[Senate Hearing 108-762]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-762

  THE ADMINISTRATION'S PROPOSED FISCAL YEAR 2005 BUDGET FOR VETERANS' 
                                PROGRAMS

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 10, 2004

                               __________

       Printed for the use of the Committee on Veterans' Affairs


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                     COMMITTEE ON VETERANS' AFFAIRS

                 ARLEN SPECTER, Pennsylvania, Chairman
BEN NIGHTHORSE CAMPBELL, Colorado    BOB GRAHAM, Florida
LARRY E. CRAIG, Idaho                JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
JIM BUNNING, Kentucky                JAMES M. JEFFORDS, (I) Vermont
JOHN ENSIGN, Nevada                  DANIEL K. AKAKA, Hawaii
LINDSEY O. GRAHAM, South Carolina    PATTY MURRAY, Washington
LISA MURKOWSKI, Alaska               ZELL MILLER, Georgia
                                     E. BENJAMIN NELSON, Nebraska
           William F. Tuerk, Staff Director and Chief Counsel
         Bryant Hall, Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              

                           February 10, 2004
                                SENATORS

                                                                   Page
Specter, Hon. Arlen, U.S. Senator from Pennsylvania..............     1
    Prepared statement...........................................     1
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
  prepared statement.............................................     3
Graham, Hon. Bob, U.S. Senator from Florida......................    15
    Prepared statement...........................................    16
Akaka, Hon. Daniel K., U.S. Senator from Hawaii..................    21
Murray, Hon Patty, U.S. Senator from the State of Washington.....    22
Nelson, Hon. E. Benjamin, U.S. Senator from Nebraska.............    24
Jeffords, Hon. James M., U.S. Senator from Vermont...............    25
Rockefeller IV, Hon. John D., U.S. Senator from West Virginia....    27

                               WITNESSES

Principi, Hon. Anthony, Secretary, U.S. Department of Veterans 
  Affairs; accompanied by Robert H. Roswell, M.D., Under 
  Secretary for Health; John W. Nicholson, Under Secretary for 
  Memorial Affairs; William H. Campbell, Assistant Secretary for 
  Management; D. Mark Catlett, Principal Deputy Assistant 
  Secretary for Management; and Robert Epley, Associate Deputy 
  Under Secretary of Benefits for Policy and Program Management..     3
    Prepared statement...........................................     8
Gaytan, Peter S., Principal Deputy Director, Veterans Affairs and 
  Rehabilitation, The American Legion............................    39
    Prepared statement...........................................    40
Fuller, Richard B., National Legislative Director, Paralyzed 
  Veterans of America............................................    53
    Prepared statement...........................................   173
    The Independent Budget.......................................    54
Surratt, Rick, Deputy National Legislative Director, Disabled 
  American Veterans..............................................   175
    Prepared statement...........................................   176
Hayden, Paul A., Deputy Director, National Legislative Service, 
  Veterans of Foreign Wars of the United States..................   184
    Prepared statement...........................................   185
Jones, Richard, National Legislative Director, AMVETS............   188
    Prepared statement...........................................   190

 
                  THE ADMINISTRATION'S PROPOSED FISCAL
                    YEAR 2005 BUDGET FOR VETERANS' 
                                PROGRAMS

                              ----------                              


                       TUESDAY, FEBRUARY 10, 2004

                               U.S. Senate,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3 p.m., in room 
418, Russell Senate Office Building, Hon. Arlen Specter 
(chairman of the committee) presiding.
    Present: Senators Specter, Campbell, Graham, Rockefeller, 
Jeffords, Akaka, Murray, and Nelson.

           OPENING STATEMENT OF HON. ARLEN SPECTER, 
                 U.S. SENATOR FROM PENNSYLVANIA

    Chairman Specter. Good morning, ladies and gentlemen. The 
Veterans' Affairs Committee will now proceed. We have a very 
distinguished panel of witnesses before us at the moment. My 
full statement will be admitted to the record, without 
objection.
    [The prepared statement of Chairman Specter follows:]
  Prepared Statement of Arlen Specter, U.S. Senator from Pennsylvania
    Good afternoon, ladies and gentlemen. And good afternoon to you, 
Secretary Principi. It is a pleasure to welcome you--and the veterans 
service organizations, who are scheduled to testify after you--to this 
hearing.
    The subject of today's hearing is the Administration's proposed VA 
budget for fiscal year 2005. We will hear testimony from Secretary 
Principi and the senior VA officials who have accompanied him here 
today. And we will hear from the service organizations who will voice 
the separate views of each organization, if they so choose, and who--
except for The American Legion--will also speak as advocates for the 
``Independent Budget.'' It is my hope that, armed with this testimony, 
the Committee will be in a position to render its collective judgment 
on a number of weighty policy questions. Among them are these:
     What precisely is VA asking for this year in terms of 
added appropriations to provide medical care benefits to currently-
enrolled veterans?
     Will this amount be sufficient to get VA through the 
year--even assuming that VA continues to bar new enrollments of so-
called ``Priority 8'' veterans? Or will VA need more, just to maintain 
current levels of services?
     What precisely will VA need in terms of added funding if, 
for example, the Congress declines to enact certain ``policy 
proposals'' requested by VA?
     And finally, what would it take for VA to be able to 
reopen enrollments to ``Priority 8'' veterans? That is a prospect that 
I, for one, have not given up on.
    These are critical questions, questions that we raise this year at 
a critical time while the Nation is at war.
    We mourn the deaths of every service member who has fallen in Iraq 
and Afghanistan, and we assure the families of these brave men and 
women that their sacrifice--the ultimate sacrifice--will not be 
forgotten. But while we mourn those who have fallen, we are also 
mindful of the fact that we have been relatively fortunate. One year 
ago, we were prepared for the possibility that hundreds--even thousands 
or tens-of-thousands--might fall, particularly as our troops approached 
Baghdad. That did not happen; we are, of course, fortunate that it did 
not.
    But now we face a very difficult situation in Iraq. While our 
troops were greeted with enthusiasm initially--how can any of us ever 
forget the scene in Baghdad when the tyrant's statue was pulled down by 
the Iraqis . . . with some small assistance from United States troops--
they now face a very troubling situation. They are viewed by at least 
some elements of the Iraqi population as enemy occupiers, and they face 
the threat of enemy small arms fire, and terrorist bombings, daily. Our 
men and women will overcome these obstacles to peace and stability in 
Iraq--but not without a price. The Nation--and VA--must be prepared to 
bind up the bodily and emotional wounds that will ensue as our troops 
fully stabilize Iraq. After we have done that, the Nation--and VA--must 
be prepared to offer the readjustment benefits that these veterans will 
have earned. For we cannot have and we will not have--another 
generation of veterans, like Vietnam veterans, who were asked to fend 
for themselves after their return from the battlefield.
    I am concerned that this proposed budget may not suffice to meet 
these requirements. Rather, it seems barely adequate--if it is adequate 
at all--to meet the existing challenges that face VA. It will be my 
mission here to find out whether this budget proposal is, at minimum, 
adequate. And if--as I expect--it is not adequate, it will be my 
mission to find out what it will take for VA to maintain current 
services; what it will take to care for and provide services to the new 
young veterans who will return from Iraq this year; what it will take 
to work through, and eliminate, clinical appointment waiting times; and 
what it will take to reopen the VA healthcare system to so-called 
``low-priority'' veterans. That is the budget number I want to identify 
and secure for VA.
    I know that the Secretary shares these goals. He surely is not a 
man who will fail to meet the needs of the brave new veterans who are 
earning their benefits in Iraq today. And he is not a man who will fail 
to meet the needs of veterans who have earned their benefits in prior 
wars. He has proved that to me repeatedly--most recently, on the 
Saturday that just passed when he visited with veterans in Oil City, PA 
and Warren, PA. I think few Cabinet Members would have made such a trip 
on the weekend through blizzard conditions. But I dare say that 
Secretary Anthony J. Principi is not like most Cabinet Members. He is, 
in this Chairman's opinion, the most extraordinary man ever to serve as 
Secretary of Veterans' Affairs. So I will not be critical of him. I 
will just seek to learn what VA will need to accomplish the goals that 
he and I--and the President--share.
    Mr. Secretary, I look forward to your testimony. And I look forward 
to continuing to work with you in service to the Nation's veterans.

    Chairman Specter. I want to begin by recognizing our 
distinguished Secretary of Veterans Affairs, Anthony Principi, 
with special appreciation for his coming to Pennsylvania last 
Saturday to announce the opening of veterans' clinics in Will 
City, Pennsylvania, and Warren, Pennsylvania. It was a rare 
occurrence for a cabinet officer to visit a city of that size, 
those sizes. We are very grateful to the Secretary. The people 
of Pennsylvania, more importantly, were very grateful and I 
think it is a solid sign as to the dedication that the 
Secretary and the Department have to aiding the veterans of 
America.
    I have said on many occasions, but never too often, my deep 
commitment to the veterans arises from the first veteran I 
knew, who was my father, Harry Specter, who was a veteran of 
World War I, who was promised a bonus, did not get his bonus, 
and perhaps in this year's appropriations bill we can deliver 
in a metaphorical sense on my father's bonus.
    Senator Campbell, would you care to make an opening 
statement?
    Senator Campbell. No. I think with your permission I will 
just submit for the record, Mr. Chairman. I have to leave in 
about half an hour, so I would rather hear Secretary Principi, 
and welcome, Mr. Secretary.
    Chairman Specter. Thank you very much, Senator Campbell.
    [The prepared statement of Senator Campbell follows:]

   Prepared Statement of Hon. Ben Nighthorse Campbell, U.S. Senator 
                             from Colorado

