, Mr. Secretary, unless you want to add 
anything, I think to enable us to get on with our schedules, we 
will submit the rest of the questions for the record. We 
appreciate the answers from you and your staff. Obviously, we 
have a lot of challenges and work ahead of us. We look forward 
to continuing to work with you to meet those challenges to 
continue to improve the viability of our service to the 
veterans.

                     ADDITIONAL COMMITTEE QUESTIONS

    Secretary Principi. The only thing I would like to add, Mr. 
Chairman, is just to congratulate you on the receipt of a very 
prestigious VFW award last evening, an award truly deserved for 
your enormous support for our agency. We thank you, very, very 
much.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
       Questions Submitted to the Department of Veterans Affairs
           Questions Submitted by Senator Christopher S. Bond
                          cost-share proposals
    Question. Your fiscal year 2004 budget request proposes to charge a 
$250 annual enrollment fee and raise the prescription copayment from $7 
to $15 for Priority 7 and 8 veterans. Both of these initiatives require 
legislative action.
    If these legislative proposals are not enacted, how much more money 
will we need in fiscal year 2004 for the medical care account to 
eliminate the waiting list? Have you considered other options to 
address the waiting list problem?
    Answer. VA's fiscal year 2004 budget contains several policy 
proposals that will allow the VA health care system to refocus on 
better meeting the needs of our core population, veterans with service-
connected disabilities, veterans with lower incomes, and veterans with 
special health care needs. Since eliminating the wait lists is closely 
tied to all our efforts to refocus the system, failure to enact any or 
all these proposals could adversely impact our ability to eliminate the 
wait lists.
    The table below provides the additional appropriations resources 
that would be required in 2004 if Congress denied the medical care 
policies proposed in the 2004 President's budget.

      IMPACT OF CONGRESSIONAL DENIAL OF PROPOSALS ON APPROPRIATION
                          (Dollars in millions)
------------------------------------------------------------------------
                                                               2004
                         Policy                           Appropriation
------------------------------------------------------------------------
Stop new enrollment of P8 veterans.....................          -$335.2
Assess $250 annual enrollment fee for NSC P7 and                  -531
 Enrolled P8s..........................................
Increase Outpatient Primary Care Copay from $15 to $20             -14.7
 NSC P7 and Enrolled P8s...............................
Increase Pharmacy Copay from $7 to $15 for NSC P7 and             -245.6
 Enrolled P8s..........................................
Increase Copay, Threshold to Aid and Attendance Level..            +33.0
Limit Long-Term Care benefits to P1a Veterans..........           -222.4
Bill HMOs and PPOs.....................................            -69.0
                                                        ----------------
      Total............................................         -1,384.9
------------------------------------------------------------------------

                              waiting list
    Question. Some advocates believe that additional funding for more 
staff is the answer to solving the waiting list problem but GAO 
reported, ``given the inefficiencies we found, it was difficult to 
determine the extent to which clinics would have benefited from 
additional staff.'' GAO also found that many of the delays were the 
``result of poor scheduling procedures and inefficient use of staff.'' 
Some clinics were making noteworthy progress in reducing waiting times 
through management reforms because of collaborative work with the 
Institute for Healthcare Improvement (IHI)--a private contractor that 
was retained to develop strategies to reduce waiting times.
    Can you briefly discuss what actions you have taken to address the 
waiting list problem, including your response to GAO's findings? How 
will you ensure that the VISNs will implement the IHI reforms?
    Answer. We have made substantial progress in working on our waiting 
times problem since the GAO did their study several years ago. The 
Veterans Health Administration (VHA), in collaboration with the 
Institute for Health Care Improvement (IHI), developed a model for 
large system change that is resulting in significant access 
improvement. This Advanced Clinic Access (ACA) initiative is oriented 
to meeting the demand of its patient population for care at the time 
the request is made.
    VA has been faced with increased demand and increased Congressional 
and public scrutiny related to waiting times. In July 2002, VA found 
itself in the untenable situation of having over 300,000 veterans who 
were not able to get an appointment within 6 months of their desired 
date. Substantial efforts have been made to remove patients from the 
wait list. However, for every 100 veterans we remove, an additional 95 
veterans are added to the wait list. By utilizing the key components of 
our Advanced Clinic Access initiative, clinics are able to make office 
practice efficiencies that ultimately result in increased capacity. 
Only when a clinic has made all of the identified efficiencies can one 
truly justify increased resources. With ACA, providers can now provide 
the necessary data for addressing the resource issue. However, 
implementing ACA requires time, patience, leadership support and 
culture change.
    VHA developed an electronic wait list (EWL) that facilities are 
using as a management tool to track veterans who are waiting for an 
appointment to be scheduled. The (EWL) software allows VHA to uniformly 
record veterans awaiting appointments in VistA to more consistently and 
accurately reflect demand across VHA. This software integrates with the 
existing VistA scheduling software at each site to allow placement of 
veterans on waiting lists as part of the automated scheduling process 
when appointments are not available in the desired timeframe. This 
software is in full use across the VA medical centers. Additional 
software was released to allow this information to be rolled up from 
the medical centers into a national database located at the Austin 
Automation Center. National reports will provide information about the 
number of patients waiting for specific types of care at VA facilities 
and the length of time that they have been on the wait list.
    To ensure that VISNs implement the IHI reforms, VHA developed an 
infrastructure to sustain improvement gained from ACA implementation 
and to facilitate the spread of ACA across the VHA system. The 
infrastructure includes the following:
  --An Advanced Clinic Access Steering Committee, chaired by a VISN 
        director, and charged with oversight of ACA implementation, is 
        in its third year of operation.
  --The steering committee appointed liaisons to each of the six 
        performance measure clinics. These liaisons have established 
        regular conference calls to accelerate the spread of ACA. 
        Attendance at these calls ranges from 50 to 100 clinicians per 
        call.
  --VHA has developed a network of ACA coaches/experts who have 
        implemented ACA in their own clinics and are willing and able 
        to teach others. Four meetings of ACA coaches, designed to 
        further the development of these coaches and to develop 
        additional coaches, have been held over the last three years. 
        Regional conferences across the country are planned for the 
        fall of 2003. The goal is to double the number of ACA coaches 
        over the next 18 months.
  --Additionally, VHA has established ACA Points of Contact in each 
        VISN and each facility. Each VISN has developed a plan for 
        implementation of ACA.
  --In October 2002, VHA appointed a full-time Clinical Program Manager 
        to continue the work begun by IHI and provide coordination and 
        oversight of the implementation of ACA across all of its 
        clinics.
    Oversight of ACA implementation is accomplished through regular 
review of the data related to waiting times, daily communication 
between the VHA program manager and the field, and articulation of the 
importance of ACA implementation by VHA senior leaders. A handbook 
outlining the ACA principles and implementation strategies will be 
published this spring.
                           prescription drugs
    Question. We have heard that a significant number of veterans on 
the waiting list are coming to VA simply to have their privately 
written prescriptions filled because VA provides a generous 
prescription drug benefit. In its December 20, 2000 report, the IG 
recommended increasing the pharmacy copay from $7 to $10 and 
streamlining the current VA process of filling prescriptions written by 
private physicians. The IG estimated that VA's administrative costs for 
re-writing prescriptions obtained from private healthcare providers was 
$1.3 billion in fiscal year 2001.
    Are there ways to structure a more streamlined and cost-effective 
approach so that veterans do not have to wait to have their 
prescriptions filled?
    Answer. VHA has not concurred with the findings of the December 
2000 OIG report or the draft update of the report. VHA has met with OIG 
to review its concerns and, as a result, OIG is currently in the 
process of recalculating its estimates of cost avoidances.
    VA is aware that the lack of Medicare prescription drug coverage is 
causing some veterans to turn to VA for access to prescription drugs. 
While VA acknowledges that some veterans have stated that they only 
want VA to provide drugs and not medical care, data suggest that 
approximately 25 percent of veterans who have stated that they are 
seeking VA care primarily for prescription drugs actually end up using 
other VA services as well, including eye care, cardiology, urology, 
and, in some cases, inpatient care. Any analysis must also consider the 
potential for significantly increased demand--an unintended consequence 
of most proposals.
    VA has agreed to work with Congress to find a solution to the 
vexing problem of waiting lists. VA is currently examining options for 
prescription drug benefits and, in doing so, is carefully assessing the 
likely impacts (financial and clinical) of such policies. VA must take 
care to ensure that the actions taken have no unintended consequences 
that could adversely affect VA's ability to provide timely, quality 
health care to enrolled veterans.
    Lastly, VA believes that a VA/Medicare+Choice cooperative 
initiative between VA and the Department of Health and Human Services 
will be a major step forward in addressing this problem and is looking 
forward to continuing that project's development.
                                 cares
    Question. First, congratulations on implementing the CARES program 
in Chicago. I know your decision was difficult but it was the right 
thing to do. For the rest of the Nation, you are undertaking a very 
ambitious plan to have all the CARES plans completed by the end of this 
year. I also appreciate the $225 million in the request to jumpstart 
CARES in fiscal year 2004.
     Do you have any preliminary estimates of the cost-savings you 
expect to achieve from CARES and how will these savings be re-directed 
to health care services for veterans?
    Answer. The Department estimates approximately $3 billion in net 
savings over a five-year period, beginning in fiscal year 2006. This 
estimate was developed via a five-year investment plan, based upon the 
experience and the data compiled from the completed VISN 12 (Chicago 
Area) CARES study, and extrapolated to the VA healthcare system 
nationwide. While the majority of savings will be from operational 
efficiencies, some receipts and in-kind consideration may also be 
generated by VA enhanced-use lease program. The potential sale of 
excess or underutilized real property may also yield some savings. The 
redirecting of resources from underutilized facilities to direct 
patient care will allow VA to better serve veterans.
    When the National Cares Plan is completed, potential investment 
needs and cost savings related to implementing CARES will be revised. 
The plan will be monitored and updated with each budget submission.
                              collections
    Question. VA projects to collect $524 million more in 2004 compared 
to 2003 yet its collections efforts continue to have problems. The GAO 
recently reviewed VA's operations and found that VA has improved its 
collections but it continues to confront operational problems, such as 
billing opportunities that limit the amount VA collects. A VA IG report 
estimated that VA could have collected over $500 million more than it 
actually did in fiscal years 2000 and 2001. However, due to VA's 
operational limitations, the GAO reported that VA lacks a reliable 
estimate of uncollected dollars, and therefore does not have the basis 
to assess its system-wide operational effectiveness.
    How is VA responding to these issues? Will you reach your 
collections goal for fiscal year 2003? How confident are you in 
reaching your projected goal of collecting $2.1 billion in fiscal year 
2004?
    Answer. VA has collected $715 million through March of 2003, which 
is 95.5 percent of our target collection goal at this point in the 
fiscal year. We anticipate being very close to our annual collection 
goal of $1.6 billion by the end of September 2003 given the multitude 
of program enhancements being put in place. In particular, we are 
continuing to evaluate and enhance the current VistA system in order to 
support a pilot commercial billing and collection system in the future. 
These changes will continue to achieve our collection goals in fiscal 
year 2004 and future years.
                              homelessness
    Question. Last year, with this Committee's support, the 
Administration reactivated the Interagency Council on Homelessness to 
improve the coordination of federal homeless programs--most notably 
between HUD, HHS, and VA. One of the most notable products of the ICH 
is the recent launching of a new $35 million collaborative program 
between HUD, HHS, and VA to provide permanent housing, health care, and 
other services to chronic homeless people.
    Can you tell me more about this program and your plans for fiscal 
year 2004, including the proposed Samaritan program? What are your 
views about the ICH? Due to the current waiting time problems, are 
homeless veterans waiting for medical care services?
    Answer. As you know, in March I was appointed the Vice Chair of the 
Interagency Council on Homelessness (ICH). The ICH provides an 
excellent forum for discussing the problems facing homeless people, 
including homeless veterans. It also serves as a vehicle for developing 
the federal strategy to end chronic homelessness in America.
    One of the keys to ending chronic homelessness is assuring that 
homeless people have access to mainstream services such as Medicaid, 
Food Stamps, Temporary Aid to Needy Families (TANF), and other 
programs. HHS, HUD and VA are sponsoring State Policy Academies to 
bring together state leadership teams to identify policies and develop 
strategic plans to assure that homeless people have better access to 
health care, mental health care, and support services that can help 
chronically homeless people exit from homelessness. Eighteen states 
have sent teams to two Policy Academies on chronic homelessness. We 
hope to hold three more Policy Academies on chronic homelessness over 
the next 6 months so that all states will have an opportunity to 
participate in developing strategies to end chronic homelessness.
    The $35 million joint HUD/HHS/VA Initiative is also designed to 
address the needs of chronically homeless people. Under this 
initiative, HUD will provide $20 million to support permanent housing, 
HHS will provide $10 million to support primary care, mental health 
care, and substance abuse treatment, and VA is providing $5 million to 
support case management for homeless veterans involved in the funded 
projects. VA will also support program monitoring and evaluation of all 
funded projects. Coordinated applications from interested service 
providers are due by April 14, 2003. The Samaritan Program is expected 
to be an expansion of the joint HUD/HHS/VA initiative.
    Homeless veterans, like all veterans seeking health care from VA 
are experiencing some problems with waiting times at some VA medical 
facilities. VA is taking aggressive steps to reduce waiting lists and 
waiting times for veterans enrolled in VA's health care system. These 
steps include providing urgent care within 24 hours, providing priority 
care for veterans who are 50 percent service connected or greater, and 
initiating procedures to improve scheduling of appointments.
                           homeless spending
    Question. For fiscal year 2004, VA estimates that it will spend 
almost $1.4 billion for veterans who are homeless and that nearly 90 
percent of that spending will come from mainstream services, such as 
medical care. These funds are not targeted to homeless veterans. This 
demonstrates that homeless veterans have access to these mainstream 
services. Research from other kinds of health care systems, however, 
shows that investment in housing for homeless people, and certainly for 
chronically homeless people, can more than pay for itself in reductions 
in the number and length of hospitalizations, not to mention how it 
improves the lives of the individuals in question.
    How is VA responding to the permanent housing needs for chronically 
homeless veterans, especially those who are frequently in and out of 
your hospital system?
    Answer. Since 1992, VA and HUD have participated in the joint HUD-
VA Supported Housing (HUD-VASH) Program in 35 locations. Under the 
program, homeless veterans have received dedicated Section 8 rental 
vouchers and VA provides ongoing case management services for homeless 
veterans who receive the vouchers. HUD has committed 1,753 Section 8 
vouchers to this program. Over the course of the past 10 years, 4,400 
homeless veterans have had access to these vouchers and have secured 
permanent housing. The median length of stay for veterans in the HUD-
VASH program is 4.1 years. A rigorous long-term follow up of the HUD-
VASH Program showed that rental assistance, coupled with case 
management services, provides a successful treatment strategy to help 
homeless veterans gain access to permanent housing and receive 
treatment for medical, mental health, and substance abuse disorders 
which helps them remain in permanent housing.
    VA also has implemented its Supported Housing (SH) Program in 23 
locations. Clinicians in the SH Program provide long-term case 
management services to homeless veterans and help them find and remain 
in long-term transitional or permanent housing. The difference between 
the HUD-VASH Program and the SH Program is that veterans in SH do not 
have access to dedicated Section 8 vouchers, although many veterans in 
this program secure Section 8 vouchers through traditional procedures. 
In fiscal year 2002, 1,639 veterans were assisted with housing and were 
provided clinical case management services. The median length of stay 
for veterans in the SH Program is about 8 months.
    Although not yet operational, it is expected that homeless veterans 
will have access to permanent housing through the HUD/HHS/VA Initiative 
and the Samaritan Program.
    It is also expected that VA's Loan Guarantee for Multifamily 
Transitional Housing for Homeless Veterans Program will assist in 
making funding available to organizations interested in developing 
long-term transitional housing for homeless veterans. While this is not 
a permanent housing program, we believe that homeless veterans who can 
live in long term transitional housing that offers a substance free 
environment and access to supportive services will have greater 
opportunities to move on to permanent housing.
                           claims processing
    Question. Will you meet your goal of processing in an average of 
100 days?
    Answer. We are committed to meeting the Secretary's goals for 
improving the timeliness of disability claims processing. Acting upon 
recommendations from the VA Claims Processing Task Force, the Under 
Secretary for Benefits has established specific performance targets for 
regional offices that are in line with the national goal of processing 
disability compensation claims in 100 days, on average, by September 
2003. In addition, we have implemented changes to our business 
processes. We are consistently tracking our progress and have seen a 
steady decline in the average processing days over the past year. 
Although much progress has been made, achievement of this goal remains 
our biggest challenge.
    Question. By improving the timeliness of claims processing, are you 
compromising the accuracy?
    Answer. VBA has experienced a steady increase in our accuracy rate 
for rating related actions over the past two years. In March 2001, our 
accuracy rate for rating related actions was 67 percent. As of March 
2002, this rate had increased to 79 percent. Based on our most recent 
data, from January 2003, our accuracy rate for rating related actions 
is 83 percent. We have also implemented several measures to ensure 
continued improvement in accuracy rates, including implementation of 
national performance standards for key positions in the Veterans 
Service Centers.
    Question. Are more claims being re-examined because of errors?
    Answer. We have not experienced a significant increase in the 
number of claims re-adjudicated as a result of the correction of errors 
identified by national or local reviews. We will continue to monitor 
the cases where errors are found and provide necessary oversight to 
ensure that the requisite corrections are made expeditiously. In 
addition to correcting these errors, stations will provide employees 
with feedback and training, where necessary.
                   mandatory spending for health care
    Question. What are your views on moving VA health care from 
discretionary to mandatory funding?
    Answer. VA does not support the concept of using a fixed formula to 
determine VHA funding. Although VA recognizes the appeal of such an 
approach, particularly in these times when the Department finds it is 
unable to provide care to all veterans who seek enrollment in the 
system, we believe the would prove to be unworkable and is 
inappropriate for funding a dynamic health care system, like VA's.
    The provision of care evolves continually to reflect advances in 
state of the art technologies (including pharmaceuticals) and medical 
practices. It is very difficult to estimate both the costs and savings 
that may result from such changes. Moreover, patients' health status, 
demographics, and usage rates are each subject to distinct trends that 
are difficult to predict. Using a proposed formula could not take into 
account any changes in these and other important trends. As such, there 
is no certainty that the amount of funding dictated by the proposed 
formula would be adequate to meet the demands that will be placed on 
VA's health care system in the upcoming years.
    Perhaps more importantly, use of an automatic funding mechanism 
would also diminish the valuable opportunity that members of the 
Congress and the Executive Branch now have to carry out their 
responsibility to identify and directly address the health care needs 
of veterans through the funding process. It might also tend to depress 
the Department's incentive to improve its operations and be more 
efficient.
    Finally, VA does not believe this proposal would ensure open 
enrollment. The Department would still be required to make an annual 
enrollment decision, and that decision would directly affect the number 
of enrolled veterans and thus the amount of funding calculated under 
the formula. Indeed, references to ``guaranteed funding'' may give the 
public the false impression that this bill would give VA full funding 
to enroll all veterans and to furnish care for all their needs, which 
would not be the case.
    Question. What impact does this have on Congress' ability to 
oversee the expenditure and performance of the VA's health care 
programs?
    Answer. VA would be able to provide the same detailed programmatic 
and cost information to Congress as it does today. However, by shifting 
VA health-care to a formulaic funding methodology Congress may be 
inclined to shift its focus away to other discretionary programs.
           health care quality management and patient safety
    Question. What specific actions have been taken in response to the 
OIG report, Review of Security and Inventory Controls Over Selected 
Biological, Chemical, and Radioactive Agents Owned by or Controlled at 
Department of Veterans Affairs Facilities (Report No. 02-00266-76, 
dated March 2002)?
    Answer. A number of offices within VHA and the Office of 
Preparedness formed a joint work group to address the issues raised in 
the OIG Report No. 02-00266-76. A number of meetings resulted in 
specific actions to address this report. VHA has subsequently taken 
actions to address the recommendations as summarized below.
    Security is a standing agenda item for National Radiation Safety 
Committee (NRSC) meetings. The primary basis to review the status of 
security issues is the security status report. The report includes 
information about the strategy for oversight, Office of Inspector 
General (OIG) report response, site visit results, source disposals, 
and information dissemination.
    The NRSC actions or strategy for security include having a standing 
agenda item for NRSC committee meetings, monitoring the National Health 
Physics Program (NHPP) focus on security, responding to OIG, NRC, and 
other initiatives, and evaluating changes for the handbook/directive.
    The NHPP actions or strategy for security include having a focus on 
security during inspections/site visits, providing updates to the 
security status report, providing information to the medical centers, 
preparing changes for the handbook/directive, evaluating disposal 
options for sources, and monitoring regulatory changes.
    The medical centers actions or strategy for security include 
increasing VA Police Service coordination, reviewing their radiation 
safety footprint at least annually, maintaining security of radioactive 
materials and/or radiation sources, and implementing the VHA Directive 
2002-075, ``Control of Hazardous Materials in VA Research 
Laboratories.''
    VHA Directive 2002-075, which directly addressed seven of the OIG 
recommendations, codified and clarified existing procedures and also 
complied with requirements mandated in the USA Patriot Act of 2001. The 
directive, which includes over 18 pages of detailed instructions to VA 
medical centers (VAMC) to specifically address the OIG report, has been 
discussed with all the VAMCs through conference calls as well as 
informal discussions with those in leadership positions at the VAMCs 
charged with implementing the recommendations. In addition, all sites 
with research programs have been notified about the impact of the USA 
Patriot Act of 2001. VHA and VA's Office of Policy, Planning and 
Preparedness have jointly signed a letter to all VHA facilities 
outlining additional controls necessary to control the access to these 
agents.
    VHA conducts annual work place evaluations for safety of all VHA 
facilities and increased security and compliance with VA and Joint 
Commission on Accreditation of Health Care Organizations (JCAHO) 
emergency management activities are getting increasing scrutiny. JCAHO 
in their accreditation surveys are also emphasizing emergency 
management plans and programs necessary to meet their standards.
    VHA has also begun a comprehensive assessment of the potential 
vulnerabilities of VA BSL 3 laboratories. Medical facilities have 
received a security self-assessment checklist for BSL 3 sites, and 
completed a self-assessment that all items on the checklist have or 
will be completed. In calendar year 2003 VHA will begin announced and 
unannounced inspections of sites with BSL 3 laboratories to ensure 
compliance with the checklist and the directive. VHA will suspend 
operations in BSL 3 laboratories that cannot demonstrate an appropriate 
level of security will be maintained.
    An Emergency Management Program Guidebook has also been developed 
and provided to each VAMC to improve their emergency management 
programs to meet VHA and JCAHO standards for emergency management. This 
guidebook provides sample policies procedures and best practices for 
emergency management including the VAMC from potential terrorist 
threats and events as well as research and clinical laboratories.
    VHA has initiated a program to spend more than $2 million to 
upgrade laboratory security at more than 50 sites in February 2002, and 
that office will systematically review all research sites over the next 
3 years as part of its infrastructure program to identify and fund 
equipment needs that include security devices. Thirty-eight sites have 
received or been approved for funding. VHA will review the revised 
applications from another 26 sites in fiscal year 2003.
    Question. Is there funding in the fiscal year 2004 budget request 
to cover the full cost to implement controls and make necessary 
changes?
    Answer. We believe that the fiscal year 2004 budget request 
contains sufficient funding. A survey conducted within VHA documented 
that approximately $13 million was spent in the last year for security 
enhancements, including security of laboratories. Individual projects 
to implement all of the requirements mentioned above that are beyond 
the resources of individual VA medical centers will have to be 
requested as part of VHA's capital resources process and compete with 
other patient care infrastructure initiatives.
                                 ______
                                 
              Questions Submitted by Senator Conrad Burns
    Question. Many in Montana Veterans have significant trouble getting 
in to see doctors due to scheduling backlogs. Does the VA budget 
compensate to enable faster processing, in order to meet this demand? 
If so how?
    Answer. Yes, the 2004 budget proposes to reduce the average waiting 
time for new patients seeking primary care clinic appointments to 30 
days in 2004 and reduce the average waiting time for next available 
appointment in specialty clinics to 30 days in 2004. VA is working to 
improve access to clinic appointments and timeliness of service. VA 
continues efforts to develop ways to reduce waiting times for 
appointments in primary and specialty care clinics. By refocusing VA's 
health care system on these groups, VA will be positioned to achieve 
our primary and specialty care access standards.
    Question. The VA claims process currently takes 9 to 12 months to 
file claims, and 9 to 11 months for remands. Does the VA budget provide 
for the resources necessary in order to expedite the claims processing 
process?
    Answer. Budget authority of $621.4 million and 6,816 FTE (without 
OBRA) are requested to fund the discretionary portion of the 
Compensation program in 2004. Compared to the 2003 current estimate, 
budget authority is expected to show a net increase of $15.0 million.
    Budget authority of $151.7 million and 1,635 FTE (without OBRA) are 
requested to fund the discretionary portion of the Pension program in 
2004. Compared to the 2003 current estimate, budget authority is 
expected to decrease by $2.4 million.
    We believe the reorganization of service centers into specialized 
work teams, as prescribed by the Claims Processing Task Force report, 
will increase work efficiencies in the Compensation program. Based on 
workflow analysis, VBA believes the discretionary portion of the 
compensation program budget will be sufficient.
    While the discretionary portion of the pension program budget shows 
a decrease, we believe that the consolidation of pension workload in 
the Pension Maintenance Centers will lead to a gain in workflow 
efficiencies. Therefore, the reduction in this area should not 
negatively affect the pension claims process.
    Question. Many veterans that need hospitalization sometimes have a 
problem traveling long distances, and not all patients are reimbursed 
for their travel expenses. Does the VA budget compensate for providing 
veterans that need hospitalization transportation to the hospital?
    Answer. Yes, VA's budget includes compensating certain veterans for 
hospital transportation to and from a department facility, but only if 
they meet the eligibility requirements set forth under current law. In 
accordance with 38 U.S.C. Sec. 111(b)(1), VA is authorized to reimburse 
the following category of veterans for their travel:
  --veterans or other persons whose travel is in connection with 
        treatment or care for a service-connected disability;
  --veterans with a service-connected disability rated at 30 percent or 
        more;
  --veterans receiving pension under section 1521 of title 38 USC;
  --veterans whose annual income does not exceed the maximum annual 
        rate of VA's pension;
  --a veteran or other person who is required to travel by special mode 
        and who is unable to defray the expenses of travel; and
  --a veteran whose travel to a Department facility is incident to a 
        scheduled compensation and pension examination.
    Question. Does the budget compensate for reimbursing all patients 
for their travel? If so, how?
    Answer. VA is not authorized to reimburse all patients for their 
travel. VA may only authorize travel reimbursement for those veterans 
who meet the eligibility requirements under 38 U.S.C. Sec. 111(b)(1). 
For those veterans who are determined to be eligible, reimbursement may 
be authorized based on mileage allowance or common carrier, whichever 
is less. If mileage reimbursement is authorized, a veteran is 
reimbursed at the rate of 11 cents per mile and is subject to a $3.00 
deductible for each one-way visit and a $6.00 deductible for each 
round-trip visit. The deductible is capped at an $18 monthly 
deductible.
    Additionally, when a clinical determination is made that special 
mode transportation is required, VA may also authorize a veteran to be 
transported by ambulance services or by other modes of special mode 
transportation. However, in these cases, a determination must be made 
by VA that the veteran is unable to defray the expenses of travel.
    Question. Does the VA budget allow for additional clinics in rural 
areas? If so, what are the plans for these new facilities?
    Answer. Decisions on new Community-Based Outpatient Clinics will be 
made on a case-by-case review until the CARES study is completed.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici
                   community-based outpatient clinics
    Question. Mr. Secretary, I am pleased with the 7.5 percent increase 
that President Bush has proposed for the Department of Veterans Affairs 
budget for fiscal year 2004. This kind of investment allows us to keep 
our commitments to America's veterans and I look forward to working 
with you to implement this budget.
    Of course, challenges remain and I am committed to addressing them, 
as well. One of those challenges concerns the stability of Community-
Based Outpatient Clinics.
    Last year, veterans in southeastern New Mexico notified me that 
Artesia Clinic was not accepting new patients because there were not 
enough doctors to accommodate the caseload.
    Although, the delay in service was only temporary, it was a cause 
of anxiety for many veterans. I am concerned about this because so many 
of New Mexico's veterans rely on clinics for their outpatient needs.
    I wrote to you about my concerns and in your response you noted 
that actual increases in the use of VA health care systems had outpaced 
projections.
    As we work together to find a solution to this problem, to what 
should we attribute the backlog of patient caseload in the VA health 
system? Is it a matter of more veterans needing care? Is it a shortage 
of medical staff? Is it a lack of funds? If it is a combination of 
these factors, what approach do you recommend to alleviate the problem?
    Answer. Public Law 104-262, the Veterans Health Care Eligibility 
Reform Act of 1996, mandated the VA to establish and implement a 
national enrollment system to manage the delivery of healthcare 
services to veterans. This legislation led the way for the creation of 
a Medical Benefits Package to provide a standard health plan for all 
veterans. Enactment of this legislation opened up the VA health care 
system to all veterans and generated a significant increase in VA 
enrollees and patient users. This has precipitated serious problems 
with access to VA outpatient care. In addition to the increased demand, 
VA has also been faced with pockets of nursing shortages and problems 
in recruiting physicians to the VA system. We have many initiatives to 
address some of these problems such as the physician pay bill, hiring 
of retired annuitants, recruitment and retention bonuses, incentive 
pay, and specialty pay schedules. So the answer to your question is 
that it is a combination of many factors.
    To ensure that VISNs implement clinic management efficiencies as 
part of our Advanced Clinic Access (ACA) initiative, VHA developed an 
infrastructure to sustain improvement gained from ACA implementation 
and to facilitate the spread of ACA across the VHA system. The 
infrastructure includes the following:
  --An Advanced Clinic Access Steering Committee, chaired by a VISN 
        director, and charged with oversight of ACA implementation, is 
        in its third year of operation.
  --The steering committee appointed liaisons to each of the six 
        performance measure clinics. These liaisons have established 
        regular conference calls to accelerate the spread of ACA. 
        Attendance at these calls ranges from 50 to 100 clinicians per 
        call.
  --VHA has developed a network of ACA coaches/experts who have 
        implemented ACA in their own clinics and are willing and able 
        to teach others. Four meetings of ACA coaches, designed to 
        further the development of these coaches and to develop 
        additional coaches, have been held over the last three years. 
        Regional conferences across the country are planned for the 
        fall of 2003. The goal is to double the number of ACA coaches 
        over the next 18 months.
  --Additionally, VHA has established ACA Points of Contact in each 
        VISN and each facility. Each VISN has developed a plan for 
        implementation of ACA.
  --In October 2002, VHA appointed a full-time Clinical Program Manager 
        to continue the work begun by IHI and provide coordination and 
        oversight of the implementation of ACA across all of its 
        clinics.
    In addition to our Advanced Clinic Access initiative that assists 
clinics in making office practice efficiencies, we monitor through the 
network performance plan the following key indicators for access to 
care:
Measure: Waiting Times--Clinic
    By September 30, 2003, networks will improve waiting time for key 
clinics as measured by a combination of indicators to include:
  --a. Primary Care--New Patients.--Percent of new patents at 3rd Qtr 
        of the SHEP Survey who answer ``yes'' to the question, ``Did 
        you get an appointment when you wanted one?'' Target--79 
        percent.
  --b. Primary Care--Established Patients.--Percent of established 
        patents at 3rd Qtr of the SHEP Survey who answer ``yes'' to the 
        question, ``Did you get an appointment when you wanted one?'' 
        Target 79 percent.
  --c. Specialty Care.--Wait time from date entered into scheduling 
        package until date of appointment for ``Next Available 
        Appointment'', in September 2003 for patients in (all 
        individual targets must be met):
    --i. Eye care.--Target 63 days or less.
    --ii. Urology.--Target 44 days or less.
    --iii. Orthopedics.--Target 43 days or less.
    --iv. Audiology.--Target 40 days or less.
    --v. Cardiology.--Target 42 days or less.
    In July of last year, all networks submitted plans for reducing 
their backlog in anticipation of supplemental dollars. Because of the 
continuing resolution, many of these plans were placed on hold. Now 
that we have a budget, networks are working on implementing those plans 
such as recruiting and hiring providers or contracting for scarce 
services and buying equipment.
    We developed an electronic wait list that serves as a management 
tool for monitoring those veterans who have yet to be scheduled for an 
appointment. We routinely provide reports and monitor the progress 
being made in removing patients from the wait list.
    Non-acceptance of new patients into the New Mexico Healthcare 
System's Artesia CBOC was a temporary situation caused by a lack of 
physician staffing. However, the issue has now been resolved. Beginning 
January 2003, new patients are being accepted into the Artesia CBOC for 
care. Patients with a 50 percent or greater service-connected 
disability have priority for appointments.
    The current staffing level at the Artesia CBOC is able to provide 
care to 2,400 veterans and currently has 2,100 veterans enrolled. When 
an eligible veteran applies for care at the Artesia CBOC, the veteran 
is provided a New Patient Health Questionnaire. Following the 
completion and return of the questionnaire, the veteran is scheduled 
for a new patient appointment. On-going care for the veterans in 
southeastern New Mexico will remain a priority.
                           claims processing
    Question. Is there something the VA can do to process claims more 
efficiently?
    Answer. The Claims Processing Task Force examined a wide range of 
issues affecting the processing of claims, from medical examinations 
and information technology to efforts to shrink the backlog and 
increase the accuracy of decisions. Numerous countermeasures were 
implemented to address the issue of the growing backlog. At the 
beginning of 2002, over 432,000 cases were pending rating action, 47 
percent of which were over six months old. As of March 14, 2003, the 
number of cases pending rating action had been reduced to just over 
310,000, with approximately 29 percent pending over six months. We 
continue to strive toward the Secretary's goal of 100 days average 
processing time and reduction of our claims inventory to 250,000 by the 
end of fiscal year 2003.
    Question. Is there merit in the idea of calling on veterans' 
organization to help process claims on a voluntary basis?
    Answer. While the ultimate responsibility for claims processing 
rests with the Veterans Benefits Administration (VBA), the assistance 
provided by veterans service organizations (VSOs) is extremely valuable 
in timely processing of claims. To improve the relationship that 
already existed, a partnership between VBA and VSOs was formed through 
the Training Responsibility Involvement and Preparation (TRIP) 
initiative to enhance service to claimants by combining resources and 
focusing on shared concerns. The vision of the TRIP initiative is to 
improve the claims adjudication process by:
  --reducing duplication of effort and combining resources,
  --providing a more direct focus on claims preparation,
  --placing a stronger emphasis on front-end of claims processing,
  --improving the quality of claims submission, and
  --improving timeliness of claims processing.
    We have recently expanded TRIP training to include a Train-The-
Trainer program. This program is a course of instruction on how to 
teach the TRIP program given to a service officer who has already 
completed the training. This is particularly beneficial to VSOs with 
out-based employees and helps to reduce travel expenses incurred in 
TRIP training. We have conducted successful Train-The-Trainer programs 
in Delaware, Florida, Alabama, and the District of Columbia. Other 
sessions are planned soon in Washington and in California.
    There are legal issues involved in having VSOs help process claims 
on a voluntary basis. The VA General Counsel would have to consider 
these before the concept could be taken into consideration.
                           homeless veterans
    Question. I am concerned about the growing number of homeless 
veterans in my state. Many suffer with mental health conditions and 
substance addictions. Unfortunately, many are reluctant to seek 
assistance from the VA.
    How does the VA budget request for fiscal year 2004 address the 
problem of homelessness among veterans? Does the VA approach to 
homelessness pro-actively seek out those veterans who need assistance?
    Answer. Approximately $174 million of VA's proposed fiscal year 
2004 medical care budget is specifically targeted for specialized 
services for homeless veterans. Over the last 16 years, VA has 
developed the largest integrated national network of services for 
homeless people in the country. Components of VA's continuum of care 
include:
  --aggressive outreach to homeless veterans living on the streets or 
        in emergency shelters;
  --clinical assessment to determine treatment needs;
  --linkage to VA medical center programs for medical, mental health, 
        and substance abuse treatment;
  --case management services;
  --residential rehabilitation in VA's Domiciliary Care for Homeless 
        Veterans (DCHV) programs and Transitional Residence Programs 
        for veterans in Compensated Work Therapy (CWT) Program and 
        supported, community-based housing through VA's Grant and Per 
        Diem Program;
  --assistance with employment through VA's CWT Program; and
  --assistance with permanent housing.
    Outreach to homeless veterans is an integral component of VA's 
continuum of care for homeless veterans. In fiscal year 2002, 
approximately 370 VA staff were dedicated to outreach and case 
management services for homeless veterans. These VA clinicians 
contacted almost 43,000 homeless veterans through outreach.
    Question. Does the VA plan to incorporate a continuum of care for 
veterans with mental illness that includes availability and 
accessibility to physician services, state of the art medications, 
supported housing and integrated substance abuse treatment?
    Answer. VA has been in the forefront in providing a full continuum 
of care for veterans requiring mental health services. The VHA Policy 
Manual (M-2, Part X, Chapter 3, June 29, 1993) describes a fully 
integrated psychiatric continuum of mental health including physician 
services, state of the art medications, supported housing, and 
integrated substance abuse treatment. This was followed by a VHA 
Program Guide 1103.3, Mental Health Program Guidelines for the New 
Veterans Health Administration, published June 23, 1999. This guidance 
expands on the manual, incorporates elements from the Eligibility 
Reform Act of 1996, includes the evidence base for our programs, and 
describes in more detail the continuum of care for special populations. 
These special populations include veterans with a serious mental 
illness, those with substance use disorders including dually diagnosed 
patients, those with post-traumatic stress disorders, homeless mentally 
ill veterans, elderly veterans with psychogeriatric problems, veterans 
in rural areas, and special considerations for women and other minority 
veterans. It includes principles involving integration of mental health 
and primary care management, and psychosocial rehabilitation including 
an integrated work rehabilitation program.
    The issue of availability and accessibility to mental health 
services involves how the VHA budget is distributed among our many 
facilities and clinics through the Veterans Equitable Resource 
Allocation (VERA) system and how decisions are made at the Veterans 
Integrated Services Network (VISN) level and at each medical center or 
health care system. VHA policy is to provide equitable access to 
funding and clinical care for veterans with a mental disorder as 
compared to those with all other disorders. The final decision 
generally rests at the facility level where local needs and priorities 
can be balanced for all veterans seeking care.
                       antipsychotic drug zyrexa
    Question. Mr. Secretary, on March 4, 2003, USA Today reported that 
Eli Lilly is facing multiple lawsuits over the antipsychotic drug 
Zyprexa (olanzapine) for deadly diabetic conditions caused by the drug. 
Many veterans are prescribed Zyprexa to treat their mental illness. 
Consequently, many veterans have been or will be exposed to the same 
diabetes risks that are the subject of these new lawsuits.
    What is the VA doing to address the side effect risks posed to 
veterans who are prescribed Zyprexa? Has the VA studied the effects of 
Zyprexa on veterans at risk of developing diabetes? Has the VA 
considered what, if any, potential liability it may incur to veterans 
who develop diabetes as a result of Zyprexa treatment received at the 
VA?
    Answer. I'm pleased to report that VA was one of the first large 
managed care organizations in the United States to address the issue of 
weight gain and diabetes associated with the atypical antipsychotic 
drug class at the enterprise level. In August 2001, in cooperation with 
the VA Mental Health Strategic Health Care Group, the VA Medical 
Advisory Panel and Pharmacy Benefits Management Strategic Health Care 
group developed and published guidance to VA practitioners regarding 
the relative safety and cost of the atypical antipsychotics available 
on the VA National Formulary. The published medical literature is 
continuously monitored for emerging data and when appropriate, the 
guidance is updated. Most recently guidance was updated in June 2002.
    In addition, VA is in the process of updating its Schizophrenia 
Clinical Practice Guideline and will include all available and relevant 
information regarding the known risks associated with this class of 
drugs.
    Finally, the VA Pharmacy Benefits Management Strategic Health Care 
Group and Medical Advisory Panel are currently working with the United 
States Food and Drug Administration (FDA) on a quality improvement and 
appropriateness of use analysis of the atypical antipsychotic drug 
class in veteran patients. It is expected that a joint report will be 
issued before the end of calendar year 2003.
                                 ______
                                 