    Thank you, Mr. Chairman. I would like to welcome you, Mr. 
Secretary, and thank you for appearing before the committee today. I am 
looking forward to your testimony which will give us a better picture 
of how the Administration is going to address the serious issues facing 
the VA at this time. And, I also want to welcome the members of the 
VSO's who are going to comment on the budget today. I will be listening 
carefully to your testimony as you represent the opinions of veterans 
throughout the nation.
    Though I notice that the fiscal year 2005 budget calls for a small 
increase in discretionary health care funding for veterans, I continue 
to be concerned that we find a way to take care of what will be an 
increasing number of elderly veterans. I think we can all agree that 
one of our greatest national responsibilities is the welfare of our 
nation's veterans. It is critical that we find a balanced way to make 
good on the promises to them.
    I am also encouraged that the budget includes monies for 
construction under the CARES (Capital Asset Realignment for Enhanced 
Services) initiative. I understand that incorporating change into a 
huge Federal entity is difficult. But, changing from institutional care 
to primary and community-based care has left the VA with vacant and 
under-utilized buildings. Deciding how to use these facilities is 
difficult and disposing of such assets is a complex process. But, 
operating hundreds of unneeded buildings can cost billions of dollars 
each year. I look forward to the draft report of the CARES Commission 
which I understand is expected sometime this week.
    Mr. Secretary, I appreciate your strong commitment to our veterans 
who have service-connected injuries and illnesses and have always 
admired you for stepping up to the plate to make the hard calls. 
However, the proposals to add co-pays and user fees for those not 
suffering from a military-related disability, will affect many veterans 
in my State of Colorado whose incomes are close to the cutoff for 
health care services.
    Speaking as a veteran, I believe we need to do all we can to serve 
those who have so honorably served us all. And, knowing that our 
soldiers are putting their lives on the line for us at this moment 
makes it even more important that we make veterans' health care our No. 
1 priority.
    I will be listening to the veterans who are meeting with me this 
month and I am looking forward to the testimony of the many veterans' 
organizations that will be testifying at the joint hearings during the 
next few weeks.
    Mr. Secretary, again, I thank you for being here. I look forward to 
hearing details of the budget proposal and how you plan to address 
these issues within the proposed budget. I look forward to working with 
you and the VSO's to make sure that our veterans receive the care they 
have been promised.
    I thank the chair.

    Chairman Specter. Then, Mr. Secretary, the floor is yours.

    STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, U.S. 
   DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY ROBERT H. 
 ROSWELL, M.D., UNDER SECRETARY FOR HEALTH; JOHN W. NICHOLSON, 
  UNDER SECRETARY FOR MEMORIAL AFFAIRS; WILLIAM H. CAMPBELL, 
ASSISTANT SECRETARY FOR MANAGEMENT; D. MARK CATLETT, PRINCIPAL 
 DEPUTY ASSISTANT SECRETARY FOR MANAGEMENT; AND ROBERT EPLEY, 
  ASSOCIATE DEPUTY UNDER SECRETARY OF BENEFITS FOR POLICY AND 
                       PROGRAM MANAGEMENT

    Secretary Principi. Thank you, Mr. Chairman, Senator 
Campbell, and members and staff of the committee. It is always 
a pleasure to be before you. It was a great, great pleasure and 
a privilege to be in Pennsylvania this past weekend and to be 
around so many heroes of World War II and Korea and Vietnam who 
were in the audience.
    Eight-hundred-thousand more veterans will receive VA 
medical care this year and next year if this bill is approved 
than in 2001, the year I took office as Secretary of Veterans 
Affairs, and these veterans are the beneficiaries of a series 
of increased budgets requested by the President and made 
tangible through active and successful advocacy by the members 
of this committee and throughout this body, and I thank you for 
your support for the Department and the men and women we have 
the privilege to serve.
    As the first chart shows--please show that first chart--our 
health care budget with the enactment of the 2005 request have 
increased more than 40 percent, and on behalf of America's 
veterans, I thank the members of the committee again for 
following through on your commitment to our nation's citizen 
soldiers.
      
    [GRAPHIC] [TIFF OMITTED] T7531.001
    
      
    I believe that this is the golden age of VA health care, 
our quality of care never before so good, veterans' access to 
VA care never before this broad, and never before have we 
treated so many veterans at so many locations, and please show 
the second chart.
    Since 2000, 2 years of the previous administration, my 
predecessor, through 2005, we will have treated one more 
million veterans than we did in the year 2000. And since the 
year 2000, and again, our projections through the year 2005 
will show that three million more veterans have enrolled in the 
VA health care system, unprecedented growth in the number of 
veterans who have come to us for care and who have enrolled in 
the VA health care system, a significant number who have not 
used the system but have enrolled in the event that they may 
need to come to us.
[GRAPHIC] [TIFF OMITTED] T7531.002

      
    For 2005, our total health care budget authority would 
increase 4.2 percent over 2004, and to be clear, that figure, 
that percentage, includes our capital construction as well as 
our collections. We have counted collections as part of the VA 
budget since 1998, when the Congress made the decision to allow 
those resources to remain in the VA health care system rather 
than going into the United States Treasury as miscellaneous 
receipts. I believe that we will be able to sustain the forward 
momentum we have achieved over the last 3 years.
      
    [GRAPHIC] [TIFF OMITTED] T7531.003
    
      
    If the President's request is endorsed by Congress, we will 
have the resources we need to meet our goal of scheduling non-
urgent primary care for 93 percent of veterans within 30 days 
and 99 percent within 90 days. Our goal is to totally eliminate 
our waiting list within 90 days.
    If the 2005 budget is approved, we will be able to provide 
timely quality treatment to all the veterans we believe will 
come to us seeking health care this year and next, and we will 
continue to focus on the medical care needs of the men and 
women who were disabled in uniform, our service-connected 
disabled veterans. I believe our highest priority needs to be 
for them. For the lower-income veterans, the poorest of the 
poor who have few other options for health care in this 
country, and those who need our specialized services--spinal 
cord injury, blind rehabilitation, they too have been 
identified by Congress as the highest priority.
    Compared to the current fiscal year, this budget request 
more than doubles our appropriation request for construction of 
CARES identified new and improved facilities. Would you please 
show the construction chart, which is that one there.
      
    [GRAPHIC] [TIFF OMITTED] T7531.004
    
      
    This has been a big concern to all of us, I know to members 
of the committee and certainly to me, the aging of our 
infrastructure, the modernization that needs to take place. 
Using the authority granted by Congress this past year, we will 
also apply up to $400 million of the 2004, this year's medical 
care appropriation, to CARES projects. These actions will 
enable us to commit approximately $1 billion more in 2004 and 
2005 toward transforming VA's medical facilities into a 21st 
century health care system.
    Mr. Chairman, members of the committee, I know that you 
have a concern and share with me a goal of ensuring that we 
provide high quality medical care for our young men and women 
returning home from our overseas conflicts Enduring Freedom and 
Iraqi Freedom, and I am absolutely confident that this budget 
will enable us to meet our commitment to this new generation of 
freedom's defenders.
    The numbers are relatively small so far. Of the 83,000 
service members, including Guard and Reserve, who have 
separated from the military and served in Iraqi Freedom 
conflict, roughly 12 percent have come to us for care, about 
9,700 of those veterans. Of the 15,000 who have been discharged 
and served in Enduring Freedom, Afghanistan, roughly 1,400 have 
come to us for care since they have been discharged, and I 
expect those numbers will increase, but they are relatively low 
compared to Persian Gulf I and, of course, Vietnam and some of 
our other conflicts. But we need to be prepared to take care of 
this new generation of men and women who have fought.
    We still have challenges. Of that, there is little doubt. 
We are responding to those challenges with policy initiatives. 
First, we emphasize our commitment to the highest priority 
veterans by asking Congress to raise the income threshold to 
$16,500 from $9,800 for exempting low-income veterans from 
pharmacy copayments, lifting the burden of copayments from the 
poorest of our veteran population who seek care in the VA. We 
also ask that you eliminate all copayments imposed on former 
POWs. We also proposed to eliminate hospice care copayments, 
hospice care provided in the home, hospice care provided under 
contract. We ask for the authority to reimburse our patients 
for the copayments that they must pay their insurance companies 
when they seek emergency care in private sector hospitals.
    At the same time, we ask Congress to approve both a modest 
increase in pharmacy copayments and an annual fee totaling less 
than $21 per month, a very small portion of the cost of care, 
for higher-income non-service-disabled veterans using our 
system. I want to be very clear to our veterans that this is 
not an enrollment fee. It would be an annual use fee collected 
only from veterans receiving care and could be paid on a 
monthly or annual basis, depending upon the needs of the 
veteran.
    For many, many years, Congress has mandated such a fee for 
enlisted personnel--tech sergeants, staff sergeants, petty 
officers--who spent at least 20 years in the military and 
retire and enroll in the Department of Defense health care 
system, Tricare. They are required to pay $254 a year to be 
enrolled in the DOD health care system after serving 20 years 
on active duty, and we are just asking those who have no 
service-connected disabilities, do not stay in the military and 
retire, and have higher incomes, usually higher than what a 
petty officer or staff sergeant retires on, to pay a modest use 
fee.
    We can meet some of our other challenges on our own. For 
example, I approved the recommendation of the Under Secretary 
of Health, Dr. Roswell, to address regional funding imbalances 
by including all veterans, Category 7 and Category 8 veterans, 
using our system and our resource allocation model.
    In addition to improving access to health care, the 
President directed me to bring our benefits processing under 
control, and by last year, thanks to the hard work of the 
people in VA, we were able to reduce our inventory of rating-
related claims, the time it takes a veteran to receive a 
decision for a disability claim or pension, down to 253,000 
from a high of 432,000, and the percentage of veterans waiting 
more than 6 months for a decision was down to 18 percent from 
48 percent. I don't think this would have happened without the 
increase requested by the President and the decisions of this 
body in giving us additional people to handle the claims 
workload. Our backlog has gone up recently due to a September 
2003 court decision, but Congress has corrected that issue and 
we are now back on track to achieve our goals.
    I think it is very telling that the number of veterans 
receiving service-connected disability compensation is 
projected to increase to 2.6 million from 2.3 million in 2001, 
and we see a sizable increase in the funding, the mandatory 
funding for disability compensation. In 2005, the President is 
asking for almost $2.8 billion in additional funding for 
disability compensation.
    VA is not only health care and benefits, we also honor our 
veterans in their final rest. Advanced by the President's 
budget request, we will continue the greatest expansion of the 
national cemetery system since the Civil War. One new cemetery 
has just been opened. We will open five more new cemeteries 
over the next year, and we have proposed to add six new 
cemeteries to the system by the year 2009. This will increase 
our gravesites by 85 percent over the current number within our 
120 existing national cemeteries, so this is indeed a major, 
major expansion of our national cemetery system, and, of 
course, it is required because of the large number of veterans, 
World War II and Korea, passing from us, some 1,800 a day. So 
we are very, very pleased with this expansion.
    I am confident that the President's request and the actions 
of the Congress will allow us to continue to build on our 
record of commitment and success. I thank the committee for all 
you have done to help us achieve our goals and I look forward 
to your questions. Thank you.
    Chairman Specter. Thank you very much, Mr. Secretary.
    [The prepared statement of Secretary Principi follows:]