           Questions Submitted by Senator Barbara A. Mikulski
                       priority 7 and 8 veterans
    Question. VA recently announced that Priority 8 veterans can no 
longer enroll in the VA medical care system. I understand this decision 
to mean that Priority 8 veterans coming to VA for the first time will 
not be able to enroll, but that Priority 8 veterans who are already in 
the system will be ``grandfathered-in.'' Is this correct?
    Answer. That is correct; veterans enrolled in Priority Group 8 on 
January 16, 2003, remain enrolled and eligible for VA health care 
benefits. Veterans applying for enrollment on or after January 17, 
2003, whose financial status places them in Priority Group 8, are 
ineligible for care. An exception is that veterans with service-
connected conditions rated zero percent disabling may seek care for 
their service-connected condition(s).
    Question. Is this decision temporary, or permanent? Does VA's 2004 
budget continue this policy?
    Answer. The Secretary is required to assess veteran demand and 
availability of resources and make an enrollment decision on an annual 
basis. The decision to restrict enrollment of Priority Group 8 veterans 
will be reconsidered during this annual process. The VA 2004 budget 
request continues the policy of restricting enrollment of Priority 
Group 8 veterans.
    Question. Can you please explain VA's authority to make this 
decision?
    Answer. The bases for VA's patient enrollment system are found in 
38 U.S.C. Sec. 1705 and 38 C.F.R. 17.36 through 17.38. Section 17.36(c) 
of title 38 C.F.R. specifically delineates the Secretary's need to 
review estimates of veteran demand and all available resources and to 
make an annual enrollment decision.
    Question. VA tells us that the number of Priority 7 and 8 veterans 
in the VA system is skyrocketing. Do you think this is because of VA's 
prescription drug benefit?
    Answer. The number of Priority Group 7 and 8 veterans treated in 
2002 was about 11 times greater than in 1996. The combined effect of 
several factors that resulted in this large increase in demand has 
severely strained VA's ability to continue to provide timely, high-
quality health care. First, the Veterans Health Care Eligibility Reform 
Act and the Millennium Health Care Act opened the door to comprehensive 
health care services to all veterans. Second, access to health care has 
greatly improved with the opening of hundreds of community-based 
outpatient clinics. Third, our patient population is growing older and 
this had led to an increase in veterans' need for health care. Fourth, 
VA has favorable pharmacy benefits compared to other health care 
providers, especially Medicare, and this has attracted many veterans to 
our health care system.
    However, VHA's actual experience in fiscal year 2002 shows that of 
the 2,129,317 Priority 7 enrollees, approximately 50 percent were 
users. Of those 1,075,040 users, 63 percent had three or more 
encounters, which indicates a reliance on VHA for health care in 
addition to pharmacy. In addition, VA analyzed the actual utilization 
of newly enrolled veterans who indicated in the VHA New Enrollee Survey 
that their primary reason for VA enrollment was pharmacy access. These 
enrollees experienced 3.4 visits per patient and 4.5 clinic stops per 
patient and the services used were not limited to primary care and 
pharmacy. Twenty-five percent of the non-ancillary encounters were to 
specialty clinics, such as eye care, cardiology and urology and in 
fact, some of the patients had inpatient admissions. This indicates 
that although a pharmacy benefit was stated as the primary reason for 
enrollment, these enrollees use other VA services as well.
    Question. Do you think that VA is faced with absorbing this new 
demand because of a lack of national policies to address the aging of 
America and the collapse of many HMOs?
    Answer. Public disenchantment with health maintenance 
organizations, along with their economic failure, may have played a 
role in causing many patients to seek out established and traditional 
sources of health care such as VA. However, we believe that VA is faced 
with this new demand primarily because of our strength as a 
comprehensive health care system and because we so ably provide our 
veteran patients with a complete and comprehensive continuum of care in 
a coordinated and unified healthcare system, which includes a 
prescription drug benefit. More than half of those veterans who receive 
health care through VA are over age 65. VA patients are not only older 
in comparison to the general population, but they generally have lower 
incomes, lack health insurance, and are much more likely to be disabled 
and unable to work.
    The projected peak in the number of elderly veterans during the 
first decade of this century will occur approximately 20 years in 
advance of that in the general U.S. population. Thus the current 
demographics of the veteran population are one of the major driving 
forces in the design of the VA health care system into a comprehensive 
system centered on providing complete continuum of care in a 
coordinated and unified system.
    Question. In December 2000, the VA's Inspector General reported on 
the use of VA's prescription benefit by Priority 7 veterans. The IG 
studied a sample group of Priority 7 veterans and found that almost 90 
percent either had access to private non-VA health care and/or said 
that their only reason for using VA was to have their private 
prescriptions filled. The IG recommended a change in the law so that 
veterans could have privately written prescriptions filled at the VA. 
The IG said this could save VA over $1 billion per year. Has the VA 
looked at this recommendation? How would this idea affect VA? Could VA 
do something like this on a pilot basis to see if it would work?
    Answer. VHA has not concurred with the findings of the December 
2000 OIG report or the draft update of the report. VHA has met with OIG 
to review its concerns and, as a result, OIG is currently in the 
process of recalculating its estimates of cost avoidances.
    VA is aware that the lack of Medicare prescription drug coverage is 
causing some veterans to turn to VA for access to prescription drugs. 
While VA acknowledges that some veterans have stated that they only 
want VA to provide drugs and not medical care, data suggest that 
approximately 25 percent of veterans who have stated that they are 
seeking VA care primarily for prescription drugs actually end up using 
other VA services as well, including eye care, cardiology, urology, 
and, in some cases, inpatient care. Any analysis must also consider the 
potential for significantly increased demand--an unintended consequence 
of most proposals.
    VA has agreed to work with Congress to find a solution to the 
vexing problem of waiting lists. VA is currently examining options for 
prescription drug benefits and, in doing so, is carefully assessing the 
likely impacts (financial and clinical) of such policies. VA must take 
care to ensure that the actions taken have no unintended consequences 
that could adversely affect VA's ability to provide timely, quality 
health care to enrolled veterans.
    Lastly, VA believes that a VA/Medicare+Choice cooperative 
initiative between VA and the Department of Health and Human Services 
will be a major step forward in addressing this problem and is looking 
forward to continuing that project's development.
    Question. Does VA know how many Priority 7 and 8 veterans have 
other health insurance?
    Answer. The following chart shows the insurance coverage for non-
compensable, zero percent service-connected (SC) and non-service-
connected (NSC) enrollees in Priorities 7 and 8 according to the 2002 
VHA Survey of Veteran Enrollees:

                                            PERCENT OF ENROLLEES WITH VARIOUS TYPES OF INSURANCE COVERAGE \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Private \3\
                           Priority                              Medicare   Medicare  Medigap \2\ ----------------------  Medicaid   TRICARE       No
                                                                    A          B                      HMO      Non HMO               for Life   Coverage
--------------------------------------------------------------------------------------------------------------------------------------------------------
P7 SC.........................................................         65         58          39          12         15          6         11         16
P7 NSC........................................................         71         67          47          13         16          8          4         13
P8 SC.........................................................         54         51          35          18         24          4         22         10
P8 NSC........................................................         59         55          42          18         23          4          7        10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2002 VHA Survey of Veteran Enrollees' Health and Reliance Upon VA.
\1\ Percentages do not total to 100 because enrollees may have multiple coverage.
\2\ Or Medicare supplemental plan.
\3\ Individual or group, excluding Medigap or Medicare supplemental plan.

    Question. Are veterans required to tell the VA if they have other 
health insurance?
    Answer. Veterans are not presently required to tell VA if they have 
other health insurance. However, VA does presently request that 
veterans voluntarily provide health insurance information on the 
Application for Health Benefits. Section 112 of Title I of Division K 
of Public Law 108-7, signed February 20, 2003, prohibits the use of 
appropriated funds for hospitalization or treatment of certain non-
service connected veterans who do not disclose to VA their current 
health insurance information. Implementing regulations have not yet 
been issued.
    Question. The VA-HUD Subcommittee gave VA $1.1 billion more than 
the request in 2003, but VA still closed its doors to new Priority 8 
veterans. What is VA doing to ensure accuracy in its budgets?
    Answer. VA's ability to estimate veteran demand and expenditures 
has improved significantly with the use of an actuarial health care 
demand model. This model is based on private sector benchmarks adjusted 
for our veterans' age, gender, morbidity, utilization, reliance, and 
insurance. The model projects veteran enrollment, utilization, and 
expenditures, and provides detailed projections for approximately 50 
health care service categories.
    While this change to using actuarial projections in budget 
development now allows us to provide very accurate estimates of 
expected enrollment and expenditures, it also quantifies the escalating 
demand for veteran health care. It was clear that continued workload 
growth of the magnitude experienced in recent years is unsustainable in 
the current federal budget climate. Therefore, using the model, we 
developed health care policies designed to ensure that VA is able to 
fulfill its core mission--providing timely access to high quality 
health care to veterans with service connected disabilities, low 
incomes, and those with special needs.
    VA expects to provide health care to 3.6 million patients in core 
Priorities 1-6 in fiscal year 2004, an increase of 5 percent over 
fiscal year 2003. Priorities 1-6 alone are expected to cost $9 billion 
more by fiscal year 2008 (over fiscal year 2003).
    Question. The budget says that VA will come forward with a new 
``VA+Choice'' program for Priority 8 veterans who can't enroll in VA. 
How will this happen? Will VA do this by regulation, or does it require 
authorizing legislation? What are the details of this plan? Will 
veterans in this program get a prescription drug benefit?
    Answer. With the assistance of the Department of Health and Human 
Services, VA is moving toward implementation of a plan to offer to 
Medicare-eligible veterans unable to enroll for VA health care the 
option of using their Medicare benefit to obtain health care through 
VA. VA plans to accomplish this by contracting with existing 
Medicare+Choice organizations to offer a special Medicare+Choice plan, 
which would be called VA+Choice; with the stipulation that VA would 
define the benefits under VA+Choice, and enrollees in VA+Choice would 
be able to receive Medicare benefits through VA facilities. The 
intention is to offer a benefit package that is competitive with those 
currently offered by M+C organizations and to include some type of 
additional benefit for prescription drugs.
    VA plans for the new VA+Choice plan to begin accepting enrollees by 
October 2003, and projects an initial demand of 25,000 enrollees within 
the first year. Medicare eligible Priority 8 veterans who are unable to 
enroll for VA health care would be offered the option of receiving 
their Medicare benefits through VA+Choice. The veteran's spouse or 
other Medicare eligible beneficiaries of the veteran would not be 
enrolled in the VA+Choice plan but would be able to enroll in a 
traditional Medicare+Choice plan, including one offered by the M+C 
organization offering a VA+Choice plan in their area.
                          $250 enrollment fee
    Question. How did VA choose $250 as the amount for this annual 
premium?
    Answer. The proposed policies in VA's fiscal year 2004 President's 
budget were designed to ensure that VA is able to fulfill its core 
mission--providing timely access to high-quality health care to 
veterans with serviced connected disabilities, low incomes, and those 
with special needs.
    This fee is similar to the fee charged a military retiree who has 
devoted 20 years or more of his life to uniform--enlisted or officer. 
The military retiree who enrolls in the DOD Tricare Prime program has 
to pay $256 or $456 to receive health care after having served 20 years 
in uniform. VA tried to structure a proposal with a very small premium 
for veterans with relatively higher incomes who may have only served 1-
4 years in uniform.
    The $250 enrollment fee and other cost-sharing proposals would only 
affect higher income, better-insured veterans in the lowest priorities 
and have been strategically priced to refocus the VA system on those 
veterans who need us most. Veterans in Priority 8 and non-service-
connected veterans in Priority 7 are being asked to pay more towards 
the cost of their care, while at the same time, we propose eliminating 
prescription copayments for the lowest income veterans in Priority 5 by 
raising the income threshold to the non-service-connected pension and 
aid and attendance level.
    According to data from the 2002 VHA Survey of Veteran Enrollees, 90 
percent of Priority 8 enrollees and 87 percent of Priority 7 enrollees 
have some type of public or private health care coverage (compared to 
just 70 percent for Priority 5 and 73 percent for Priority 1 
enrollees). These policies discourage use of VA by veterans who, for 
the most part, do not use VA as their primary provider of care but 
supplement their other care options with services from VA when it is 
financially opportune for them. Under the proposed policies, these 
veterans who choose to use VA selectively, such as those who come to us 
only for prescriptions, can make the economic decision to continue to 
do so. Most importantly, those veterans who do not have other health 
care options can still access the high quality, comprehensive care VA 
provides at a very minimal cost.
    Question. What authority does VA have to require this $250 premium? 
Can VA do this through regulation, or does it require a specific change 
to the authorizing statutes?
    Answer. VA is requesting legislation that would authorize the 
Secretary to collect an enrollment fee of $250 per year from all 
veterans enrolling in Priority Group 8 and from all non-service-
connected veterans enrolling in Priority Group 7.
    Question. How many veterans will have to pay this premium?
    Answer. In fiscal year 2004, 1,082,335 Priority 8 enrollees and 
non-service-connected Priority 7 enrollees are expected to choose to 
pay the $250 enrollment fee.
    Question. How many veterans will leave VA if they have to pay this 
premium?
    Answer. In fiscal year 2004, 1,136,225 Priority 8 enrollees and 
non-service-connected Priority 7 enrollees are not expected to pay the 
$250 enrollment fee.
    Question. How will VA collect this fee? Will VA send a bill to 
every middle-income veteran on its list?
    Answer. VA proposes to initiate bills at the beginning of each 
fiscal year for all enrolled veterans required to pay the fee. Bills 
for existing enrollees would be generated by each veteran's preferred 
facility. As new veterans subject to payment of the enrollment fee are 
enrolled, they would be billed at the time of enrollment. After 
appropriate due process, veterans failing to pay the enrollment fee 
would be disenrolled.
    Question. Some veterans are ``enrolled'' but they don't use the VA 
system. They're reserving their space in case their private insurance 
fails. Will these veterans have to pay $250 even if they don't come to 
VA yet? How many veterans are like them?
    Answer. Enrollees must pay the $250 enrollment fee at the beginning 
of fiscal year 2004 to remain enrolled and eligible for care in VA. In 
fiscal year 2002 the number of enrollees in Priority 8 and the non-
service-connected enrollees in Priority 7 who did not use the VA system 
totaled 1,054,277. We expect that 65 percent of those under age 65 and 
90 percent of those over age 65 will not pay the $250 enrollment fee.
                          copayment increases
    Question. How did VA choose $15 as the amount for prescription 
drugs?
    Answer. This and the other proposed policies in VA's fiscal year 
2004 President's budget were designed to ensure that VA is able to 
fulfill its core mission--providing timely access to high-quality 
health care to veterans with serviced connected disabilities, low 
incomes, and those with special needs.
    The $15 outpatient pharmacy copayment proposal and other cost-
sharing proposals would only affect higher income, better-insured 
veterans in the lowest priorities and have been strategically priced to 
refocus the VA system on those veterans who need us most. Veterans in 
Priority 8 and non-service-connected veterans in Priority 7 are being 
asked to pay more towards the cost of their care, while at the same 
time, we propose eliminating prescription copayments for the lowest 
income veterans in Priority 5 by raising the income threshold to the 
Pension and Aid and Attendance level.
    These policies discourage use of VA by veterans who, for the most 
part, do not use VA as their primary provider of care but supplement 
their other care options with services from VA when it is financially 
opportune for them. Under the proposed policies, these veterans who 
choose to use VA selectively, such as those who come to us only for 
prescriptions, can make the economic decision to continue to do so. 
Most importantly, those veterans who do not have other health care 
options can still access the high quality, comprehensive care VA 
provides at a very minimal cost.
    Question. Can VA increase the prescription drug copayment by 
regulation, or does VA need authorizing legislation?
    Answer. The Secretary has the authority to increase the medication 
copayment at any time, and this has been specified in the current 
regulations. Any increase to the medication copayment would need to be 
put forth in new regulations. The medication copayment amount is based 
upon VA costs and does not include the cost of the medication. The 
current VA costs do not support an increase to $15 for the medication 
copayment. A legislative change will be required to remove the phrase 
from the current law that states the medication copayment is based on 
VA costs.
    Question. How did VA choose $20 per outpatient primary care visit?
    Answer. This and the other proposed policies in VA's fiscal year 
2004 President's Budget were designed to ensure that VA is able to 
fulfill its core mission--providing timely access to high quality 
health care to veterans with serviced connected disabilities, low 
incomes, and those with special needs.
    The $20 outpatient copayment proposal and other cost-sharing 
proposals would only affect higher income, better-insured veterans in 
the lowest priorities and have been strategically priced to refocus the 
VA system on those veterans who need us most. Veterans in Priority 8 
and non-service-connected veterans in Priority 7 are being asked to pay 
more towards the cost of their care, while at the same time, we propose 
eliminating prescription copayments for the lowest income veterans in 
Priority 5 by raising the income threshold to the Pension and Aid and 
Attendance level.
    These policies discourage use of VA by veterans who, for the most 
part, do not use VA as their primary provider of care but supplement 
their other care options with services from VA when it is financially 
opportune for them. Under the proposed policies, these veterans who 
choose to use VA selectively, such as those who come to us only for 
prescriptions, can make the economic decision to continue to do so. 
Most importantly, those veterans who do not have other health care 
options can still access the high quality, comprehensive care VA 
provides at a very minimal cost.
    Question. Can VA increase the outpatient copayment by regulation, 
or does VA need authorizing legislation?
    Answer. The Secretary has the authority to increase the copayment 
through a change to VA regulations. Legislation is not required.
                              collections
    Question. How much will VA collect from insurance companies?
    Answer. VA estimates that it will collect approximately $760 
million in fiscal year 2003 from third-party insurance companies.
    Question. Does VA know how much it is owed by insurance companies?
    Answer. VA's gross account receivables are $488 million from third-
party insurers. Payment is dependent upon the terms of the various 
policies issued to veterans.
    Question. How is VA's collections system set-up?
    Answer. VA presently handles collections through a combined effort 
of employed staff and private vendors who follow-up on accounts once 
they are delinquent. All staff employ a combination of follow-up 
letters, phone calls, and other tracking within VISTA computer software 
to prioritize accounts for follow-up action.
    Question. What is VA doing to get better? Is VA seeking help from 
the private sector to get better?
    Answer. VA is putting in place a number of program and operational 
enhancements with the expectation that they will improve revenue 
collections by streamlining production of accurate and timely claims. 
Initiatives include the following:
  --Technology.--In fiscal year 2002, the Deputy Under Secretary for 
        Health for Operations and Management issued guidance for VHA 
        sites to purchase encoding software. This software enables 
        coders to more accurately and efficiently code encounters and 
        to measure coding productivity. All sites have purchased 
        encoder software.
  --Education.--VHA is pursuing a variety of educational programs to 
        enhance the knowledge base of coding staff and improve medical 
        record coding. Current educational initiatives include an 
        online web-based coding curriculum, monthly satellite programs 
        on specific coding and documentation topics, and publication of 
        a VHA coding handbook and a quarterly coding newsletter.
  --Documentation and Coding.--As part of VHA coding improvement 
        efforts, tools have been developed to improve the source 
        documentation created by providers. Many VISN's and VA medical 
        centers have contracted with external vendors to provide coding 
        services as a means to improve lag time in billing and 
        collections. Currently, VHA is pursuing a national coding 
        contract, which will standardize requirements and enhance the 
        quality of the coding provided by vendors.
  --Electronic Claims Submission.--To streamline VA medical center 
        operations and to ensure compliance with the Health Insurance 
        Portability and Accountability Act (HIPAA), software for 
        submitting standardized electronic claims and currently, EDI 
        claims software is live at all VA medical centers, and all 
        sites are submitting electronic claims to commercial payers.
    VA is also seeking help from the private sector relative to 
collections including the implementation of a Patient Financial 
Services System (PFSS) demonstration project that will result in the 
integration of a commercial billing and accounts receivable system. The 
primary goal of the project is to demonstrate the feasibility of 
emulating industry proven business solutions to streamline workflow 
processes and further improve collections. VA is moving forward with 
the project and expects to select the recommended product in April 2003 
and complete installation by September 2003. Based on the outcome of 
the pilot, a recommendation for national deployment will follow.
                       medical care waiting lines
    Question. How many veterans are waiting to get a VA doctors 
appointment?
    Answer. As of April 2003, there are 167,852 veterans on the waiting 
list.
    Question. How is VA going to end the waiting list?
    Answer. It is estimated that if the current rate at which new 
enrollment for priority 1-7 veterans remains constant and the rate at 
which veterans are added and removed from the wait list remains 
constant, then the wait list will be ended by February of fiscal year 
2004.
    VA is aggressively working on its Advanced Clinic Access initiative 
to make office practice efficiencies. By implementing these principles, 
clinics can then free up slots to meet the increased demand.
    Question. How long does it take a veteran to get a specialty care 
appointment like dermatology and audiology?
    Answer. For patients that have scheduled appointments, the average 
next available wait time as of February 2003 is 61 and 28 days for 
Dermatology and Audiology, respectfully. For patients placed on the 
wait list the wait time is 117 days and 158 days, respectfully.
    Question. What standards does VA have for waiting times?
    Answer. VA has the standard to schedule appointments within 30 days 
of the desired appointment date. This is quantified by measuring the 
average waiting time for patients requesting the next available 
appointment and requires that there are no patients on the wait list 
waiting more than 30 days for their appointment.
    Question. How do these compare to the private sector?
    Answer. VA was unable to find benchmarks for similar health care 
systems.
                    claims processing waiting times
    Question. What is the current processing time for claims?
    Answer. VBA's current processing time for rating related claims is 
189.5 days for the month of March. The cumulative performance for the 
period from October 2002 through March 2003 is 198.5 days.
    Question. What is the goal?
    Answer. The cumulative target for average processing time for March 
2003 is 190.6 days. VBA will continue to improve the average processing 
time for rating related claims. Specific station performance targets 
have been established in line with the Secretary's goal of 100 days 
average processing time for rating related actions.
    Question. Why did average processing times increase from six to 
seven months last year?
    Answer. For the month of March 2002, VBA's average processing time 
for rating related claims was 233.5 days. During the first six months 
of fiscal year 2002, the cumulative average processing time for rating 
related claims was 224.3 days. Over the last year, VBA has improved the 
average processing time for rating related claims by 44 days, from 
233.5 days in March 2002 to 189.5 days in March 2003.
    Question. If times are increasing, how is VA going to make its 
goal?
    Answer. The leading timeliness indicator of performance is average 
days pending, rather than average processing time. In October 2002, 
VBA's average days pending was 168.2 days. In March 2003, the average 
days pending had improved to 144.5 days. This downward trend for 
average days pending indicates that our oldest claims are being 
processed. As these older claims are removed from the inventory, the 
processing time for rating related claims will continue to improve.
    Question. How much funding does VA anticipate devoting to improving 
claims processing time in 2004?
    Answer. The Veterans Benefits Administration has budgeted $22.3 
million in 2004 to improving claims processing time. The following 
initiatives have been devoted to accomplishing these improvements:

------------------------------------------------------------------------
------------------------------------------------------------------------
Training & Performance Support System (TPSS)............      $2,601,000
Compensation & Pension Evaluation Redesign (CAPR).......       3,821,000
Benefits Replacement System (VETSNET)...................       9,200,000
Data Centric Benefits Integration (DCBI)................       6,662,000
                                                         ---------------
      Total.............................................      22,284,000
------------------------------------------------------------------------