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

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

                              MEDICAL CARE

    The President's 2005 request includes total budgetary resources of 
$29.5 billion (including $2.4 billion in collections) for the medical 
care program, an increase of 4.1 percent over the enacted level for 
2004, and more than 40 percent above the 2001 level. With these 
resources, VA will be able to provide timely, high-quality health care 
to nearly 5.2 million unique patients, a total 21 percent higher than 
the number of patients we treated in 2001.
    I have taken several steps during the last year to refocus VA's 
health care system on our highest priority veterans, particularly 
service-connected disabled veterans who are the very reason this 
Department exists. For example, we recently issued a directive that 
ensures veterans seeking care for service connected medical problems 
will receive priority access to our health care system. This new 
directive provides that all veterans requiring care for a service 
connected disability, regardless of the extent of the injury or 
illness, must be scheduled for a primary care evaluation within 30 days 
of their request for care. If a VA facility is unable to schedule an 
appointment within 30 days, it must arrange for care at another VA 
facility, at a contract facility, or through a sharing agreement.
    By highlighting our emphasis on our core constituency (Priority 
Levels 1-6), we will increase our focus on the Congressionally 
identified highest priority veterans. The number of patients within our 
core service population that we project will come to VA for health care 
in 2005 will be nearly 3.7 million, or 12 percent higher than in 2003. 
During 2005, 71 percent of those using VA's health care system will be 
veterans with service-connected conditions, those with lower incomes, 
and veterans with special health care needs. The comparable share in 
2003 was 66 percent. In addition, we devote 88 percent of our health 
care funding to meet the needs of these veterans.
    While part of our strategy for ensuring timely, high-quality care 
for our highest priority veterans involves a request for additional 
resources, an equally important component of this approach includes a 
series of proposed regulatory and legislative changes that would 
require lower priority veterans to assume a small share of the cost of 
their health care. These legislative proposals are consistent with 
recent Medicare reform that addresses the difference in the ability to 
pay for health care. We are submitting these proposals for Congress' 
reconsideration because we strongly believe they represent the best 
opportunity for VA to secure the necessary budgetary resources to serve 
our core population. Among the most significant legislative changes 
presented in this budget are to:
     assess an annual use fee of $250 for Priority 7 and 8 
veterans; and
     increase co-payments for pharmacy benefits for Priority 7 
and 8 veterans from $7 to $15.
    We will work with Congress to enact our legislative proposal to 
eliminate the pharmacy co-payment for Priority 2-5 veterans, who have 
fewer means by which to pay for these costs, by raising the income 
threshold from the pension level of $9,894 to the aid and attendance 
level of $16,509 (for a single veteran). This would allow about 394,000 
veterans within our core constituency to receive outpatient medications 
without having to make a co-payment.
    The 2005 budget includes several other legislative and regulatory 
proposals that are designed to expand health care benefits for the 
Nation's veterans. Among the most significant of these is a provision 
that would give the Department the authority to pay for insured veteran 
patients' out-of-pocket expenses for urgent care services if emergency/
urgent care is obtained outside of the VA health care system. This 
proposal would ensure that veterans with life-threatening illnesses can 
seek and receive care at the closest possible medical facility. In 
addition, we are proposing to eliminate the co-payment requirement for 
all hospice care provided in a VA setting and all co-payments assessed 
to former prisoners of war. Currently, veterans are charged a co-
payment if hospice care cannot be provided in a VA nursing home bed 
either because of clinical complexity or lack of availability of 
nursing home beds.
    The President's 2005 budget for VA's medical care program also 
continues our effort to expand access to long-term care for veterans. 
This budget includes a legislative proposal to focus long-term care on 
non-institutional settings by expanding the 1998 average daily census 
nursing home capacity requirement to include the following categories 
of extended care services--nursing homes, community residential care 
programs, residential rehabilitation treatment programs, home care 
programs, non-institutional extended care services under VA's 
jurisdiction, and long-term care beds for which the Department pays a 
per diem to states for services in State homes. As part of this effort, 
we aim to significantly enhance access to non-institutional care 
programs that allow veterans to live and be cared for in the comfort 
and familiar setting of their home surrounded by their family.
    We are continuing our work with the Department of Health and Human 
Services to implement the plan by which Priority 8 veterans aged 65 and 
older, who cannot enroll in VA's health care system, can gain access to 
the new ``VA Advantage'' program. This would allow these veterans to 
use their Medicare benefits to obtain care from VA. In return, we would 
receive payments from a private health plan contracting with Medicare 
to cover the cost of the health care we provide.
    In return for the resources we are requesting for the medical care 
program in 2005, we will continue to aggressively pursue my priority of 
providing timely and accessible health care that sets a national 
standard of excellence for the health care industry. During the last 3 
years, we have significantly enhanced veterans' access to health care. 
We have opened 194 new community clinics, bringing the total to 676. 
Nearly 9 out of every 10 veterans now live within 30 minutes of a VA 
medical facility. This expanded level of access has resulted in an 
increase in the number of outpatient visits from 44 million in 2001 to 
51 million in 2003, as well as a 26 percent rate of growth in the 
annual number of prescriptions filled to a total of 108 million last 
year. To further highlight the Department's emphasis on the delivery of 
timely, accessible health care, our standard of care for primary care 
is that 93 percent of appointments will be scheduled within 30 days of 
the desired date and 99 percent of all appointments will be scheduled 
within 90 days. For appointments with specialists, the comparable 
performance goal is 90 percent within 30 days of the desired date.
    As I mentioned earlier Mr. Chairman, a key component of our overall 
access goals is the assurance that veterans seeking care for service-
connected medical problems will receive priority access to health care. 
In addition, we have dramatically reduced the number of veterans on the 
waiting list for primary care. We will eliminate the 6-month waiting 
list no later than April 2004.
    VA's health care system continues to be characterized by a 
coordinated continuum of care and achievement of performance outcomes 
that improve services to veterans. In fact, VA has exceeded the 
performance of private sector and Medicare providers for all 18 key 
health care indicators, from diabetes care to cancer screening and 
immunizations. The Institute of Medicine has recognized the 
Department's integrated health care system, including our framework for 
using performance measures to improve quality, as one of the best in 
the nation. Additionally, VA's quality score based on a survey 
conducted by the Joint Commission on Accreditation of Healthcare 
Organizations exceeds the national average quality score (93 versus 
91).
    We will continue to use clinical practice guidelines to help ensure 
high-quality health care, as they are directly linked with improved 
health outcomes. We expect to show improvements in both of our 
principal measures of health care quality. The clinical practice 
guidelines index will rise to 71 percent in 2005, while the prevention 
index will increase to 84 percent.
    The 2005 budget includes additional management savings of $340 
million that will partially offset the need for additional funds to 
handle the increasing utilization of health care resources, 
particularly among our highest priority veterans who require much more 
extensive care, on average, than lower priority veterans. We will 
achieve these management savings through improved standardization 
policies in the procurement of supplies, pharmaceuticals, and other 
capital purchases, as well as in other operational efficiencies such as 
consolidations.
    Our projection of medical care collections for 2005 is $2.4 
billion. This total is 38 percent above our estimated collections for 
2004 and is more than three times the collections level from 2001. 
Approximately $407 million, or 61 percent, of the increase above 2004 
is possible as a result of the proposed medical care policy 
initiatives. The Department continues to implement the series of 
aggressive steps identified in our revenue cycle improvement plan in 
order to maximize the health care resources available for the medical 
care program. We are establishing industry-based performance and 
operational metrics, developing technological enhancements, and 
integrating industry-proven business approaches, including the 
establishment of centralized revenue operation centers. For example, 
during the last year we have lowered the share of reimbursable claims 
receivable greater than 90 days old from 84 percent to 39 percent, and 
we have decreased the average time to produce a bill from 117 days to 
49 days. Further, the Department is implementing the Patient Financial 
Services System in Veterans Integrated Service Network 10 (Ohio). This 
will be a single billing system that we will use for both hospital 
costs as well as physician costs, and 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. 
To address this Presidential initiative, our two Departments 
established a high-level Joint Executive Council to develop and 
implement significant collaborative efforts. We are focusing on three 
major system-wide issues: (1) facilitating electronic sharing of 
enrollment and eligibility information for services and benefits; (2) 
establishing an electronic patient health record system that will allow 
rapid exchange of patient information between the two organizations by 
the end of 2005; and (3) increasing the number of shared medical care 
facilities and staff. The sharing of DoD enrollment and eligibility 
data will reduce the burden on veterans to provide duplicative 
information when making the transition to VA for care or benefits. 
Shared medical information is extremely important to ensure that 
veterans receive safe and proper care. VA and DoD are working together 
to share facilities and staff in order to provide needed services to 
all patients in the most efficient and effective manner.

        CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

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

                    MEDICAL AND PROSTHETIC RESEARCH

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

                           VETERANS' BENEFITS

    The Department's 2005 budget request includes $36 billion for the 
entitlement costs associated with all benefits administered by the 
Veterans Benefits Administration (VBA). Included in this total, is an 
additional $2.740 billion for disability compensation payments to 
veterans and their survivors for disabilities or diseases incurred or 
aggravated while on active duty. Recipients of these compensation 
benefits will have increased from 2.3 million in 2001 to over 2.6 
million in 2005. The budget includes another $1.19 billion for the 
management of these programs: disability compensation; pensions; 
education; vocational rehabilitation and employment; housing; and life 
insurance. This is an increase of $26 million, or 2.2 percent, over the 
enacted level for 2004.
    We have made excellent progress in addressing the Presidential 
priority of improving the timeliness and accuracy of claims processing. 
Not only have we hired and trained more than 1,800 new employees in the 
last 3 years to directly address our claims processing backlog, but the 
productivity of our staff has increased dramatically as well. Between 
2001 and 2003, the average number of claims we completed per month grew 
by 70 percent, from 40,000 to 68,000. Last year the inventory of 
rating-related compensation and pension claims peaked at 432,000. By 
the end of 2003, we had reduced this backlog of pending claims to just 
over 250,000, a drop of over 40 percent. We have experienced an 
increase in the backlog during the last few months, due in large part 
to the impact of the court decision (PVA v Secretary of Veterans 
Affairs) that interpreted the Veterans Claims Assistance Act of 2000 as 
requiring VA to wait a full year before denying a claim. However, this 
rise in the number of pending claims will be temporary, and we expect 
the backlog to be back down to about the 250,000 level by the end of 
2004. We thank the Committee for the legislation that eliminated the 
mandatory 1-year waiting period.
    In 2002 it took an average of 223 days to process a claim. Today, 
it takes about 150 days. We are on track to reach an average processing 
time of 100 days by the end of 2004 and expect to maintain this 
timeliness standard in 2005. One of the main reasons we will be able to 
meet and then sustain this improved timeliness level is that we have 
reduced the proportion of claims pending over 6 months from 48 percent 
to just 19 percent during the last 3 years.
    To assist in achieving this ambitious goal, VA established benefits 
delivery at discharge programs at 136 military installations around the 
country. This initiative makes it more convenient for separating 
servicemembers to apply for and receive the benefits they have earned, 
and helps ensure claims are processed more rapidly. Also, the 
Department has assigned VA rating specialists and physicians to 
military bases where servicemembers can have their claims processed 
before they leave active duty military service.
    We expect to see an increase in claims resulting from the return of 
our brave servicemen and women who fought to protect the principles of 
freedom in Operation Enduring Freedom and Operation Iraqi Freedom. We 
propose to use $72 million of the funds available from the war 
supplemental during 2004 to address the challenges resulting from an 
increasing claims processing workload in order to assist us in reaching 
our timeliness goal of 100 days by the end of 2004. We propose to use 
the remaining $28 million in 2005 to help sustain this timeliness 
standard.
    At the same time that we are improving timeliness, we will be 
increasing the accuracy of our claims processing. The 2005 performance 
goal for the national accuracy rate for compensation claims is 88 
percent, well above the 2001 accuracy level of 80 percent.
    This budget request includes additional staff and resources for new 
and ongoing information technology projects to support improved claims 
processing. We are requesting $2 million for the Virtual VA project, 
the ultimate goal of which is to replace the current paper-based claims 
folder with electronic images and data that can be accessed and 
transferred electronically through a web-based solution. The 2005 
funding will maintain Virtual VA at the three Pension Maintenance 
Centers. We are seeking $3.4 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 2005 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.
    The Veterans Service Network (VETSNET) development is nearing 
completion and is scheduled to begin deployment in April 2004. This 
system offers numerous improvements over the legacy Benefits Delivery 
Network (BON) that it is replacing (e.g., correction of material 
weaknesses and implementation of comprehensive claims processing within 
a modern corporate environment). Sufficient platform capacity is 
required to successfully deploy VETSNET and to ensure the continued and 
uninterrupted payment of approximately $24 billion annually in benefits 
to around 3.4 million deserving veterans and their beneficiaries. 
Therefore, $5 million in funding is requested to procure the capacity 
required. This platform capacity will ensure successful deployment and 
operation of VETSNET throughout VBA's Regional Offices and in a modern 
corporate environment that integrates all components of claims 
processing (e.g., establishing the claim, rating the claim, preparing 
the claim award, and paying the claim award). Without sufficient 
platform capacity, the Veterans Benefits Administration will be unable 
to operate this critical new system.
    In support of the education program, the budget proposes $5.2 
million for continuing the development of the Education Expert System. 
These resources will be used to expand upon an existing prototype 
expert system and will enable us to automate a greater portion of the 
education claims process and expand enrollment certification. This 
initiative will contribute toward achievement of our 2005 performance 
goals for the average time it takes to process claims for original and 
supplemental education benefits of 25 days and 13 days, respectively.
    VA is requesting $9.6 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.
    In order to make the delivery of VA benefits and services more 
convenient for veterans and more efficient for the Department, we are 
requesting $1.5 million for the collocation and relocation of some 
regional offices. Some of this will involve housing regional office 
operations in existing VA medical facilities. In addition, we are 
examining the possibility of collocations using enhanced-use authority, 
which entails an agreement with a private developer to construct a 
facility on Department-owned grounds and then leasing all or part of it 
back to VA. At the end of these long-term lease agreements, the land 
and all improvements revert to VA ownership.
    In recognition of the fact that the home loan program is primarily 
a benefit that assists veterans in making the transition from active 
duty life to veteran status, the 2005 budget includes a legislative 
proposal to phase in an initiative to limit eligibility for this 
program to one-time use. Under our proposal, one-time use of the loan 
program would apply to any person who becomes a veteran after the date 
this proposed legislation becomes law. Those who are already veterans, 
or who will achieve veteran status prior to enactment of the proposed 
law, would retain their eligibility to use the home loan benefit as 
many times as they need to for a period of 5 years after the law takes 
effect. Once that 5-year period has passed, they would no longer be 
able to use this benefit more than once. This legislative proposal does 
not change eligibility for active duty personnel who would retain the 
ability to use this benefit as many times as they need it. VA home 
loans are important for first-time buyers because they require no down 
payment-making them riskier than other loans. After the first use, home 
equity can be used to obtain more favorable terms from conventional 
loans, or through the Federal Housing Administration. Therefore, 
limiting this benefit to its original intent of one-time use after 
leaving the military will lower loan volume and risk, save money over 
the long-term, and coordinate Federal programs.

                                 BURIAL

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

                        MANAGEMENT IMPROVEMENTS

    Mr. Chairman, we have made excellent progress during the last year 
in implementing the President's Management Agenda. Our progress in the 
financial, electronic government, budget and performance, and DoD/VA 
coordination areas is currently rated ``green.'' Our human capital 
score is ``yellow'' due only to some very short-term delays. However, 
VA's competitive sourcing rating is ``red'' because existing 
legislation precludes us from using necessary resources to conduct cost 
comparisons of competing jobs such as laundry, food and sanitation 
service. The Administration will work with Congress to develop 
legislation to advance this effort that would free up additional 
resources to be used to provide direct medical services to veterans. We 
will continue to take the steps necessary to achieve the ultimate goals 
the President established for each of the focus areas.
    We have several management improvement initiatives underway that 
will lead to greater efficiency and will be accomplished largely 
through centralization of several of our major business processes. We 
are currently realigning our finance, acquisition, and capital asset 
management functions into business offices across the Department. There 
will be one business office in each of the 21 Veterans Integrated 
Service Networks and a single office for the National Cemetery 
Administration. For the Veterans Benefits Administration, the majority 
of the field functions will be centralized into product lines. In 
addition, we are establishing an Office of Business Oversight in our 
Office of Management that will provide much stronger oversight of these 
functions by our Chief Financial Officer, will improve operations 
through more specialization, and will achieve efficiencies in staffing. 
The realignment of these business functions will reduce and standardize 
field business activities into a more manageable size, limit the number 
of sites to be reviewed, provide for more consistent interpretation of 
policies and procedures, and promote implementation of performance 
metrics and data collection related to these business functions. As a 
result of the realignment, we will significantly strengthen compliance 
and consistency with finance, acquisition, and capital asset policies 
and procedures.
    We continue to make excellent progress in implementing the 
recommendations of our Procurement Reform Task Force, as 43 of the 65 
recommendations have been completed. By the end of 2004, we expect to 
implement all of the remaining recommendations. These procurement 
reforms will optimize the performance of VA's acquisition system and 
processes by improving efficiency and accountability. We expect to 
realize savings of about $250 million by the end of 2004 as a result of 
these improvement initiatives. This figure will rise after we have 
completed all 65 recommendations.
    During 2005 VA will continue developing our enterprise architecture 
that will ensure that all new information technology (IT) projects are 
aligned with the President's E-government initiatives as well as the 
Department's strategic objectives. The enterprise architecture will 
help eliminate redundant systems throughout VA, improve IT 
accountability and cost containment, leverage secure and 
technologically sound solutions that have been implemented, and ensure 
that our IT assets are built upon widely accepted industry standards 
and best practices in order to improve delivery of benefits and 
services to veterans. One of our primary focus areas in IT will be 
cyber security. We will concentrate on securing the enterprise 
architecture and providing continuous protection to all VA systems and 
networks. This will require purchases of both hardware and software to 
address existing vulnerabilities.
    We are continuing the development and implementation of our CoreFLS 
project to replace VA's existing core financial management and 
logistics systems with an integrated, commercial off-the-shelf package. 
CoreFLS will help us address and correct management and financial 
weaknesses in the areas of effective integration of financial 
transactions from Department systems, necessary financial support for 
credit reform initiatives, and improved automated analytical and 
reconciliation tools. We have conducted initial tests at selected sites 
and are still on schedule for full implementation during 2006.
    The Department has developed a comprehensive human capital 
management plan and has started implementing some of the strategies 
outlined in this plan. In addition, we are implementing a redesigned 
performance appraisal system to better ensure that all employees' 
performance plans are linked with VA's mission, goals, and objectives.