    A detailed description of these initiatives is contained in the 
2004 Budget Submission, Volume 1, Benefits Programs, on pages 2-25 
through 2-31.
    Question. How many new employees has VA hired?
    Answer. VBA hired approximately 150 additional Veterans Service 
Representatives (VSRs) and 150 additional Rating Veterans Service 
Representatives (RVSRs) in December 2002.
    Question. How will VA retain these new employees so they will be 
able to make a real difference?
    Answer. The RVSRs were recruited through the Federal Career Intern 
Program. To attract the best-qualified candidates, VBA utilized the 
same ``focused recruitment activities'' that were developed to attract 
nurses and other health care professionals. Experience has demonstrated 
that people with some medical training or experience in the health care 
field develop the necessary skills of an RVSR more rapidly and become 
proficient within a relatively short time period (two years).
    Under the Federal Career Intern Program, new employees are enrolled 
in a comprehensive two-year training program. The employees will 
receive five weeks of centralized classroom training. They will use all 
available Training and Performance Support System (TPSS) modules at 
their home station. In addition, mentors have been assigned to the new 
employees to assist them with processing claims. Mechanisms have been 
established to track progress of these new hires during the two-year 
training program. VBA believes that the targeted recruitment, the 
structure of the Federal Career Intern program, the comprehensive 
training schedule and the assignment of mentors will assist in 
retaining these new employees. (VBA)
    Question. How will VA ensure accuracy while trying to reduce times?
    Answer. Budget authority of $621.4 million and 6,816 FTE (without 
OBRA) are requested to fund the discretionary portion of the 
Compensation program in 2004. Compared to the 2003 current estimate, 
budget authority is expected to show a net increase of $15.0 million.
    Budget authority of $151.7 million and 1,635 FTE (without OBRA) are 
requested to fund the discretionary portion of the Pension program in 
2004. Compared to the 2003 current estimate, budget authority is 
expected to decrease by $2.4 million.
    In developing the 2004 budget, VBA did not assume there would be 
armed conflict with Iraq. Therefore, our workload and performance 
projections did not address the potential effects. However, we believe 
the reorganization of service centers into specialized work teams, as 
prescribed by the Claims Processing Task Force report, will increase 
work efficiencies in the Compensation program. Based on workflow 
analysis, VBA believes the discretionary portion of the compensation 
program budget will be sufficient.
    While the discretionary portion of the pension program budget shows 
a decrease, we believe that the consolidation of pension workload in 
the Pension Maintenance Centers will lead to a gain in workflow 
efficiencies. Therefore, the reduction in this area should not 
negatively affect the pension claims process.
                     physician time and attendance
    Question. What is VA doing to ensure that when VA is paying a 
doctor, the doctor is working for veterans?
    Answer. By December 31, 2002, facility Directors were required to 
make all part-time VA physicians aware of VA time and attendance 
procedures, and all part-time VA physicians were required to certify 
that they were aware of and understood these requirements. The Under 
Secretary for Health also issued a VHA Directive (copy attached) that:
  --Outlined everyone's responsibilities related to this issue; and
  --Required facility Directors to:
    --Review the appointments of part-time physicians to determine 
            whether they were consistent with patient care needs,
    --Establish procedures for monitoring the attendance of part-time 
            physicians; and
    --Certify to the Director of their Veterans Integrated Service 
            Network that the above actions had been completed.
    Question. What staffing standards are in place for part-time 
doctors?
    Answer. In the past, VA managers made staffing decisions based on a 
variety of factors such as anticipated physician productivity, 
characteristics of assigned patient populations, prior and anticipated 
workload, waiting times, referral patterns, availability of funds, as 
well as the availability of staff or equipment needed to support and/or 
complement the services to be acquired. VA is now managing primary care 
workloads through panel size (see below); however, we are aware of the 
need for more specificity in this area and are developing a physician 
productivity model in four key outpatient areas: primary care, 
cardiology, urology, and ophthalmology. These models will help local 
managers more accurately assess the need for physician staff.
    Question. How does VA estimate the number of doctors it needs? Is 
this comparable to the private sector?
    Answer. Local VA officials are currently estimating their 
requirements for primary care physicians based on panel size or based 
on the numbers of patients assigned to each primary care physician. 
This methodology is comparable to the private sector; however, VA panel 
sizes are smaller because of differences in patient acuity, age, 
incidence of disease, and other population characteristics.
    Question. Part-time doctors are critical to the VA--they often also 
work for affiliated research institutions and have many demands on 
their time. How does VA communicate clearly to doctors about keeping 
track of their time?
    Answer. Medical Center Directors and Chiefs of Staff are 
responsible for ensuring all part-time physicians are made aware of 
their responsibilities with respect to VA time and attendance 
procedures. All part-time physicians recently certified their 
understanding of VA policies and procedures. VA officials are also 
responsible for enlisting the cooperation of affiliate institutions in 
the implementation of VA time and attendance policies and procedures.
    Question. How does VA keep track of physician time, especially for 
part-time doctors?
    Answer. Supervisors establish tours of duty for all full-time and 
part-time employees and place these tours in an automated ``Enhanced 
Time and Attendance'' system, which generates electronic timecards 
every two weeks. Employees also request and obtain supervisory approval 
for absences through this system (e.g., annual leave, excused absence, 
leave without pay). Supervisors are responsible for ensuring that 
employees under their supervision were working or that the employee's 
absence was approved. After the supervisor verifies the employee's 
presence (by visually noting the employee's presence, calling the 
employee's work number, reviewing work records, etc.), the supervisor 
asks the timekeeper to electronically record the employee's attendance. 
At the end of the 2-week period, electronic timecards are certified by 
the supervisor and released to the payroll activity for payment.
    VA established ``Adjustable Work Hours,'' a program to accommodate 
varying VA patient care needs and part-time VA physicians with VA or 
non-VA patient care, research, or educational responsibilities that 
makes adherence to the same scheduled tour of duty every 2 weeks 
difficult. A work schedule is established for these employees, but they 
may, with prior supervisory approval and consistent with VA patient 
care requirements, adjust a portion of the tour (up to 75 percent) to 
meet these demands. The remainder of their tour is considered ``core 
time'' or time during which the employee must be present unless granted 
an appropriate form of leave or absence. All part-time physicians who 
have been authorized to be on adjustable work hours must record their 
time and attendance on subsidiary timesheets, which are certified by 
their supervisor and entered into the Enhanced Time and Attendance 
system by the timekeeper. After certifying the electronic time card, 
the records are released to the payroll activity for payment. As with 
other employees, supervisors are responsible for ensuring that 
employees on adjustable work schedules were either present or that 
their absence had been approved.
    Question. How does VA estimate the number of doctors it needs?
    Answer. Local facility managers are responsible for estimating the 
numbers and types of physicians needed to meet their patient care 
requirements. As indicated above, these decisions are based on a 
variety of factors; however, national productivity standards are being 
developed to assist them in making these determinations.
                             long term care
    Question. The budget request proposes to limit nursing home care. 
Please explain this proposal.
    Answer. VA plans to provide nursing home care to all veterans 
mandated under the Millennium Act when those veterans in need of 
nursing home care choose to receive it from VA. In addition, VA plans 
to provide nursing home care to veterans who are in the discretionary 
group, with priority given to those in need of post-hospital 
rehabilitation or special care, hospice, respite, intensive geriatric 
evaluation and management, and veterans with a spinal cord injury/
disease and in need of nursing home care. In accordance with the 
recommendations of the Federal Advisory Committee on the Future of VA 
Long-Term Care, VA will also continue to support a rising number of 
veterans in State home nursing homes. Increasingly, however, VA 
anticipates providing needed care for elderly veterans in less 
restrictive, less costly home-and community-based non-institutional 
settings.
    Question. What are the consequences of this proposal? How many 
veterans will not receive nursing home care under this proposal?
    Answer. VA's fiscal year 2004 budget policy would limit nursing 
home care in VA nursing homes and contract community nursing homes to 
Priority 1 veterans rated 70 percent service-connected disabled or 
greater or who require nursing home care because of a service-connected 
disability and to other veterans in need of post-acute rehabilitation, 
special or extensive care, comprehensive geriatric evaluation and 
management services, respite care, or hospice care. VA will provide 
nursing home care for all veterans who are mandated to receive nursing 
home care under the provisions of the Millennium Act, who seek to 
receive such care from VA, and whose medical and personal circumstances 
require such care. The budget continues to support increases in State 
veterans nursing home care--generally a less acute level of care. The 
fiscal year 2004 budget also recognizes that a substantial portion of 
long-term care needs are more appropriately met in non-institutional 
settings by providing for increased census in home and community-based 
services, including home respite that was authorized by the Millennium 
Act and a new home hospice service. This strategy will help assure that 
VA Nursing Home Care Units are available for care of service-connected 
veterans and for post-acute rehabilitation and special care needs while 
allowing veterans who do not need this level of care to receive care in 
their homes or closer to their homes in community settings.
    In 2004, VA will treat an additional 2,261 average daily census 
(ADC) over the 2003 level in a combination of institutional and non-
institutional care settings.
    Question. Will VA do this by regulation, or does it require 
authorizing legislation?
    Answer. VA understands that a change to the Millennium Act is 
required in order to reduce the level of effort in VA nursing homes 
below the 1998 baseline level. VA is proposing that VA's three nursing 
home care programs (VA operated, contract community, and State home), 
VA and State domiciliary, and VA and contract home and community-based 
care in total be utilized as the 1998 baseline.
    Question. What is the status of VA's implementation of long term 
care overall?
    Answer. VA recently submitted to Congress an extensive report 
entitled, ``VA Extended Care: January 2003 Report to Congress of VA's 
Experience Under the Millennium Act''. A few highlights from that 
report include:
  --From fiscal year 1998-2001, the proportion of VA LTC patients 
        treated in outpatient settings has grown from 57 percent to 
        almost 64 percent;
  --The number of VA LTC patients treated in inpatient settings grew by 
        6.7 percent;
  --The average daily census (ADC) in VA nursing homes declined by 12 
        percent even though the number of patients grew (because of 
        shorter lengths of stay);
  --ADC for respite care and geriatric evaluation and management units 
        located in VA Nursing Home Care Units grew over 50 percent;
  --The budget for VA LTC programs grew by $200 million;
  --Full-time equivalent employees increased for both nursing home care 
        units and outpatient LTC programs;
  --80 percent of patients surveyed about VA home-based primary care 
        rated their care as very good or excellent.
    Since passage of the Millennium Act in November 1999, VA has issued 
directives on the new eligibility requirements, the new and expanded 
program types, and copayments in an effort to guide implementation of 
the Act.
    Question. How much will VA spend on long-term care in 2004?
    Answer. Estimated obligations for fiscal year 2004 are 
approximately $2.8 billion for institutional care and approximately 
$549 million for home- and community-based care.
    Question. What is the status of the long-term care assisted living 
pilots?
    Answer. VA is carrying out a three-year Assisted Living (AL) Pilot 
in Network 20 (Oregon, Washington, Idaho, Alaska). The pilot began 
enrolling veterans in January 2002 and to date has placed 286 veterans 
in AL facilities with which VA has established a contract. VA is 
authorized to pay the cost of AL for up to 6 months and then the 
veteran transitions into another payment arrangement (Medicaid or 
private pay) with the assistance of VA staff. The AL pilot is being 
evaluated by two of VA's Health Services Centers of Excellence. The 
evaluation report will be submitted to Congress in October 2004, 90 
days before the end of the pilot.
                   patient safety in medical research
    Question. How does VA safeguard patients who participate in VA 
research studies?
    Answer. In safeguarding research participants, VA follows the 
Common Rule (Federalwide Policy for the Protection of Human Research 
Subjects), found at 38 CFR Part 16, as well as pertinent regulations of 
the Food and Drug Administration. These regulations and implementing 
policy require Institutional Review Board Review of research involving 
human subjects of research, informed consent, and assurances from each 
VA Medical Center conducting human research of compliance with the 
Common Rule.
    Within VA, the Secretary recently approved establishment of the 
Office of Human Research Oversight (OHRO). This new office will be 
responsible for performing the oversight functions formerly performed 
by the Office of Research Compliance and Assurance (ORCA). It will 
investigate allegations of research misconduct and improprieties, 
develop event specific protocols as needed, and establish and implement 
procedures to report non-compliance with VA regulations and policies. 
In addition to staff in VA Central Office, OHRO will operate five 
field-based offices located at the former sites of the ORCA Regional 
Offices in Bedford, Massachusetts; Washington, D.C.; Decatur, Georgia; 
Chicago, Illinois; and Moreno Valley, California. At the same time, the 
new Program for Research Integrity, Development and Education (PRIDE) 
has been established within the Office of Research and Development 
(ORD). PRIDE will have responsibility for the training, education, and 
policy development functions formerly accomplished by ORCA.
    We expect that this new structure will enhance our ability to 
provide effective research oversight, while improving our ability to 
identify, communicate, and provide necessary training on complex issues 
in a timely and responsive manner. It will strengthen protection for 
our human research subjects, and the support and guidance we provide 
our research community.
    Question. How does VA make sure that patients are fully informed of 
the risks of the research?
    Answer. VA follows the Common Rule and the FDA regulations that 
require that, unless appropriately exempted or waived under regulation, 
all volunteers in research be fully informed through the informed 
consent process of the purpose of the research risks and possible 
benefits of research in which they are asked to participate; whom to 
contact for additional information; any compensation in case of injury; 
that they may choose not to participate or may withdraw without losing 
any benefits to which they are otherwise entitled; as well as other 
information stipulated by regulation and policy. The information to be 
provided and the informed consent process is approved and monitored by 
the Institutional Review Board. ORCA has also produced a brochure 
entitled ``I'm a Veteran. Should I Participate in Research?'' to help 
veterans understand some basics about research in the VA and their 
rights in research. The brochure, which has been widely distributed 
within VA, will also be produced in Spanish. A video is also in 
production to convey the same information to the veterans. ORCA has 
also produced information letters regarding informed consent for the VA 
research community and other educational initiatives dealing with this 
topic. The adequacy of the informed consent process is a key factor in 
oversight of VA facilities in activities undertaken by ORCA.
    VA's ORD has initiated research in how to improve the quality of 
the informed consent and the consenting process. The project entitled 
``Enhancing Quality of Informed Consent'' (EQUIC) will attempt to 
determine the success and validity of the informed consent process by 
interviewing subjects immediately after they have given informed 
consent for a study. The information gained through these studies will 
be used to improve the informed consent and the informed consent 
process.
    During the past 3 years ORD has placed more emphasis on both the 
written informed consent and the consenting process through quality 
improvement efforts that include the ongoing EQUIC study that surveys 
research participants after they have consented to participate in a 
clinical trial; the development of focus groups composed of veterans 
that assist in the review; development of informed consents; 
presentations by ORD staff to national and regional conferences; and 
the State of the Art conference on informed consent held March 7-9, 
2001.
    In a recent quality improvement survey conducted by ORD, 97 percent 
of responding research subjects agreed with the statement ``The 
Informed Consent process including discussion with study staff gave me 
the information needed to make an informed decision about whether or 
not to participate in the study.''
    Question. What are VA's safety standards for research involving 
patients?
    Answer. VA adheres to the Common Rule at 38 CFR Part 16, FDA 
regulations at 21 CFR, and the implementing instructions developed by 
VA (M-3, Part 1, Chapter 9). A primary method of ensuring that risks to 
research participants is minimized is through Institutional Review 
Board review as required by the regulations, oversight at the VA 
facility through the research service and compliance personnel, and 
through ORCA.
    Question. Does VA ensure that all of the medical professionals who 
treat veterans have current licenses and credentials?
    Answer. The VA uses a peer review credentialing process with 
standards that are set forth by the Joint Commission on Accreditation 
of Healthcare Organizations. In this process the qualifications of 
providers, as well as periodic reviews of currently employed providers, 
are verified prior to appointment, reappointment, and privileging. 
Credentialing must be completed prior to initial appointment or 
reappointment and before transfer from another medical facility. In 
2001, the Veterans Health Administration (VHA) implemented VetPro, the 
VA Credentials Data Bank. As an Internet enabled program, the VA is 
able to obtain complete, validated, and verified credentials. The 
credentialing process includes verification of the individual's 
professional education, training, licensure, certification, and review 
of health status, previous experience (including any gaps greater than 
30 days in training and employment), clinical privileges, professional 
references, malpractice history, and adverse actions or criminal 
violations, as appropriate. Provider credentials are screened through 
the State Licensing Board (SLB) for all current and previously held 
licenses, the Federation of State Medical Boards (FSMB) Disciplinary 
File, and the National Practitioner Data Bank (NPDB). All information 
obtained through the credentialing process is carefully reviewed by the 
Facility Executive Committee of the medical staff before employment/
privileging decision are made.
    Question. How does VA headquarters make sure that the networks are 
following these standards and procedures?
    Answer. Research Safeguards.--Information and instruction on the 
standards and procedures are coordinated through VA Central Office to 
the network offices. Several network offices have compliance officers 
who help educate the facilities about their responsibilities and 
conduct oversight if issues are detected. ORCA informs individual 
network offices of actions regarding oversight compliance issues. ORCA 
has also provided extensive and formal training for all network 
leadership and facility leadership on human subject protections issues. 
In addition, ORCA has issued information letters, alerts, and other 
updates to remind the networks of their responsibilities and provides 
copies to the network leadership on all official actions that it takes. 
ORCA negotiates the assurances of compliance required by the Common 
Rule with all VA facilities conducting research. Network directors have 
taken web-based training modules to describe the commitments made in 
the assurance and the basic protections afforded to subjects in VA 
research as required by the Common Rule and VA policy.
    The Chief Research and Development Officer requires all research 
offices to verify the credentials of not only VA employees but of all 
individuals who perform independent clinical activities as part of 
their research duties. In addition, all other individuals involved in 
human studies research must have their credentials confirmed, a scope 
of work established, and a record of such maintained and available for 
review. Sites must check the licenses of all licensed staff annually, 
and facilities will create an electronic means of tracking all without 
compensation (WOC) employees involved in human subjects research to 
facilitate the regular checking of these individuals against 
exclusionary lists.
    Credentialing in General.--By monitoring the VetPro credentialing 
process, VA can determine the extent to which VISNs and facilities are 
using this system. The system requirements ensure that the standards 
and procedures are followed to the extent that providers are 
credentialed via VetPro.
                              fort howard
    Question. What is the status of the Mission Change and Enhanced use 
project underway at Fort Howard? What is the current timetable for the 
project?
    Answer. The Mission Change portion is completed. The current 
timeline for the Enhanced-Use project is as follows:

------------------------------------------------------------------------
                                        Target             Completed
------------------------------------------------------------------------
Submit Business Plan...........  12/2002............  12/06/2002.
Business Plan Approval.........  01/2003............  01/20/2003.
Public Hearing.................  02/2003............  02/26/2003.
Designation to Congress........  02/2003............  Pending (VACO).
Solicitation/Request for         03/2003............  3/26/2003.
 Proposal (RFP).
Evaluation.....................  07/2003.             ..................
VA Capital Investment Board      09/2003.             ..................
 Review.
OMB Notification and Review....  10/2003.             ..................
Congressional Notification.....  10/2003.             ..................
Award..........................  11/2003.             ..................
------------------------------------------------------------------------

    Question. What is the method the VA will use to broadcast [send 
out] its Request for Proposals (RFP) for Fort Howard? Will the VA rely 
solely on newspaper notices or will there be targeted mailings to 
companies which provide the type of development the VA is seeking at 
Fort Howard?
    Answer. Targeted mailings were made to over 240 parties that have 
previously expressed interest in Ft. Howard, or that have expressed 
interest or participated in other similar enhanced use projects. The 
RFP was also advertised in local newspapers.
    Question. What is the final date due for the RFP's? If there are no 
qualified bidders after the due date, will the VA make adjustments to 
the RFP and re-broadcast? What affect would such re-broadcast have on 
the current timeline for Ft. Howard?
    Answer. Proposals in response to the RFP are due on June 13, 2003. 
If there are no qualified proposals, VA will interview some of the 
firms that had expressed interest in an attempt to assess the reasons 
for the lack of response, and will revise and adjust the RFP if 
appropriate. Any such assessment, revision, and re-issue of the RFP was 
not envisioned in the aggressive timeline, and would add in excess of 
90 days to future milestones.
    Question. Will VA require the inclusion of assisted living and 
nursing care units at Fort Howard?
    Answer. No. The RFP specifies VA's preference for all elements of a 
continuous care retirement community but does not require them. Instead 
it allows potential proposers to present a plan for the redevelopment 
that they deem most appropriate and feasible.
    Question. Veterans with inpatient needs are being referred to the 
Baltimore VAMC. What has the VA done to prepare the Baltimore facility 
for its expected increase in workload? What facility improvements are 
being made? What is the VA doing to ensure that healthcare workers at 
the facility are able to provide quality customer service to an 
increased workload?
    Answer. The Fort Howard Mission Change did not impact the Baltimore 
VAMC. The Baltimore division of the VA Maryland Health Care System 
inpatient beds is dedicated to acute medical care and served the acute 
medical needs of the patients at Fort Howard prior to the Mission 
Change. Consequently, there is no projected impact on inpatient care at 
Baltimore as a result of the Mission Change.
    The inpatient programs that where located at Fort Howard were 
dedicated to intermediate medicine. The Mission Change relocated 68 of 
the 85 existing beds to the Loch Raven and Perry Point facilities, 
where excess capacity existed within the healthcare system. At the time 
the inpatient beds were relocated, the average daily census in 
intermediate medicine was 68 depicting that excess capacity existed. 
The VA Maryland Health Care System was given permission to close 17 
beds as a result of the low occupancy rate.
    Question. Will outpatient services continue at the Fort Howard 
campus throughout the entire transition?
    Answer. Yes. The Fort Howard campus will retain a Community Based 
Outpatient Clinic that will be staffed by VA physicians and support 
staff.
    Question. If the State does not authorize a new State Veterans Home 
at Fort Howard, what impact will it have on the Enhanced Use plan?
    Answer. The RFP requires all proposers to identify a 7-acre parcel 
of the campus that they will set aside in their redevelopment plan for 
future use as a site for a State Nursing Home. If at some future time 
the Department, after consultation with the State of Maryland, 
determines that this State Home is no longer a possibility, the 
Department may choose to offer this parcel to the enhanced-use lessee 
for additional consideration or could choose to pursue a separate 
enhanced-use lease for a purpose as yet to be determined.
                           homeland security
    Question. VA's Fourth Mission is to serve as a backup to the DOD 
healthcare system in times of national emergency. What does VA propose 
to spend in 2004 to prepare for this mission?
    Answer. VA does not budget separately for preparedness to execute 
its plans to provide back up to the DOD health care system in times of 
war or national emergency. Medical preparedness actions to support DOD 
in wartime are part of an overall integrated comprehensive Emergency 
Management Program (EMP) used within VA and, in particular, the 
Veterans Health Administration (VHA). This concept employs an ``all 
hazards'' approach to emergency preparedness that addresses the broad 
range of threats and missions that VA can be called upon for response. 
This includes not only providing care to active duty service members in 
wartime, but also requests under the Stafford Act and other authorities 
for VA assistance in domestic disasters or terrorist incidents. Each of 
VHA's medical facilities must, as mandated by the Joint Commission on 
Accreditation of Healthcare Organizations, employ this comprehensive 
approach in development of their local Emergency Operations Plans. This 
includes planning for receipt of military casualties under activation 
of the VA-DOD Contingency Plan, as well as for other contingencies 
associated with natural or manmade events within their communities.
    Question. If there is a biological attack in Baltimore, what would 
be the role of the VA hospital?
    Answer. A biological attack would most likely prompt an activation 
of the Federal Response Plan (FRP). Under Emergency Support Function 
#8, ``Health and Medical,'' of the FRP, VA is cited as a support 
agency. The lead agency is the Department of Health and Human Services 
(HHS).
    VA could be tasked to provide support in several ways. The mostly 
likely forms of support would be:
  --Pharmaceuticals for immediate treatment and as prophylaxis (e.g., 
        antibiotics, as were administered after the anthrax incidents 
        post 9-11). VA may oversee or assist with coordinating the 
        logistics of various caches (Centers for Disease Control (CDC), 
        HHS) or in providing pharmaceuticals from its internal sources.
  --VA may be requested to provide staff (especially clinical) to 
        assist in administering pharmaceuticals and rendering 
        treatment.
  --VA may be asked to support supplies (e.g., swabs, syringes/needles, 
        culture materials) or equipment (ventilators, dialysis, or 
        other biomedical equipment depending on the biological agent 
        and its effects). In the short term, many of these requested 
        resources would be provided by the Baltimore VA Medical Center.
    VA's role in such an attack would also depend on the local 
emergency plan and specific expectations cited in the plan. For 
instance, if the event is assessed to warrant decontaminating victims, 
VA may, through the Local Emergency Preparedness Committee (LEPC) be 
cited as a source to provide decontamination.
    Finally, in such an attack, the local VA medical center will 
activate their internal disaster plan, including implementing 
heightened security, facility level decontamination (and other 
preparedness measures), staff call-back roster implementation and 
vigilant surveillance, and reporting of actual or suspected bio-terror 
victims to the public health authorities.
    Question. Are employees there being vaccinated for smallpox? If 
yes, how? If not, why not?
    Answer. Yes, as of March 13, five members of VAMHCS have been 
vaccinated through the State plan as implemented through the University 
of Maryland Hospital. The remainder of the Smallpox Vaccination Team 
and of the Smallpox Healthcare Response Team has not been vaccinated. 
The Maryland Health Care System plans to vaccinate other team members 
when the VA supply of vaccine becomes available.
                      physician assistant advisor
    Question. In previous Committee reports, the Committee has 
encouraged VA to make the Physician Assistant Advisor a full-time field 
position in close proximity to headquarters. What is the status of this 
position? Is it full-time? Where is it located?
    Answer. The Physician Assistant (PA) Advisor position was created 
pursuant to The Veterans Benefits and Health Care Improvement Act of 
2000 (Public Law 106-419) that directed VHA to create a position of PA 
Advisor to the Office of the Under Secretary for Health. This was an 
unfunded mandate. To prevent delay, VHA elected to create the position 
as a half-time national basis and half-time field-based position. The 
part-time PA Advisor reports within the Office of the Chief Consultant 
for Primary and Ambulatory Care in Patient Care Services, VHA. The 
current PA Advisor is based at the Milwaukee, WI, VAMC where he was 
employed before his appointment to this position.
    While Congress's interest in having a full-time PA Advisor is clear 
in principle, the current arrangement of the PA Advisor as part-time at 
the national level, while continuing to practice in a clinical capacity 
at the field level, is working well. The PA Advisor has established a 
highly functional communications network for PAs, has a national Field 
Advisory Group to assist him, serves on national committees and 
workgroups, and provides advice regarding clinical practice and 
employment and utilization of PAs within VHA. He is able to communicate 
effectively when critical time responses are required from the field or 
from VHA about PA issues.
    There are distinct benefits of having a field-based practicing 
clinical PA in the role of PA Advisor, and this is true for the other 
decentralized program directors as well. In addition, field-based 
positions allow for the recruitment of the best-qualified individuals 
rather than just those who are willing to move to Washington, DC. 
Consequently, VHA is not recommending that the PA Advisor be 
established as a VACO-based full-time employee equivalent position at 
this time.
    Question. What other Advisor positions are full time? Which ones 
are located at or close to headquarters?
    Answer. The PA Advisor position, which represents approximately 
1,400 PAs within VHA, is compatible with the other occupational 
representatives within Patient Care Services, all of who perform these 
duties on a part-time basis. Within VA's Office of Patient Care 
Services, the National Directors of Pathology, Radiology, Optometry, 
Ophthalmology, Podiatry, Neurology, and Anesthesia have part-time VACO 
appointments. The Chief Consultants for Spinal Cord Injury, Physical 
Medicine and Rehabilitation, and Diagnostic Services are also part-time 
VACO appointments. Of these, only the current Chief Consultant for 
Physical Medicine and Rehabilitation is based at the Washington, DC, 
VAMC where she is also Chief of the Audiology and Speech Pathology 
Service. The current Director of Optometry is based in Baltimore, MD. 
All other incumbents are at more distant locations, ranging from West 
Haven, CT, to the West Coast.
    Question. What is the budget request for travel and administrative 
support of this position?
    Answer. The PA Advisor has a travel budget to allow trips to VACO 
and to PA national meetings. This support allows him to perform his 
duties and meet with other federal PAs. VA provided $10,565 in fiscal 
year 2002 for the PA Advisor to travel to VACO for face-to-face 
meetings. VA also provided funding for a face-to-face meeting of the PA 
Field Advisory Group, which is composed of six members including the PA 
Advisor.
    VA has allocated $6,600 to the PA Advisor for fiscal year 2003 
travel. This funding level was established while VA was on continuing 
resolution and is commensurate with that of the Directors of Optometry 
and Podiatry, who are also within the Office of the Chief Consultant 
for Primary and Ambulatory Care. Funding for a face-to-face meeting of 
the PA Field Advisory Group is not provided in the fiscal year 2003 
budget due to limits on all VHA travel funding. When the PA Advisor 
serves on VHA committees or workgroups, travel may be funded through 
those groups. If additional funds become available during fiscal year 
2003, they will be distributed equitably in response to need. Funding 
of $6,600 has been requested for fiscal year 2004.
    Administrative support for the PA Advisor is not specifically 
funded, but the administrative support personnel in VA's Office of the 
Chief Consultant for Primary and Ambulatory Care are available to 
assist with administrative duties such as correspondence and responses 
to information requests. Satellite education conferences are supported 
by the Employee Education Service (EES) and face-to-face conferences 
for PAs have also been supported by EES in the past. Conference call 
capability is readily available to the PA Advisor.
                          transitional housing
    Question. The budget proposes to convert Guaranteed Transitional 
Housing from a mandatory to discretionary account. Why?
    Answer. VA has found that many potential developers of transitional 
housing are in need of a cash grant or other sources of funds that do 
not require regular repayment. Based on numerous discussions with 
potential developers, VA has concluded that a grant would be of more 
benefit to such developers than a loan.
    The key advantage for the Federal government of changing from a 
guaranteed loan to a grant program is the reduction of financial loss 
resulting from loans defaulting. The current pilot program, as a loan 
guaranty, is full of risks (pre-development, construction, operating 
risks) and currently has a subsidy rate of 48.25 percent. The potential 
sponsors could apply for grant funding, in lieu of a loan guaranty, 
where repayment is not required.
    The proposal to convert this loan guaranty to a grant program 
resulted after VA's experience in trying to design the loan guaranty 
program and meeting with potential partners under this pilot program. 
In addition, numerous representatives of government, private and public 
lending institutions, and real estate developers of multifamily housing 
projects have advised VA of the high risk involved and high rates of 
defaults by borrowers.
    Veterans could be better served with the proposal to change from a 
loan guaranty to a grant program because VA believes more developers 
would be interested in and able to complete projects with the 
assistance of a grant rather than a loan that must be repaid. 
Therefore, there exists the likelihood that more projects will be 
completed and more beds will become available to homeless veterans if 
this program were converted to a grant.
    Question. How much will this proposal cost in 2004? How much is it 
expected to cost each of the next five years?
    Answer. VA anticipates spending approximately $9.6 million per year 
in grants to help develop long-term multifamily transitional housing 
for homeless veterans. Across a 5-year period, VA would offer 
approximately $48 million in grants. In addition, VA estimates eight 
FTE to administer and oversee this program at an average cost of 
$52,000 per FTE. Staffing costs would be approximately $416,000 per 
year. Cumulative staffing costs would be $2.08 million across a 5-year 
period. VA also anticipates spending $869,000 per year on contracts to 
help implement and administer the program. Contracting costs would be 
$4.345 million across a 5-year period.
                                 ______
                                 
               Questions Submitted by Senator Tom Harkin
    Question. Mr. Secretary, as you know, physician assistants provide 
vital care to our nation's veterans. Physicians Assistants had 5.2 
million contacts with VA patients last year alone. Congress took an 
important step in recognizing this contribution when passing the 
Veterans Benefits and Health Care Improvement Act of 2000 (Public Law 
106-419), which included the creation of Physician Assistant Advisor 
position for the Veterans Health Administration (Title II, Subtitle A, 
Sec. 206). Since that time, the Committee has included language in 
fiscal year 2002 and fiscal year 2003 requesting VHA to make the 
position a full-time, field-based position with adequate travel and 
administrative support. The fiscal year 2003 language asked for a 
report on the status of this request. This report was due March 3, 
2003. I would like a report from VHA on the amount of travel and 
administrative support for the position in fiscal year 2002 and fiscal 
year 2003, as well as proposed fiscal year 2004 support? What is the 
timetable for making the PA Advisor position a full-time position, as 
requested by the Committee?
    Answer. Travel and Administrative Support.--The PA Advisor has a 
travel budget to allow trips to VACO and to PA national meetings. This 
support allows him to perform his duties and meet with other federal 
PAs. VA provided $10,565 in fiscal year 2002 for the PA Advisor to 
travel to VACO for face-to-face meetings. VA also provided funding for 
a face-to-face meeting of the PA Field Advisory Group, which is 
composed of six members including the PA Advisor.
    VA has allocated $6,600 to the PA Advisor for fiscal year 2003 
travel. This funding level was established while VA was on continuing 
resolution and is commensurate with that of the Directors of Optometry 
and Podiatry, who are also within the Office of the Chief Consultant 
for Primary and Ambulatory Care. Funding for a face-to-face meeting of 
the PA Field Advisory Group is not provided in the fiscal year 2003 
budget due to limits on all VHA travel funding. When the PA Advisor 
serves on VHA committees or workgroups, travel may be funded through 
those groups. If additional funds become available during fiscal year 
2003, they will be distributed equitably in response to need. Funding 
of $6,600 has been requested for fiscal year 2004.
    Administrative support for the PA Advisor is not specifically 
funded, but the administrative support personnel in VA's Office of the 
Chief Consultant for Primary and Ambulatory Care are available to 
assist with administrative duties such as correspondence and responses 
to information requests. Satellite education conferences are supported 
by the Employee Education Service (EES) and face-to-face conferences 
for PAs have also been supported by EES in the past. Conference call 
capability is readily available to the PA Advisor.
    Full-time Status.--The Physician Assistant (PA) Advisor position 
was created pursuant to the ``Veterans Benefits and Health Care 
Improvement Act of 2000'' (Public Law 106-419), which directed VHA to 
create a position of PA Advisor to the Office of the Under Secretary 
for Health. VA elected to create the position as a half-time national 
basis and half-time field-based position. The part-time PA Advisor 
reports within the Office of the Chief Consultant for Primary and 
Ambulatory Care in Patient Care Services in VHA. The current PA Advisor 
is based at the Milwaukee, WI, VAMC where he was employed before his 
appointment to this position.
    The current arrangement of the PA Advisor as part-time at the 
national level, while continuing to practice in a clinical capacity at 
the field level, is working well. The PA Advisor has established a 
highly functional communications network for PAs, has a national Field 
Advisory Group to assist him, serves on national committees and 
workgroups, and provides advice regarding clinical practice and 
employment and utilization of PAs within VHA. He is able to communicate 
effectively when critical time responses are required from the field or 
from VHA about PA issues.
    The PA Advisor position, which represents approximately 1,400 PAs 
within VHA, is compatible with the other occupational representatives 
with in Patient Care Services, all of who perform these duties on a 
part-time basis. Within the Office of Patient Care Services, the 
National Directors of Pathology, Radiology, Optometry, Ophthalmology, 
Podiatry, Neurology, and Anesthesia have part-time VACO appointments. 
The Chief Consultants for Spinal Cord Injury, Physical Medicine and 
Rehabilitation, and Diagnostic Services are also part-time VACO 
appointments. Of these, only the current Chief Consultant for Physical 
Medicine and Rehabilitation is based at the Washington, DC, VAMC, where 
she is also Chief of the Audiology and Speech Pathology Service. The 
current Director of Optometry is based in Baltimore, MD. All other 
incumbents are at more distant locations, ranging from West Haven, CT, 
to the West Coast.
    There are distinct benefits of having a field-based practicing 
clinical PA in the role of PA Advisor. Field-based positions allow for 
the recruitment of the best-qualified individuals, not simply those 
willing to make the transition to the Washington, DC, area. 
Consequently, VA is not recommending that the PA Advisor be established 
as a VACO-based full-time position at this time.
    Question. Mr. Secretary, can you tell me the current wait for 
appointments for new (non-emergent) patients at each of Iowa's 
facilities, the current plans for improving the situation, and how long 
you anticipate waits will be when those plans are implemented? Can you 
also compare the waits for appointments for new non-emergent patients 
in each of the VISN's?
    Answer. There are two VA health care facilities located in the 
State of Iowa, VA Central Iowa Health Care System (Des Moines/
Knoxville) and Iowa City VAMC.
    The following chart provides waiting times to primary care for new 
non-emergent patients.