                                CLOSING

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

    Chairman Specter. I turn now to our distinguished ranking 
member, Senator Graham, for an opening statement.
    Senator Graham. Thank you very much, Mr. Chairman. I have a 
statement that I would like to file for the record.
    Chairman Specter. Without objection, it will be made a part 
of the record in full.

          STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR 
                          FROM FLORIDA

    Senator Graham. I would like to summarize some of the 
issues that I raise in that opening statement. I am concerned 
about the resource commitment that this budget makes, which has 
been calculated as a 1.8 percent increase for medical care and 
calls for the reduction in other areas, such as 540 staff 
responsible for processing veterans' claims. I am also 
concerned about the question of the additional pressures that 
are being placed upon the VA medical system.
    For an example, there will be a significant number of those 
American men and women who have been wounded in Afghanistan or 
Iraq who will return to the United States, separate from the 
military, and then be statutorily entitled to 2 years of 
medical care provided by VA. I am concerned as to whether we 
are prepared to meet that challenge.
    I am also concerned about the reliance on annual user fees 
on higher-income veterans,--those with income of as little as 
$24,000 a year. Also, the doubling of copayments for 
prescription drugs is a matter of concern at a time when we are 
trying to expand coverage of prescription drugs in the Medicare 
program. I will ask some questions about the consistency here.
    In my State, we have had difficulty with delays in veterans 
being able to get access to health care providers. There is a 
standard being suggested that enrolled veterans would be seen 
within 30 days for primary care. Does this budget provide the 
resources necessary to achieve that goal?
    At the Gainesville VA Hospital, there are several hundred 
veterans who have been waiting well beyond 30 days for their 
initial visit and there are 600 veterans who have waited more 
than a year for services like audiology at the Fort Myers 
clinic. How will this budget impact on those delays?
    Mr. Principi, not to just focus on some of the areas of 
concern, I want to commend you and the VA for the professionals 
that you have been able to bring in and retain within the VA 
system. I recently spent time at the VA hospital in Miami and 
at the outpatient clinic in Ocala, and I was very impressed 
with the quality of providers and the level of not just 
satisfaction, but enthusiasm, of those veterans who had 
received care from those professionals.
    Mr. Chairman, I have other points that are made in the 
statement that will be in the record, but at this point, I 
would defer to other members of the committee and then to 
questions.
    Chairman Specter. Thank you very much, Senator Graham.
    [The prepared statement of Senator Graham follows:]
      Prepared Statement of Bob Graham, U.S. Senator from Florida
    I join Senator Specter in welcoming our witnesses to today's 
hearing and I look forward to working with the Chairman, Members of 
this Committee, Secretary Principi, and the veterans service 
organizations to meet the needs of the men and women who have served 
our nation.
    Today, we begin the long process of ensuring that the fiscal year 
2005 budget allows VA to provide veterans with the care and benefits 
they have earned. To say that the proposed budget is tough is an 
understatement. The request includes only a 1.8 percent increase for 
medical care, and it calls for cutting 540 staff that process veterans 
benefits.
    This budget, unfortunately, reflects the priorities of this 
Administration and, if enacted, will have devastating effects on the 
men and women who have served this country with honor. The 
Administration has said the proposed VA budget will ``provide the best 
possible health care and benefits to our veterans.''
    I would disagree, and I believe we will hear similar sentiments 
from our witnesses on the second panel. As we shape VA's budget for the 
next year, we must move beyond hopeful rhetoric and political 
gamesmanship and take an honest assessment of the needs of veterans. We 
must then match this assessment with real dollars.
    When you take away the new and higher fees that are to be paid 
directly by veterans and the theoretical management efficiencies, the 
Administration has asked for an appropriation that fails to cover half 
of the expected inflationary increases. I take issue with a budget that 
relies on an annual user fee levied upon so-called ``higher income'' 
veterans--especially when ``higher income'' can mean as little as 
$24,000 a year.
    It is insulting to laud this budget, but continue to bar veterans 
from VA health care. It is unfair to double the prescription drug co-
payments for other veterans. And it is nothing short of hypocrisy to 
deliberately reduce demand for health care services and then to count 
that as savings.
    I am relieved to hear that waiting times for care will disappear in 
early fiscal year 2004, but am mystified as to how this will occur. 
Does this mean that all enrolled veterans will be seen within 30 days 
for primary care? Or does this mean that veterans will not have to wait 
to be assigned an appointment, but will quickly get an appointment that 
is scheduled up to a year later? Will the hundreds of veterans who must 
wait more than a year to see a doctor at the Gainesville VA Hospital or 
the 600 veterans waiting more than a year for audiology care at the Ft. 
Myers clinic be seen promptly? VA's committed professionals are already 
struggling to handle the increased patient load, and for the next 
fiscal year they will be doing it without a corresponding increase in 
resources.
    It is not only the VA health care system that stands to suffer 
under this budget. The Administration proposes a cut, for the second 
year in a row, in the number of staff who process VA benefits, 
including those who decide veterans' disability claims. I commend the 
progress that VA professionals have made in reducing the staggering 
backlog of claims over the past year, but I fear that these cuts will 
erode the gains VBA has made. In addition, this budget request does not 
account for recent changes to the system. Specifically, last year's 
concurrent receipt legislation will allow military retirees that are 
more than 50 percent disabled to receive both their disability pay and 
pension payments.
    However, this new benefit may bring a rush of claimants into the 
system who believe they are eligible, creating an additional backlog. 
The Administration's budget does not account for additional claims that 
service members returning from Iraq and Afghanistan will file during 
the next 2 years.
    In addition, the Administration has failed to consider the health 
care needs of these returning service members, re-directing $100 
million intended for their care. Even without these demands, veterans 
are currently forced to wait 189 days for VA to make a determination of 
eligibility for benefits. With the proposed funding level, I have 
trouble believing VA will be able to meet, much less sustain, the 
ambitious target of 100 days for processing new claims.
    As we begin discussing next year's budget proposal, there will be 
talk of fiscal discipline. It is true that the deficit is a serious 
problem we must tackle, but we must make choices. Should we choose to 
make a permanent tax cut our nation's priority? Or should we fulfill 
our commitment to those who have served our Nation honorably? We cannot 
send the signal to our men and women in uniform that we will not care 
for them upon their return. I fear the Administration's budget proposal 
may send that signal.