                                           IOWA FEB 2003 WAITING TIMES
----------------------------------------------------------------------------------------------------------------
                                                                                                        Average
                                                                                                          New
                                                                                                        Patient
            State               VISN    Station     Station Name      Clinic Type     Type of CBOC/    Wait Time
                                         Number                                          Division      (Recoded
                                                                                                        as next
                                                                                                      available)
----------------------------------------------------------------------------------------------------------------
IA...........................      23  636A6....  Des Moines        PRIMARY........  VA PROVIDED....        61.2
                                                   Division--Centr
                                                   al Plains
                                                   Health Network.
IA...........................      23  636A7....  Knoxville         PRIMARY........  VA PROVIDED....        35.2
                                                   Division--Centr
                                                   al Plains
                                                   Health Network.
IA...........................      23  636A8....  Iowa City         PRIMARY........  VA PROVIDED....        38.8
                                                   Division--Centr
                                                   al Plains
                                                   Health Network.
IA...........................      23  636GC....  Mason City......  PRIMARY........  VA PROVIDED....        63.9
IA...........................      23  636GF....  Bettendorf......  PRIMARY........  VA PROVIDED....        73.7
IA...........................      23  636GH....  Waterloo........  PRIMARY........  VA PROVIDED....        59.6
IA...........................      23  636GJ....  Dubuque.........  PRIMARY........  VA PROVIDED....       125.2
IA...........................      23  636GK....  Fort Dodge......  PRIMARY........  CONTRACT.......        27.5
----------------------------------------------------------------------------------------------------------------

    The Iowa City VAMC does not have a waiting list and can schedule an 
appointment for a new patient in less than 40 days, therefore, no other 
plans are being considered except for close observation of panel sizes 
to ensure that supply and demand are in balance.
    At all of the Central Iowa sites, they are actively working on 
implementing the Advanced Clinic Access principles, and they have 
brought in a fee basis physician to see new patients to accelerate the 
process at Des Moines. Des Moines also added a Nurse Practitioner at 
Mason City CBOC in November. The projection is that by July 2003, Mason 
City will be at 30 days or less. Based on the current rate of new 
patients requesting appointments and those who had previously been 
scheduled at Des Moines while they were waiting for Mason City, it is 
projected to be late June before the waiting time will be within 30 
days. In February and March, there were fewer applicants for care and 
that may also expedite the process.
    The following data compares waits for new non-emergent patients by 
VISN:

------------------------------------------------------------------------
                                                     New Patient Next
                      VISN                        Available Appointment
------------------------------------------------------------------------
1..............................................                     44.1
2..............................................                     30.0
3..............................................                     43.8
4..............................................                     46.1
5..............................................                     41.6
6..............................................                     47.5
7..............................................                     51.4
8..............................................                     65.2
9..............................................                     60.7
10.............................................                     41.9
11.............................................                     51.5
12.............................................                     59.5
15.............................................                     54.8
16.............................................                     43.1
17.............................................                     50.9
18.............................................                     46.6
19.............................................                     56.3
20.............................................                     41.7
21.............................................                     46.6
22.............................................                     31.3
23.............................................                     59.9
------------------------------------------------------------------------

    Question. Last year, I joined the Senators representing the 
veterans in VISN 23 in writing you about reform of the VERA model. As 
you know, a recent GAO report I requested found that the VERA model is 
unfairly hurting several VISN's and examined the effects of including 
Priority 7 patients, using more patient categories, and using more 
recent data to determine the distribution. Can you tell me what 
changes, if any, you plan to make to the VERA model in distributing 
fiscal year 2003 and fiscal year 2004 funds? Please also give me any 
analysis the VA has done on how changes to the VERA model would affect 
the distribution of health care funds.
    Answer. Fiscal Year 2003 VERA Model Changes.--Based on the 
deliberations of VHA's internal VERA workgroups, and in response to a 
February 2002 General Accounting Office VERA report and the Rand 
Corporation recommendations, the Secretary approved the following 
improvements to the VERA methodology for fiscal year 2003:
  --Move from a VERA three case-mix model to a VERA ten case-mix model. 
        This change expands the VERA patient price groups from three 
        (Basic Vested Care, Basic Non-Vested Care, and Complex Care) to 
        10 (6 Basic Care price groups and 4 Complex Care price groups) 
        and better recognizes a differentiation in VA's ``core 
        mission'' patients (veterans with service connected 
        disabilities or those with incomes below the current threshold 
        or special needs patients, e.g., the homeless).
  --Additional Allocation for High-Cost Patients.--This change provides 
        an additional allocation to networks with the top 1 percent 
        highest cost patients. This recognizes the impact on those 
        networks with patients whose annual costs exceed $70,000, the 
        threshold for the 1 percent highest cost patients. These 
        networks will receive an additional allocation equal to the 
        amount that a patient's actual costs exceed the $70,000 
        threshold.
  --Implement a low cap (5 percent) and high cap (12.6 percent) for 
        fiscal year 2003 funding increases above the final allocation 
        received in fiscal year 2002. As a result, it is expected there 
        will be no VERA adjustment or supplemental allocation provided 
        in fiscal year 2003.
    These fiscal year 2003 VERA refinements will improve the equitable 
allocation of funds to the 21 networks by recognizing the financial 
differences in ``core mission'' patients, by continuing the basic 
patient classification structure of the VERA model, by minimizing the 
incentives for unconstrained workload growth, and by eliminating the 
need for supplemental funding for networks during the year.
    Priority 7 Veterans.--There was one VERA change recommended for 
fiscal year 2003 implementation that was not approved by the Secretary. 
In its February 2002 report on VERA (GAO-02-338), GAO recommended that 
VA ``Better align VERA workload measures with actual workload served 
regardless of veteran priority group.''
    Based on a careful assessment of all policy options, the Secretary 
determined not to include non-service-connected Priority 7 Basic Care 
patients in the VERA model for fiscal year 2003. Although the inclusion 
of non-service-connected/non-complex care Priority 7 veterans in the 
VERA Basic Care category would be a step toward better aligning the 
VERA allocation model with VA's actual enrollment experience, including 
these veterans in the VERA model would create financial incentives to 
seek out more of these veterans instead of veterans with service 
connected disabilities or those with incomes below the current income 
threshold or special needs patients (e.g., the homeless), veterans who 
comprise VA's core health care mission.
    VA experienced uncontrolled growth in the Priority 7 veterans 
(designated as Priority Group 8 for fiscal year 2003) when they were 
not included in the VERA model, and VA does not want to encourage 
unmanageable workload growth by including them in the VERA model in 
other than the Complex Care price groups. The allocation of fixed 
resources to networks is done on a zero sum basis. Increased resources 
for non-service-connected/non-complex care Priority 7 veterans would 
come at the expense of veterans who are service-connected, poor, or who 
require specialized services. The allocation of resources to areas with 
a disproportionate percentage of non-service-connected/non-complex care 
Priority 7 veterans would come at the expense of veterans who live in 
areas with disproportionately higher numbers of service-connected and 
lower income veterans.
    Fiscal Year 2003 Network Funding Allocations.--The table below 
depicts VERA allocations for the 21 Networks in fiscal year 2003 
compared to the VERA fiscal year 2002 year-end allocation.

                  FISCAL YEAR 2003 NETWORK ALLOCATIONS COMPARED TO FISCAL YEAR 2002 ALLOCATIONS
                                             (Dollars in thousands)
----------------------------------------------------------------------------------------------------------------
                                                                  Fiscal Year 2003 VERA 10 (1% High Cost Adjust,
                                                                            5% Low Cap, 12.6% High Cap)
                                                    Fiscal Year  -----------------------------------------------
                     Network                      2002 VERA Year                      Dollars
                                                        End         Fiscal Year    Shifted from   Percent Change
                                                    Allocations      2003 VERA      Fiscal Year     from Fiscal
                                                                    Allocations      2002 Base       Year 2002
----------------------------------------------------------------------------------------------------------------
01 Boston.......................................        $943,383      $1,012,354         $68,971             7.3
02 Albany.......................................         507,386         556,418          49,032             9.7
03 Bronx........................................       1,058,664       1,111,597          52,933             5.0
04 Pittsburgh...................................         955,780       1,076,519         120,739            12.6
O5 Baltimore....................................         575,640         617,523          41,882             7.3
06 Durham.......................................         881,606         990,671         109,066            12.4
07 Atlanta......................................       1,071,956       1,158,656          86,699             8.1
08 Bay Pines....................................       1,470,056       1,655,761         185,705            12.6
09 Nashville....................................         848,607         926,758          78,151             9.2
10 Cincinnati...................................         697,551         771,274          73,723            10.6
11 Ann Arbor....................................         766,210         849,127          82,917            10.8
12 Chicago......................................         898,572         978,050          79,478             8.8
15 Kansas City..................................         717,747         761,453          43,707             6.1
16 Jackson......................................       1,499,125       1,688,502         189,377            12.6
17 Dallas.......................................         850,104         936,733          86,629            10.2
18 Phoenix......................................         731,784         803,265          71,481             9.8
19 Denver.......................................         483,243         528,463          45,220             9.4
20 Portland.....................................         840,081         902,764          62,683             7.5
21 San Francisco................................         947,781       1,062,177         114,396            12.1
22 Long Beach...................................       1,082,849       1,219,641         136,791            12.6
23 Minneapolis..................................         874,116         917,822          43,706             5.0
                                                 ---------------------------------------------------------------
      VHA Totals................................      18,702,243      20,525,528       1,823,285             9.7
----------------------------------------------------------------------------------------------------------------

    Future Year VERA Changes.--The National Leadership Board (NLB) 
Finance Committee will continue to review and evaluate future potential 
enhancements to the VERA methodology. In addition to these refinements, 
a regression-based model being developed by the RAND Corporation, and a 
Diagnostic Cost Groups (DCGs) model will be evaluated for fiscal year 
2005 and beyond.
    Question. According to press reports last year, the VA health care 
system was short $400 million for fiscal year 2002. As you know, 
Congress approved an additional $417 million in supplemental funding to 
make up for this shortfall. Of this amount, $142 million had been 
requested by President Bush and was sent to the VA. Unfortunately, the 
President chose not to release a budget package that included the other 
$275 million. Can you tell me how large the shortfall for fiscal year 
2002 was and how you made up for the shortfall? Do expect a shortfall 
in fiscal year 2003?
    Answer. We do not anticipate a shortfall in fiscal year 2003. The 
demand for medical services in 2002 outpaced our capacity to provide 
timely, quality care to all who sought these services. As a result, we 
implemented policies to focus resources and care on our highest 
priority veterans--those with service connected conditions, low income 
and special needs veterans. To ensure that combat-disabled veterans can 
gain timely access to VA health care, VA published a regulation to 
provide for priority scheduling of appointments for veterans who are 50 
percent or more disabled from service-connected causes and other 
veterans who are seeking care for their service-connected conditions. 
In the first quarter of fiscal year 2003, VA made an enrollment 
decision to stop enrollment of most new Priority 8 higher income 
veterans for care starting on January 17, 2003. This decision allows VA 
to continue to focus on the care of our highest priority veterans.
    Question. Many of our veterans seek care at VA hospitals because of 
the excellent pharmacy benefits, sometimes even if they have another 
primary care physician. As you know, our elderly on Medicare do not 
have coverage for prescription drugs. Would it relieve some of the 
burden on the VA if Congress passed a real prescription drug benefit in 
Medicare?
    Answer. We believe that in the context of the President's Medicare 
modernization framework, which would provide for a pharmaceutical 
benefit to Medicare beneficiaries, some burden on the VA could be 
relieved since more than half of the veterans who receive health care 
through VA are over age 65. According to data from the 2002 VHA Survey 
of Veteran Enrollees, 90 percent of Priority 8 enrollees and 87 percent 
of Priority 7 enrollees have some type of public (Medicare/Medicaid) or 
private health care coverage (compared to just 70 percent for Priority 
5 and 73 percent for Priority 1 enrollees).
    However, it is the combined effect of several factors that has 
resulted in the large increase in demand that has severely strained 
VA's ability to continue to provide timely, high-quality health care. 
First, the Veterans Health Care Eligibility Reform Act and the 
Millennium Health Care Act opened the door to comprehensive health care 
services to all veterans. Second, access to health care has greatly 
improved with the opening of hundreds of community-based outpatient 
clinics. Third, our patient population is growing older and this had 
led to an increase in veterans' need for health care. Fourth, VA has 
favorable pharmacy benefits compared to other health care providers, 
especially Medicare, and this has attracted many veterans to our health 
care system. (In this regard, however, VA has found that even though 
many patients initially come to VA for drugs, some ultimately used 
other services, including cardiology, urology, eye care, and inpatient 
care.)
    VA will continue to face significant challenges, as the demand for 
health care services reaches unprecedented levels. At the same time, VA 
must continue to fulfill its core mission--providing timely access to 
high quality health care to veterans with service connected 
disabilities, low incomes, and those with special needs. The actuarial 
projections show that the increasing demand placed on VA health care 
system will continue to strain VA's ability to provide timely, high-
quality health care for veterans in Priorities 1-6. VA expects to 
provide health care to 3.6 million patients in core Priorities 1-6 
(service connected and low-income veterans) in fiscal year 2004, an 
increase of 5 percent over fiscal year 2003. Priorities 1-6 alone are 
expected to cost $9 billion more by fiscal year 2008 (over fiscal year 
2003).
                                 ______
                                 
               Questions Submitted by Senator Tim Johnson
    Question. For the past several years, Congress has provided 
additional funds over the President's request for VA health care. While 
your fiscal year 2004 budget request has an increase over what was 
funded in fiscal year 2003, the Independent Budget estimates you are 
still about $2 billion below what is needed for veterans medical care.
    Do you agree with the analysis of the VA's needs that is provided 
in the Independent Budget? Is your fiscal year 2004 VA medical care 
request sufficient to fund all the needs of the VA health system?
    Answer. As with the President's budget, the total Independent 
Budget is well articulated and certainly has veterans' health care 
foremost in mind. However, there are two fundamental differences 
between the two budgets. The President's budget uses collections and 
management efficiencies to help offset the overall cost of the 
increased workload and utilization. The cost-sharing proposals in the 
2004 budget only affect the lowest priority veterans in Priority 8 and 
non-service-connected veterans in Priority 7 and have been 
strategically priced to refocus the VA system on those veterans who 
need us most and those who need the specialized care VA provides. The 
management savings will be achieved by implementing a rigorous 
competitive sourcing plan; reforming the health care procurement 
process; increasing employee productivity; continuing to shift from 
inpatient care to outpatient care, a less costly alternative; and 
reducing requirements for employee travel, interagency motor pools, 
maintenance and repair services, operating supplies, and materials to 
redirect them to providing direct health care for veterans. When 
collections and efficiencies are taken into consideration, the 
President's budget request exceeds the Independent Budget by $108 
million. However, the sufficiency of the VA medical care request is 
dependent on passage of the policies proposed in the 2004 President's 
budget.
    Question. I recently had the pleasure of visiting several VA 
facilities in South Dakota. While there, I had the opportunity to talk 
to veterans who are having to wait up to a year to get an appointment. 
Nationally, according to the VA, there are over 200,000 veterans on 
waiting lists for appointments.
    Does your budget request for fiscal year 2004 provide sufficient 
funds to eliminate the waiting lists for VA appointments? If not, what 
is your plan to end the long waits for appointments at the VA?
    Answer. Yes, the 2004 budget proposes to reduce the average waiting 
time for new patients seeking primary care clinic appointments to 30 
days in 2004, and reduce the average waiting time for next available 
appointment in specialty clinics to 30 days in 2004. VA is working to 
improve access to clinic appointments and timeliness of service. VA 
continues efforts to develop ways to reduce waiting times for 
appointments in primary and specialty care clinics. By refocusing VA's 
health care system on these groups, VA will be positioned to achieve 
our primary and specialty care access standards.
    There are two VA facilities located in South Dakota. VA Black Hills 
Health Care System is an integrated facility with two campuses located 
in Fort Meade and Hot Springs. Sioux Falls houses the VA medical and 
regional office center and offers inpatient and outpatient primary and 
specialty care.
    The Black Hills Health Care System has a waiting list of 24 
patients and Sioux Falls VAM&ROC has a waiting list of 3,264 patients. 
When a name is removed from a waiting list the average wait time for a 
new patient appointment in primary care is less than 60 days.
    All of the medical facilities in South Dakota are using Advance 
Clinic Access practices to eliminate wait lists and reduce wait times. 
With the additional resources for new workload in fiscal year 2003, the 
network's plan is to release $2.1 million to Sioux Falls VAM&ROC. Wait 
lists at all facilities are expected to be eliminated by the end of 
this fiscal year.
    The following chart provides waiting times to primary care for new 
non-emergent patients.

                                       SOUTH DAKOTA FEB 2003 WAITING TIME
----------------------------------------------------------------------------------------------------------------
                                                                                                    Average New
                                                                                                   Patient Wait
             State                 VISN    Station Number      Station Name       Clinic Type      Time (Recoded
                                                                                                      as next
                                                                                                    available)
----------------------------------------------------------------------------------------------------------------
SD.............................       23  438.............  Sioux Falls......  PRIMARY..........            37.5
SD.............................       23  438GD...........  Aberdeen (Brown    PRIMARY..........            49.6
                                                             County).
SD.............................       23  568.............  Fort Meade.......  PRIMARY..........            41.3
SD.............................       23  568A4...........  Hot Springs......  PRIMARY..........            54.6
SD.............................       23  568GA...........  Rapid City SD....  PRIMARY..........            47.1
SD.............................       23  568HJ...........  Rosebud..........  PRIMARY..........            18.5
SD.............................       23  568HM...........  Eagle Butte SD...  PRIMARY..........             0.0
----------------------------------------------------------------------------------------------------------------

    Question. As a part of the fiscal year 2002 Emergency Supplemental 
Appropriations bill, Congress provided an additional $417 million for 
VA medical care. Unfortunately, the President chose to veto $275 
million of this funding.
    What were the consequences in terms of care for our veterans of the 
President's decision not to spend this additional health care funding? 
Does your budget reflect these unmet fiscal year 2003 needs? Do you 
anticipate making a supplemental request for fiscal year 2003?
    Answer. We do not anticipate a shortfall in fiscal year 2003. The 
demand for medical services in 2002 outpaced our capacity to provide 
timely, quality care to all who sought these services. As a result, we 
implemented policies to focus resources and care on our highest 
priority veterans--those with service connected conditions, low income 
and special needs veterans. To ensure that combat-disabled veterans can 
gain timely access to VA health care, the VA has published a regulation 
to provide for priority scheduling of appointments for veterans who are 
50 percent or more disabled from service-connected causes and other 
veterans who are seeking care for their service-connected conditions. 
In the first quarter of fiscal year 2003, I made an enrollment decision 
to stop enrollment of most new Priority 8 higher income veterans for 
care starting on January 17, 2003 to continue the focus of care on our 
highest priority veterans.
    Question. Ron Porzio, the Director of the Sioux Falls VA Medical 
Center, has been on administrative leave for several months. The acting 
director has done a fine job, but has no interest in a long-term 
administrative job. I am starting to hear from veterans who are 
concerned that the lack of a full-time, permanent director is starting 
to affect the operations at the Sioux Falls Medical Center.
    When will this issue be resolved?
    Answer. In September 2002, an administrative review was convened to 
investigate allegations made by one of Mr. Porzio's employees. The 
review team visited the Sioux Falls VAM&ROC and the findings of that 
investigation are not complete. We cannot speculate or comment on the 
outcome of the review while the case remains open and under review. Mr. 
Porzio remains on temporary detail at the VISN office in Minneapolis, 
MN.
    On March 24, 2003, the Network Director appointed Rose Hayslett, an 
experienced Associate Director from Iowa City VAMC, as the Acting 
Director/Chief Operating Officer (COO) at the Sioux Falls VA Medical 
and Regional Officer Center (VAM&ROC). This appointment allows the 
Chief of Staff, serving as the Acting Director/COO, to fully 
concentrate on his clinical responsibilities. Ms. Hayslett was 
appointed Associate Director for Patient Care Services and Nurse 
Executive at the Iowa City VAMC in 1998. She served as Acting Medical 
Center Director for the Iowa City VAMC from September 2000 through 
January 2002.
                                 ______
                                 
               Questions Submitted by Senator Harry Reid
    Question. As you may know, I have recently re-introduced the 
Retired Pay Restoration Act (S. 392) seeking full concurrent receipt 
for our nation's veterans. Can you tell me the position of the 
Department of Veterans Affairs on this legislation?
    Answer. S. 392 would amend 10 U.S.C. Sec. 1414, to permit a former 
service member who is eligible for military retired pay under title 10 
as well as disability compensation under Chapter 11 of title 38, U.S. 
Code, to receive both benefits without regard to 38 U.S.C. 
Sec. Sec. 5304 and 5305. S. 392 would also repeal special compensation 
programs, codified in section 1413 and 1413a of Title 10, which provide 
monthly monetary benefits for certain severely disabled veterans and 
provide combat-related special compensation to military retirees.
    Section 5304(a)(1) of Title 38 U.S. Code, prohibits, among other 
things, the award of VA disability compensation concurrently with 
military retirement pay, ``[e]xcept to the extent that retirement pay 
is waived under other provisions of law.'' Such waiver is authorized by 
38 U.S.C. Sec. 5305, which permits a retired service member to waive 
part or all of his or her retirement pay to receive instead an equal 
amount of VA benefits. Waiver is often advantageous to the veteran 
because VA compensation, unlike military retirement pay, is not subject 
to income taxes. The amendments made by S. 392 would override section 
5304 by expressly authorizing the concurrent payment of military 
retired pay and disability compensation for veterans.
    New section 1414 would also establish a special rule regarding the 
payment of retired pay and disability compensation in the case of a 
former service member with 20 years or more of creditable service, who 
retires due to physical disability under Chapter 61 of title 10. Such a 
person's retired pay would remain subject to reduction under 38 U.S.C. 
Sec. Sec. 5304 and 5305, but only to the extent that the individual's 
retired pay exceeds the amount of retired pay the individual would have 
been entitled to had they not retired under Chapter 61.
    The Congress has considered numerous bills over the past few years 
to partially or completely repealed the prohibition against concurrent 
receipt. The 108th Congress so far has been presented with two bills 
that would allow full concurrent receipt for retirees with at least 20 
years of service: H.R. 303 sponsored by Congressman Bilirakis, and S. 
392 sponsored by Senator Reid. Both of these bills would remove the 
prohibition against concurrent receipt for all retirees with 20 plus 
years of service. However, any amount of disability retired pay that 
exceeds what the member would receive for longevity retirement remains 
subject to offset. In effect then, payments under H.R. 303 and S. 392 
would work in much the same way as the recently enacted Combat-Related 
Special Compensation program, but without the requirement that the 
disabilities be combat-related. No added benefits would apply to those 
retired for disability with less than 20 years of service. But, full 
repeal of the existing prohibition is very expensive--our previous 
estimate is $58 billion over ten years ($42 billion associated with the 
additional cost of retired pay and the $16 billion associated with the 
payment of additional VA disability compensation for claims that would 
otherwise not be submitted). VA estimates that enactment would result 
in 700,000 original claims and 118,000 reopened claims over the next 
five years, increasing the existing backlog and adversely affecting 
timeliness. The Administration is on record as strongly opposing the 
changes included in these bills. Last year, the President's senior 
advisors recommended that he veto such legislation if it were presented 
to him.
    Question. Although we were not able to pass full concurrent receipt 
last year, we were able to broaden the special compensation programs. 
Under the law passed last year, veterans with a 60-100 percent combat 
related disability and Purple Heart recipients will be able to draw 
retirement pay and receive disability benefits concurrently. There has 
been a great deal of confusion about how this program will be 
implemented. Will the Department of Veterans Affairs play any role in 
distributing these benefits or is the Department of Defense (DOD) 
taking the lead?
    Answer. Department of Defense (DOD) will take the lead in 
administration of this program. VBA will continue to work closely with 
DOD to provide all necessary information required for effective 
implementation.
    Question. Please provide us with the office and contact person 
within DOD or the VA that is handling this matter.
    Answer. We defer to the Department of Defense regarding a DOD 
contact for this issue. The VA contact for this program is Thomas 
Pamperin, Assistant Director for Policy, Compensation and Pension 
Service.
    Question. Please provide an update on your plan for the VA Clinic 
in Las Vegas. What obstacles, if any, have you encountered in your 
efforts to plan for and build a new facility? Have you settled on a 
location for the clinic? What is the time frame for completion? In the 
interim period, what is your plan on how to treat the veterans living 
in the Las Vegas area?
    Answer. Based on VA's need to find a permanent location for our 
major Ambulatory Care Center (ACC) in Las Vegas, a planning committee 
was tasked with evaluating VA long-term workload requirements in 
Southern Nevada and options for the future delivery of services. That 
committee produced a report that is pending final review and approval 
but that was shared with Nevada congressional offices in January 2003. 
The committee evaluated four options and recommended the following as 
the preferred long-term strategy: 1) to locate the replacement ACC and 
a Veterans Benefits Regional Office in a downtown Las Vegas location, 
and 2) to meet projected VA hospital bed needs (84 beds total) by 
expanding inpatient care at the Mike O'Callaghan Federal Hospital.
    Based on an offer made by the City of Las Vegas, VA evaluated land 
in the former Union Pacific rail yard as a potential location for the 
replacement ACC. However, it has recently been determined that there is 
not sufficient available acreage that the City can make available at 
that location for the type of facility VA needs. VA is in need of a 
two- or three-story clinic on twenty to thirty acres of land, so that 
surface parking can be available. An advertisement soliciting land for 
the ACC was put in the local papers over the weekends of April 5/6 and 
April 12/13. VA's goal is for fast-track construction and to activate 
this clinic as soon as possible. It is not possible at this time to 
give a precise timetable for activation.
    In the interim, VA is in the process of relocating its operations 
from the current Addeliar Guy ACC to 10 separate and new locations in 
the Las Vegas metropolitan area. The plan is to be completely out of 
the current ACC location by the end of May or early June 2003. To date, 
surgical clinics from the ACC have been relocated to the Mike 
O'Callaghan Federal Hospital. Information Technology and 
telecommunications operations have been moved and the warehouse 
operation has been partially relocated to a new site.
    Prior to relocating any clinic operations to a new site, VA 
provides veterans with instructions and information regarding the new 
location and how their care will be provided. Contact points for 
appointment information and transportation information, including maps 
and directions, are included in this written instruction packet.
    To date, the relocations that have occurred have been done with a 
minimum of disruption for either staff or patients.
    Question. On numerous occasions when I have met with veterans from 
Northern Nevada they expressed concerns about the quality of care 
available in the Elko area. Do you foresee additional funding being 
directed to facilities in this region?
    Answer. The CARES planning process in VISN 19 has identified 
several population centers that could benefit from greater 
accessibility to VA health care services. Elko, Nevada is one of those 
areas. The Elko area is in the catchment area of the VA Salt Lake City 
Health Care System. Salt Lake is proposing a new CBOC to be located in 
Elko, and they are currently working on a business plan and proposal.
    Question. The Veterans Health Administration's facilities in Reno 
fall under the umbrella of the Sierra Pacific Network while facilities 
in northeastern Nevada are part of the Rocky Mountain Network. I 
believe it would benefit the Veterans Health Administration to 
incorporate Northeastern Nevada into the Sierra Pacific Network which 
is already dealing with the majority of cases from the northern region 
of my state, and is well versed in the needs of veterans from this 
area. Can you please comment on the feasibility of moving the boundary 
to incorporate Elko and surrounding areas into the Sierra Pacific 
Network?
    Answer. The original network boundaries were determined by 
historical referral and patient origin patterns. More veterans in 
northeastern Nevada use the Salt Lake City VA Medical Center than the 
Reno VA Medical Center. Elko and surrounding areas are slightly closer 
to Salt Lake City than Reno. Salt Lake City also provides a greater 
range of health care services than Reno. Reno refers many veterans in 
need of highly specialized services to the San Francisco Bay Area VA 
Medical Centers. There is no compelling advantage to change the network 
boundaries. As noted in the response to the previous question, Salt 
Lake City is proposing a new CBOC to be located in Elko, and they are 
currently working on a business plan and proposal.
                                 ______
                                 
              Questions Submitted to the Inspector General
           Questions Submitted by Senator Barbara A. Mikulski
                     physician time and attendance
    Question. What did the IG find about physician time and attendance?
    Answer. VA medical center managers did not ensure that part-time 
physicians met employment obligations required by their VA 
appointments. Although VHA had established time and attendance policy 
and procedures to account for part-time physicians, neither VHA 
headquarters officials nor VA medical center managers enforced the 
policy. VHA management at many levels told us they were generally 
satisfied with physician productivity and believed VA received more 
value than it paid for from the services provided by part-time 
physicians, despite apparent timekeeping violations. Results of audit 
clearly showed that part-time physicians were not working the hours 
established in their VA appointments and as a result part-time 
physicians were not meeting their employment obligations to VA.
    VHA does not have effective procedures to align physician-staffing 
levels with workload requirements. VA medical centers did not perform 
any workload analysis to determine how many full time employee 
equivalents (FTE) were needed to accomplish the medical centers' 
workload or evaluate their hiring alternatives (such as part-time, 
full-time, intermittent, or fee basis). VA medical center managers 
responsible for staffing decisions did not fully consider the 
physicians' other responsibilities--such as medical research, teaching, 
and administration--when they determined how many physicians the VA 
medical centers needed. VHA officials told us the determination of the 
number of part-time physician FTEs needed has more to do with the 
financial needs of the affiliated university in meeting physician pay 
packages, than the number of hours needed by VA to meet patient 
workload requirements. In addition, only one of the managers at the 
five VA medical centers we visited, had informed their part-time 
physicians of what was expected of them to meet their VA employment 
responsibilities. We believe communication of expectations and 
responsibilities would significantly improve operations at the VA 
medical centers.
    Question. How much VA funding is ``lost'' due to this problem?
    Answer. The issue of lost VA funding is not just a consideration of 
paying physicians for time that was not directed towards VA duties. In 
considering the lost opportunity costs VA would need to evaluate the 
value of such issues as the costs of not providing care to veterans on 
waiting lists, the inability to bill for medical care that was provided 
by residents and not properly supervised by attending physicians, the 
value of any research conducted for which VA does not get credit as 
well as the salary paid for service that was not provided. While we did 
not quantify the value of the time that VA physicians did not spend at 
VA, at a minimum we noted, that about 11 percent of VA physicians were 
not meeting their employment obligations. In addition, from fiscal year 
1997 through the second quarter of fiscal year 2002, the Federal 
Government paid, on behalf of VA, at least $21 million for 63 
malpractice cases where VA's peer review panel found that the attending 
VA physicians provided substandard resident supervision. Based on our 
review of available documentation, the attending physicians were not 
present to supervise the residents during the performance of a 
procedure or the provision of a treatment to a veteran in at least 
eight cases resulting in malpractice settlements totaling $4.7 million. 
An additional pending case involves an attending surgeon who could not 
provide needed assistance to a VA medical center patient because he was 
operating on a non-veteran patient at the affiliated medical school.
    Question. Do you think this is a matter of fraud by VA doctors, or 
is it because of VA's lack of standards?
    Answer. There are cases where fraud is a possibility. In addition, 
some VHA managers were not willing to enforce existing time and 
attendance controls, and VHA does not have effective procedures to 
align physician-staffing levels with workload requirements.
    Further, inherent conflicts of interest that exist for the part-
time physician with a dual appointment with the affiliated medical 
school contributed to the weak internal controls. Most VA supervisors 
of part-time physicians were also faculty members at the same 
university medical school as their subordinates. At one VA medical 
center, the service chiefs told us they did not consider themselves to 
be supervisors with any direct authority over their subordinate 
physicians--rather they were colleagues and served in a liaison role 
between VA medical center management and the physicians. From our 
discussions with managers and physicians at five VA medical centers and 
VA's Central Office, universities generally pay their physicians a base 
salary plus additional compensation based on the number of procedures 
or the level of productivity they achieved in their clinical practices. 
This compensation package provides a strong incentive for physicians to 
maximize the time they spend at the university medical schools. When 
the physician's supervisor has the same incentive based compensation 
package--as is apparently the case at affiliated VA medical centers--
the integrity of the supervisory role is compromised. (IG)
    Question. The VA's budget proposes to hire 3,800 new doctors and 
nurses to address the waiting lists. How can VA ensure that new and 
existing doctors know what is expected of them?
    Answer. Require that Veterans Integrated Services Network (VISN) 
and medical center directors ensure part-time physicians meet their 
employment obligations and hold field managers accountable for 
compliance. (IG)
  --Determine what reforms are needed to ensure VA physician 
        timekeeping practices are effective in an academic medicine 
        environment and VA physicians are paid only for time and 
        service actually provided. Recommend statutory or regulatory 
        changes needed to implement the reforms and publish appropriate 
        policy and guidance.
  --Establish performance monitors to measure VISN and medical center 
        enforcement of physician time and attendance; ensure desk 
        audits are conducted of timekeeping functions; provide 
        continuing timekeeping education to supervisors, physicians, 
        and timekeepers; require medical center managers to certify 
        compliance with applicable policies and procedures to VHA's 
        Deputy Under Secretary for Operations and Management annually; 
        and hold VHA managers accountable for successful implementation 
        of time and attendance requirements.
  --Apprise all part-time physicians of their responsibilities 
        regarding VA timekeeping requirements.
  --Evaluate appropriate technological solutions that will facilitate 
        physician timekeeping.
  --Develop comprehensive guidance for medical centers to use when 
        conducting desk audits.
  --Establish appropriate training modules, making the best use of 
        technological solutions for training VHA managers, VA 
        physicians, and timekeepers in timekeeping requirements, 
        responsibilities, and procedures.
  --Publish policy and guidance that incorporates the use of workload 
        analysis to determine the number of physicians needed to 
        provide timely, cost effective, and quality service to veterans 
        seeking care from VA.
  --Require medical centers to review their staffing structures (such 
        as part-time, full-time, intermittent, or fee basis) and 
        determine if these appointments are appropriate to the needs of 
        the medical center.
  --Require that VISN and medical center directors reassess staffing 
        requirements annually and certify their staffing decisions to 
        VHA's Deputy Under Secretary for Operations and Management.
  --Evaluate alternative methods to acquire physician services and 
        publish national guidance to assist VISN and medical center 
        directors in determining the best strategies for their 
        regional, academic, and patient care circumstances.
  --Publish guidance describing how VISN and medical center managers 
        should determine, monitor, and communicate the allocation of 
        physician time among patient care, administrative duties, 
        academic training, and medical research.
                            medical research
    Question. Does VA have adequate controls to enforce patient safety 
in medical research?
    Answer. Currently, the Office of the Inspector General has an 
ongoing criminal investigation involving one facility's medical 
research program. The OIG cannot comment on a criminal investigation in 
progress. The OIG does not have any other work underway, or recent 
reviews, that could be a body of knowledge on the effectiveness of VA 
controls for patient safety in medical research.
    The Program on Research Integrity Development and Education 
(PRIDE), within the Office of Research and Development (ORD), is 
responsible for providing education and policy on protection of human 
participants in VA research.
    Please refer to VA's responses to questions on ``Patient Safety in 
Medical Research'' that provide information on VA safeguards for 
patients who participate in VA research studies, VA procedures to 
inform patients fully of the risks of research, and VA's safety 
standards for research involving patients.

                          subcommittee recess

    Senator Bond. A great honor, appreciated you being there. 
Thank you very much.
    The hearing is recessed.
    [Whereupon, at 11:40 a.m., Thursday, March 13, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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