    Chairman Specter. We will now proceed with our customary 
approach of 5-minute rounds of questions on the early bird 
principle of order of arrival.
    Mr. Secretary, I commend you for the candid testimony which 
you gave to the House last week as reported in CQ that you 
asked for a $1.4 billion addition, which was denied by the 
Office of Management and Budget. I think that kind of candor is 
really necessary. I know the custom in many quarters is to not 
be candid, but we understand the budget constraints. We know 
about the deficit. We understand the problems with the economy 
and the very heavy costs of the wars, the ones against 
terrorism, Al Qaeda, and the other in Iraq. That kind of candor 
is very impressive.
    We have noted your request for copayments and we will 
consider them carefully, but in a spirit of candor from this 
side of the table, they are very, very difficult. When you 
start making evaluations of ability to pay, that is very hard. 
And in an era where we are calling on our servicemen and women 
to do so much and recruiting depends in significant manner on 
what is happening to veterans who have been discharged as well, 
we take that into account before we make our own budgetary 
considerations.
    There has been a good deal of talk about Medicare 
subvention, where the veterans' budget would be supplemented by 
the care you give which could have been, perhaps should have 
been, borne by Medicare. You have a new program called VA 
Advantage. Would you describe that new approach and what you 
anticipate from that by way of increased revenues?
    Secretary Principi. Yes, Mr. Chairman. Secretary Thompson 
and I over the past year have worked to develop a program, a 
concept, wherein veterans who are in Category 8, because of 
this dramatic increase in workload and the Congress directs 
that I make an annual enrollment decision, have not been able 
to enroll in the VA health care system would be able to come to 
the VA for care under this VA Advantage program and we would be 
reimbursed from Medicare.
    Over the past 6 to 8 months, we have been working very 
closely with the folks at HHS and CMS to work through the many, 
many legalistic and regulatory issues on getting reimbursed 
from Medicare, but I am hopeful by the end of this year those 
veterans can come to the VA for health care and VA would get 
reimbursed by the Medicare Trust Fund. I am not sure we have a 
projection on how much we would receive, but the cost of their 
care would be covered in full by Medicare. So it is the first 
time that we have been able to develop a program with Medicare 
and I am hopeful that we can work through the many regulatory 
issues that Medicare has so that we can implement this program 
as soon as possible.
    Chairman Specter. That would certainly be a big boost to 
the VA budget if that can be accomplished.
    We have also looked to supplementing the VA income by 
proceeds of those who are insured. Would you give us a brief 
summary as to what you anticipate in that respect?
    Secretary Principi. Well, again, starting in 1998, the 
Congress authorized the VA to keep the revenues from third-
party payments, payments from insurance companies. Rather than 
those dollars going into the Treasury as miscellaneous receipts 
and then coming back to the VA indirectly in increased 
appropriation, Congress said, you keep them there and you count 
them as new resources in addition to your appropriation. 
President Clinton started that, rightfully so, and it has been 
that way--it has been programmed that way since.
    We are making great progress in doing better collecting 
from insurance companies. We still have some difficulty with 
HMOs, and, of course, Medicare is off the table, the largest 
insurance company in the nation, so to speak. But this year, we 
project to collect--or for 2005, a little over one billion 
dollars in revenues. That is used to enhance our medical care 
appropriation and expand the reach of health care, buy more 
pharmaceuticals, more outpatient visits, more inpatient visits.
    So it is a great program. We just need to do better in our 
accounts in collecting those dollars from insurance companies. 
We are improving, but we still have a ways to go.
    Chairman Specter. Your answer ended just with the 
expiration of my time so I will not ask you another question 
and I will yield now to Senator Graham.
    Senator Graham. Thank you.
    Chairman Specter. He is the one exception to the early bird 
rule, the Ranking Member.
    Senator Graham. Thank you, Mr. Chairman.
    I would like to ask in this round about the responsibility 
of the VA to provide medical care for combatants who have 
separated from the service. During the 2003 consideration of 
the VA's budget, I proposed an amendment to add $375 million to 
meet the health care needs of returning service members. This 
amount was based on a formula taking the percentage of veterans 
who sought VA health care and benefits following the first Gulf 
War, multiplying that by the VA's average per patient cost 
today, and the result of that is $375 million.
    In conference with the House, that amount was reduced to 
$100 million. It is now my understanding that the 
Administration believes that the right number is not $375 
million or $100 million, but is zero, and intends to redirect 
the full amount from health care to the Veterans Benefit 
Administration.
    Mr. Secretary, is that policy correct, and if so, what is 
the basis of the Administration's determination that there will 
be no budgetary cost in terms of providing benefits as 
statutorily required to returning servicemen and women?
    Secretary Principi. Senator Graham, I applaud you and I 
applaud the Congress for adding that $100 million. But the law 
in the appropriation, or the language of the appropriation 
bills says for an additional amount for costs associated with 
processing claims of veterans who may have incurred injuries 
with service in the Persian Gulf, war combat arena, $100 
million. It did give me the authority to use the dollars for 
health care, as well, and the reason that I have elected to use 
the $100 million for veterans' benefits and veterans' claims is 
because in 2004, the President's request and the Congress's 
actions increased our health care budget by 11.5 percent. I 
think that is probably a record. We received close to $3 
billion in 2004, 4 months, 5 months late, but nonetheless a 
very dramatic increase.
    Senator, I am absolutely confident that this increase that 
you have given us in 2004 is more than adequate to ensure that 
we take care of the health care needs of veterans coming back 
from Iraq and Afghanistan. Otherwise, that money would be 
there, believe me.
    At the same time that we received this dramatic increase in 
health care spending in 2004, for our Benefits Administration, 
the processing of claims, I think there was zero increase. We 
really are struggling in the Veterans' Benefits Administration 
to ensure that these claims that veterans who are coming back 
wounded, filing for disability compensation, are processed in a 
timely manner and that was the basis for the decision.
    The law said veterans' benefits, and I could move money 
over to health care if I need it. I found that I didn't need to 
do so, Senator. The $100 million is very important and that is 
how we have applied it.
    Senator Graham. Are you saying $100 million to process 
benefit claims is going to be focused exclusively on combatants 
returning from Afghanistan or Iraq?
    Secretary Principi. No, sir. I am trying to use that money 
to--you know, obviously, by improving our timeliness, by having 
the right equipment, the right people on board--we are giving 
them a very, very high priority, but it is going to help us 
improve our benefit delivery process in general. So no, I would 
not make the statement, be misleading and say all $100 million 
is going to be for the veterans returning from Iraq and 
Afghanistan who are filing disability claims. There are not 
that many claims. But in general, this whole system needed the 
resources. But----
    Senator Graham. That 11 percent increase that you stated 
was given to veterans' medical benefits, what was that on a per 
capita basis? For each VA patient, how much additional 
resources did the 11 percent allow?
    Secretary Principi. Rounded, about $500 per patient.
    Senator Graham. What is that as a percentage?
    Secretary Principi. Eleven percent increase in funding for 
our medical care, of which we have--how many users--4.8 million 
users of our health care system, so that almost $3 billion 
increase that you gave us this year is very, very significant, 
Senator.
    Senator Graham. I would like to return to this. My round is 
now over. That will give you something to look forward to.
    [Laughter.]
    Chairman Specter. Thank you, Senator Graham.
    Senator Campbell.
    Senator Campbell. Thank you, Mr. Chairman.
    Mr. Secretary, as I understand your testimony, the waiting 
time that a veteran has to wait to get in to see a doctor is 
going down. I think that is really terrific. The backlog, from 
your testimony, is going to continue going down. I am sure that 
is good news to all the veterans.
    The last 3 years, we have put in more money from Congress 
than the President requested in his budget, and even at that, 
we hear every year from the veterans' associations it is not 
enough, and more than likely after you have testified today, 
when the VSO's testify, we are going to hear the same thing, 
that we are not putting enough resources into it.
    I guess with a $450 billion deficit or maybe more, who 
knows what it is going to be by the end of the year, it is 
going to be a real tug-of-war around here to get money. I, like 
many of the people on this committee, happen to really try to 
prioritize veterans' health, being a veteran myself. But I, 
like Senator Graham and maybe some of the other members, am a 
little concerned about these user fees, too.
    I guess I would like you to clarify a little bit, when you 
talked about the veterans who are better off, how is that going 
to be determined? Is there going to be some kind of a threshold 
by which they would have to pay a higher user fee? Who is going 
to determine that?
    Secretary Principi. Yes. Congress established seven 
priority groups when open enrollment went into effect in 1998, 
and then about a year or two ago added an eighth priority 
group. The Priority Group 7s and 8s are veterans who have no 
military disabilities and have--they are not high incomes, but 
they have higher incomes. I believe it is around--Category 7 is 
about $25,000 for a single veteran, higher if you are married 
with dependents.
    The copayment--these fees would only be assessed against 
the Category 7 and 8 veterans. We are proposing to eliminate 
copays, on the other hand, for the poorer veterans. Today, if 
you have an income above $9,800, you start paying copays. We 
are asking Congress to say, raise that level to $16,500.
    So yes, indeed, I believe it is reasonable to ask the 
higher-income non-disabled to pay a little bit, a very small 
proportion of their care and the poorer veterans to be 
alleviated of that burden.
    Senator Campbell. I understand that. It may be a little 
more complicated on determining some of the things that were 
military related. I guess the most common, of course, is 
smoking and the long-term effects. I remember when I was in the 
service, we got cigarette rations. Even though I didn't smoke, 
I still got cigarette rations. We were encouraged to smoke. 
What happens to a veteran who is encouraged as a youngster to 
smoke and years later he develops cancer? Is there a 
possibility that somehow he would be forced to pay higher user 
fees because he didn't develop the cancer until after he got 
out, even though the roots of it began when he was in the 
service?
    Secretary Principi. If he is service-connected disabled for 
cancer, he would not pay any copays or user fees. This would 
only be those who come to the VA health care system or enroll 
in the VA health care system and have no military-related 
disabilities.
    Senator Campbell. OK. Maybe I phrased my question very 
poorly. How do you determine whether it was a military 
disability when the cancer didn't appear until after he was out 
sometime?
    Dr. Roswell. Senator Campbell, if I may, that is why I 
think our efforts to work on disability claims are so important 
and the $100 million that Senator Graham spoke about. As the 
Secretary alluded, over 300 additional veterans are now 
receiving service-connected compensation this year, which I 
think is a direct reflection on how we are able to reach out to 
veterans, to help them file disability claims for illnesses 
such as lung cancer, which can be service connected, for 
example, for veterans who served in Vietnam, and help them file 
those claims so that they receive disability compensation. 
They, in turn, not only receive that compensation, but they 
then receive priority health care.
    Senator Campbell. I think I have no further questions, Mr. 
Chairman.
    Chairman Specter. Thank you very much, Senator Campbell.
    Senator Akaka.

        STATEMENT OF HON. DANIEL K. AKAKA, U.S SENATOR 
                          FROM HAWAII

    Senator Akaka. Thank you very much, Mr. Chairman.
    I would like to add my welcome to Secretary Principi and 
our other witnesses here. I want to express my appreciation to 
you for all you have done. I know it is so difficult to carry 
on the programs we want with the kind of revenue and 
appropriations that you receive.
    I have two questions I would like to ask. Secretary 
Principi, as the chairman mentioned about Priority 8, I am also 
concerned about that. Last year, as you know, I signed a joint 
letter objecting to your decision to end the eligibility for 
enrollment of Priority 8 veterans in the VA health care 
program. I am still concerned about that. After hearing the 
fiscal year 2005 budget, I see that Priority 8 veterans are 
still barred from enrolling in the VA health care system and I 
also see that prescription drug copayments are increasing for 
middle-income veterans.
    I realize, as you mentioned, that Priority 8 veterans are 
considered high-paid veterans. My question to you is, what 
would be the impact in your budget if Priority 8 veterans could 
enroll--could enroll--into the VA health care system, as well 
as the impact on the budget if the increases in copayments were 
not implemented?
    Secretary Principi. Yes, Senator. If I just very briefly, 
historically, as you know, in 1998, we went from approximately 
three million eligible for comprehensive VA health care to 25 
million, a very, very dramatic jump in eligibility. That, 
coupled with the opening--my predecessor and I have continued 
to open community-based outpatient clinics. We now have almost 
700, a great pharmaceutical benefit, and high quality. We have 
seen this enormous, enormous increase in demand for health 
care, so much so that consistent with the law, I have to make 
an annual enrollment decision based upon resources made 
available in the Appropriation Act.
    It was only because we had a growing number of veterans on 
waiting lists, as Senator Graham talked about in Florida, it 
was close to over 300,000 waiting more than 6 months for care, 
that I made that decision, because we were enrolling veterans 
and had no expectation of providing them with timely care.
    To reopen the door to Category 8s--and I continually look 
at it to see if we can do it--in 2005 would be $590 million. Of 
course, enrolling veterans has an impact not only in the year 
that we do so, but as they become older and perhaps sicker, 
that the number increases. So it does have a rather 
significant, financial impact.
    Senator Akaka. I am also concerned about VA's ability to 
meet its production goal of processing new claims in 100 days. 
It appears to me that VA's 2005 budget does not include an 
anticipated increase in claims by service members returning 
from service in Iraq or Afghanistan. Additionally, the VA's 
budget request assumes a 1.5 percent increase in Federal pay. 
However, the Federal pay increase is expected to be 3.5 
percent.
    Given these factors, Mr. Secretary, I am very concerned 
that the VA will need to cut other resources which will result 
in additional time processing new claims and will compromise 
health care service to veterans. Given this background, I would 
like to hear your thoughts regarding these.
    Secretary Principi. It is very challenging. I set those 
goals of never having more than 250,000 claims in our 
inventory, which would allow us to process claims in 100 days. 
I felt that veterans having to wait years to get a decision on 
a claim is just unconscionable, and that is why I set those 
goals and put in place new processes, and with the support of 
the President, with the support of the Congress, we added some 
1,300 new rating specialists to the VA and we have been able to 
dramatically bring down the backlog, and also hundreds of 
millions of dollars that you gave us for information technology 
enhancements to improve our productivity.
    I think the combination of these things, now that these 
1,300 people are trained and being very productive, that we 
will be able to achieve these goals. But it is going to be 
challenging, Senator, you are absolutely right, and that is 
why, as Senator Graham said, I have used some of that money for 
claims processing.
    Chairman Specter. Senator Akaka, we have eight members here 
and a second panel of five witnesses.
    Senator Akaka. Thank you very much.
    Chairman Specter. Thank you, Senator Akaka.
    Senator Murray.

          STATEMENT OF HON. PATTY MURRAY, U.S SENATOR 
                        FROM WASHINGTON

    Senator Murray. Thank you very much, Mr. Chairman, for 
holding this very timely hearing, and Mr. Secretary, thank you 
for being here and all the work you do on behalf of veterans 
and especially for your willingness to request an additional 
$1.2 billion for the VA budget. I was disappointed that the 
President didn't follow through on that, but I appreciate your 
putting it out there.
    I have a lot of very serious reservations about the 
President's budget. I think with the new generation of veterans 
coming home that are going to be reliant upon the VA for health 
care and services, we really have an obligation to take care of 
them and I think this budget request we have seen really falls 
short.
    I agree with the comments about the new fees on veterans. I 
think it is highly unlikely that Congress is going to approve 
that and the health care is going to be far short of what we 
need. I am very concerned about the major medical construction 
dollars in here, $180 million, and I understand the 
administration is going to transfer $400 million from health 
care to construction, which will make our construction account 
about $600 million. If that is accurate, that is far short of 
what the CARES initiative plans were to spend. I think we have 
all been assured more than once that the CARES process was--
that we would accept significant changes based on new 
construction and service delivery, and if that falls short, it 
is going to leave a lot of us really feeling like we were not 
told the whole story and our veterans are not going to be 
served.
    I want to ask you about that, but before I do, I want to 
bring up a separate issue and that is on the Department of 
Labor rule that is eliminating overtime compensation that will 
affect some veterans. I think you are aware that the proposed 
rule could very well undermine many of our young people who 
enlist in the military because it is going to change the 
definition of professional employees. It basically will mean 
veterans working in professional fields will now be classified 
as professional employees and lose their overtime.
    I wanted to know if you had made comments on that, and as 
the nation's leading advocate for veterans, if you intend to 
express your opposition to the Department of Labor on that 
issue.
    Secretary Principi. I guess I am not as knowledgeable about 
it as I should, Senator. To say that veterans would lose income 
by being designated a professional employee, which is based 
upon education, experience, and I would hope that being 
designated a professional would somehow provide more upward 
mobility and more increase in compensation and benefits. But I 
guess we could debate that.
    I would just, if I can, just take a quick second to say 
that, yes, I have always tried to be honest with the Congress, 
and having grown up here, about what I requested. Every year, 
every Department goes through a very difficult negotiating 
process with OMB and we achieve a requested level of spending 
that the President makes to Congress.
    I just want to be clear that I believe that the budget we 
requested, coupled with--I believe we are going to have $800 
million or somewhere in that neighborhood that we will be able 
to carry over into 2005--will allow us to achieve our goals, to 
take care of the very veterans we are all concerned about as 
well as, very importantly, the men and women who served in 
combat in Iraq and Afghanistan.
    But on the Department of Labor issue, I think that is one I 
need to study.
    Senator Murray. Mr. Secretary, I have actually sent you a 
letter dated February 9 on that, and if you could take a look 
at that and respond, I would really appreciate it.
    Let me also tell you, I am very concerned about the new 
generation of veterans that we are creating today. About 40 
percent of the U.S. armed forces in Iraq and Afghanistan, as 
you know, are activated Guard and Reservists. Those men and 
women are going to have a very different priority from the 
regular troops. They are older. They are more likely to have 
families. They are in a hurry to get back to their jobs and 
their community and their own life. I am concerned that we 
could lose track of many of those people when we return home, 
and I don't think we want them to fall through the cracks.
    What is the VA prepared to do in order to capture those 
veterans and make sure we don't lose them?
    Secretary Principi. You are so right. It is far different 
than it was during the Vietnam War, what we are asking our 
Reservists and Guardsmen and women to do today.
    We are truly outreaching to them. We have engaged in some 
over 3,000 of them in TAP programs, Transition Assistance 
Programs for members of the armed forces. We have engaged in 
another 2,000 briefings. We have outreached to some 46,000 
Reservists and Guardsmen and women around the country to just 
make sure they understand what their benefits are, that when 
they are called up to active duty, they are veterans and they 
are eligible and entitled to the veterans' benefits program. 
They are entitled to VA health care.
    So absolutely, we have an important responsibility to 
outreach to them and I can assure you we are going to continue 
to do so.
    Senator Murray. Good, and I would like to work with you on 
that. I think it is really important. Thank you.
    Dr. Roswell. Let me just add that we----
    Chairman Specter. Senator Murray, your time has expired.
    Senator Murray. If Dr. Roswell could just respond to the 
last question in 2 seconds.
    Dr. Roswell. I was just going to add that we have actually 
printed a million brochures specifically for Reserve and Guard 
and have distributed those through all of the Reserve and Guard 
units. We have opened our readjustment counseling service to 
the Reserve and National Guard. The Secretary is planning to 
send letters to all 90,000 people who have been separated thus 
far, and we have unprecedented cooperation with DOD to make 
sure that we know everyone who is being discharged, whether 
they are on active duty, in the Reserves, or in the National 
Guard.
    Chairman Specter. Thank you, Senator Murray.
    Senator Nelson.

    STATEMENT OF HON. E. BENJAMIN NELSON, U.S. SENATOR FROM 
                            NEBRASKA

    Senator Nelson. Thank you, Mr. Chairman, and may I add my 
appreciation, Mr. Secretary, for the continuing good work that 
you do for our veterans. I suspect after all the praise that 
you have received from all of us today, you have to be sitting 
there wondering how we can have so many critical things to say 
and/or to ask of the care for veterans, but I think it is a 
common thought that we have. You are trying to do a better job. 
We want to see a better job done, and I hope we can work 
together to do that.
    When Nebraska was moved into a new VISN just some time ago, 
we were all told that the services wouldn't change for veterans 
in Nebraska. I remember somebody from your staff saying that 
one of the reasons they were having headquarters in Minneapolis 
was because there were more qualified people there and I took 
issue with that, being from Nebraska. My staff tells me that a 
change has occurred, that veterans requiring cardiac surgery 
are now being required to go to Minneapolis for the care. If it 
is emergency care, surgery, they will be treated in Nebraska.
    Once again, I want to point out that we have excellent 
cardiac surgeons in Nebraska and this isn't consistent with 
what we had hoped would happen, where veterans would be treated 
as close to home as possible. It is not a matter of trying to 
patronize Nebraska as much as it is to take care of veterans as 
close to home as possible. I would hope that you would look 
into that to see what you can find out.
    We were also told that, well, Nebraska would become the hub 
for some other services. But I am not sure that unless there is 
a particular reason why the care can't be provided in a 
location that we would try to create hubs for care, and yet I 
am one who is as hawkish on the budget as can be. I know you 
want to save every dollar that you can. But we all have to come 
up short of shortchanging the veterans in the process.
    Secretary Principi. I made a commitment to you that 
Nebraska would not get shortchanged. I will ensure that that 
commitment is adhered to. Next week, I happen to be meeting, 
along with Dr. Roswell, the network director that has Nebraska. 
I will certainly ask these questions, and----
    Senator Nelson. We were told part of the reason is because, 
and I don't want to overplay my time, the chairman is quite 
sharp when you do that, but it is because they can provide the 
care in the veterans' hospital there and it has to be 
outsourced in Nebraska. But it would seem like we could work 
out a contractual relationship that would even out the cost if 
it is a cost factor because it needs to be about the care 
providing at the closest possible----
    Secretary Principi. I am sure there are a number of 
factors, and certainly going in for cardiac surgery, open 
heart, we certainly want to go and make sure the outcomes are 
good. I mean, that is most important. Sometimes it is a little 
inconvenient to go to one of those major cardiac care medical 
centers, and, of course, cost is an issue, but I will certainly 
look into it and I will get back to you personally to make sure 
that there are reasons or that there will be a change, so we 
can discuss it further.
    Senator Nelson. As always, I appreciate the ability and the 
opportunity to work with you. Thank you very much. Thank you, 
Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Nelson.
    Senator Jeffords.

 STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM VERMONT

    Senator Jeffords. Mr. Secretary, I would like to thank you 
for coming today and thank you for your leadership over the 
past few years on behalf of veterans. Your job is not an easy 
one and I appreciate all you have done for increased funding 
for the VA over the objections from those who don't want to see 
any more money spent on veterans. I believe we have an 
obligation to care for those who have carried the flag and I 
would like to see that we continue to hold that banner high. We 
must not let the banner sag or fall by merely meeting the 
minimal obligations.
    I have a two part question about benefits. First, how does 
the VA plan to notify newly discharged veterans of their 
benefits? Second, in anticipation of the increase in claims 
submitted by these new veterans, please tell me what VA's 
current plan is in processing veterans' initial claims.
    Secretary Principi. We are taking as many steps as possible 
to outreach to veterans being discharged. Of course, we have 
the TAP programs. As I indicated, we have done over 3,000 
Transition Assistance Programs for military personnel. Well 
over 100,000 have attended those briefings. We engage in other 
briefings for military personnel, Guard and Reservists. We have 
health fairs. Some 700,000 veterans attended health fairs this 
past year. We have brochures that we mail out. I am sending a 
letter to all of the recently discharged servicemen and women 
coming back from Iran and Afghanistan.
    We now have staff on 136 military bases. You know, in the 
past, you had to wait until you were discharged and then you 
would have to find your way to a regional office, maybe 4 or 5 
hours' drive. Today, at 136 military bases, you can walk across 
the street from your barracks. You can fill out a claim for 
disability compensation or whatever it might be, have an exam 
right there across the street from your barracks, and when you 
get your discharge papers, you get your disability compensation 
or you get your GI bill benefit right away. I mean, I think 
this is what we have to do for our customers, the men and women 
who served in uniform, bringing the benefit structure to 
military bases.
    We have full-time staff now for the first time in history 
at Walter Reed and Bethesda to make sure the wounded who are 
coming back, when they go home on convalescent leave or 
discharged, they are already enrolled in a VA hospital near 
their home and they have been given the claims information so 
that they can get their disability compensation.
    I am sure there is more that we can do. I just don't want 
to see anybody fall through the cracks, and this is especially 
meaningful to me, because I had two sons serve in Iraq at the 
same time. So I just feel very strongly, personally and 
professionally. We are not perfect. We don't, of course, ever 
have all the resources you need. I am not saying we do, but I 
think the President, this Congress has treated us very 
generously and we need to continually strive to do better.
    Senator Jeffords. I appreciate that answer. As you know, 
many of us here represent rural States. In the past, the VA has 
made an effort to open community-based outreach clinics to get 
access to the VA for more vets. But in the last 2 years, the VA 
has had a policy of not opening any more clinics. Is there any 
chance that this policy will change? I believe these clinics 
perform a very useful service for veterans and would like to 
know your answer.
    Secretary Principi. I applaud my predecessor for 
transitioning the VA from a hospital-centric system to a 
patient-focused health care system and I have continued that 
process. I think I have opened probably or directed that we 
open 170, 190 outpatient clinics over the past 3 years and I 
will continue to open outpatient clinics.
    Of course, we have to balance outpatient clinics and 
inpatient hospitals because we have an inpatient mission as 
well as an outpatient mission, but we need to continually bring 
health care closer to the veteran's home so that they don't 
have to drive long distances to get outpatient care in a VA 
medical center. They can get it in a community-based outpatient 
clinic.
    I think it is a great program, Senator. We have tried to 
balance it and watch it and maybe there has been a slowing 
down, but we will continue to do so.
    Senator Jeffords. Thank you. I thoroughly appreciate what 
you are doing. Thank you.
    Secretary Principi. Thank you, Senator Jeffords.
    Chairman Specter. Thank you very much, Senator Jeffords.
    Senator Rockefeller.

           STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Rockefeller. Thank you, Mr. Chairman.
    I want to say what others have said and I want to say it 
with as much or even more feeling, and that is that when you 
came in here to be confirmed, I remember I asked you the 
question, if you came up against something which really 
bothered you, would you go face to face with the President, and 
he was on ``Meet the Press,'' so you didn't have time. Before 
that, you did, in a sense, go face to face with the President 
because you went face to face with the budget officials and 
asked for $1.2 billion more for VA health care, which 
represents a real act of courage and you did it publicly.
    I really commend you for that. It is a gutsy thing to do. 
This is an administration which wants people to be in line, and 
when somebody isn't in line, they don't like it, but you 
decided that you were going to put the veterans ahead of this. 
I really congratulate you for that, Secretary Principi, and I 
think you understand that I mean it when I say that.
    As Ben Nelson said, Senator Nelson, we praise you and then 
we ask for things, but that is because you are under a budget. 
This is a national budget. It is not a free health care system, 
so everything is always in competition with something else. If 
you come from States like mine, you have to fight. That is what 
we have always done. We have always fought uphill. Arlen 
Specter knows something about that in the western part of his 
State, and we have to do that.
    Now, in the CARES Commission, which hasn't come out, but 
they are going to and they are going to suggest cutting some 
beds, I am told, from the Beckley VA facility. On the other 
hand, you have recognized, and, in fact, due to your 
leadership, you have recognized that there are some hospitals 
that because of certain situations need to be declared critical 
care hospitals, critical access hospitals.
    My understanding is that CARES as a commission does not 
recognize such designations, wherein we have a quandary because 
I need to fight very hard for what is the most isolated part of 
my State. I am not sure how we can do this or if we can do it 
together or if it can be done, but I am going to try in every 
way that I know how. I can't do less than that, because, 
frankly, the majority of our veterans come from that part, the 
coal fields, the steepest mountains, the poorest counties of 
West Virginia, which is 1 of 50 States.
    So I ask your attention for that. I don't necessarily need 
to have a comment from you. I want to have a sense that you 
hear me loud and clear on that, that it is----
    Secretary Principi. Senator--oh, I am sorry.
    Senator Rockefeller. Go ahead, please.
    Secretary Principi. I would just say, I had the pleasure to 
tour West Virginia with you. I saw firsthand, as you have 
experienced, the needs of veterans in rural America, in West 
Virginia. I had the privilege of being in Western Pennsylvania 
with Senator Specter, an awful lot of poor people, an awful lot 
of elderly people, veterans, who are lacking health care. So I 
certainly intend to very carefully review the commission's 
report, analyze it, and do what is best for veterans.
    I know it is going to entail some changes because health 
care is changing and demographics change, and if we don't 
change with the changing dynamics in health care, I am afraid 
we will fail America's veterans maybe 10, 15, 20 years from 
now, because our infrastructure has been built up over 150 
years. So we just need to be mindful of that, but at the same 
time recognize it is not only in large urban areas, but also in 
rural areas that we have a responsibility. I just want you to 
know I am listening and hopefully we will make the right 
decision.
    Senator Rockefeller. Thank you, Mr. Secretary, and I have 
two other questions which I will simply submit for the record. 
I thank you, sir, and I thank the chairman.
    Chairman Specter. Thank you very much, Senator Rockefeller.
    Mr. Secretary, I have a thick sheet of 19 questions to ask 
you for the record on going into some substantial details. May 
I inquire of my colleagues if they would like another round?
    Senator Graham. I would like to ask two more questions, Mr. 
Chairman.
    Chairman Specter. Senator Murray. Senator Nelson.
    Senator Nelson. Nothing.
    Chairman Specter. Senator Jeffords. Senator Graham, two 
questions.
    Senator Graham. The first has to do with the assumptions in 
the budget. The assumptions, as I read them, are that veterans 
will make $1.3 billion in copayments for their medical care, 
but only $1 billion will be collected from insurers who are 
third party responsible persons. That results in nearly $2 
billion in claims being rejected by those insurers. It is my 
assumption that if we could do better with insurance company 
collections, that would relieve some of the pressures off 
taxpayers and veterans. What would be your recommendations as 
to what could be done? What role will Congress play in 
increasing the percentage of collections made from claims 
submitted?
    Secretary Principi. As you know, we can't bill Medicare, 
and that is a Finance, Ways and Means Committee, and that has 
been an issue, a longstanding issue with regard to that. But I 
think that Congress can help us with HMOs. I think there is a 
very significant amount of resources that we do not collect 
from HMOs and it has been a real struggle. So I think 
legislation that would somehow require HMOs to reimburse us at 
a certain level, reasonable level for billed charges would 
certainly generate significant revenues to the VA and that 
would expand the reach of health care, because you said we can 
keep those dollars. So I would look to that area and we will 
work with you, Senator Graham.
    Senator Graham. If you could give us what you believe would 
be the most effective legislative solution in combination with 
your administrative action, I would be very appreciative.
    Secretary Principi. Yes, sir.
    Senator Graham. The second question goes back to a hearing 
that was held last week with Secretary Thompson of HHS. We were 
talking about the fact that there seems to be a difference in 
the way in which the VA is currently negotiating pharmaceutical 
prices, whereas Medicare in the recent legislation is 
prohibited from doing so. When asked about this difference, 
Secretary Thompson said that Medicare was reluctant to 
negotiate because it might constitute an undue intrusion into 
the marketplace, i.e., could be described as price setting.
    As I understand it, and I know this was true at the VA 
hospital in Miami where I spent a day in November, it is 
getting better than a 50 percent reduction off what would be 
the drug store prices of some $39 million of prescription drugs 
that they dispense a year. Has it been your finding that the 
VA's effective use of negotiations has constituted an undue 
intrusion in the marketplace?
    Secretary Principi. No, not at all. I think we have done 
extraordinarily well. We have had $1.1 billion in cost 
avoidance for pharmaceuticals over the past 3 years. We rely 
very heavily, we use a lot of generic drugs. Sixty-five percent 
of the drugs we provide are generic. Unfortunately, the brand 
name drugs, the 35 percent brand name drugs account for 92 
percent of our costs.
    So I think a combination of factors of how we procure 
pharmaceuticals, how we manage them, our formulary, I think 
that it has worked very, very well for our nation's veterans 
and for the American taxpayer.
    Senator Graham. I would urge you to consider having that 
conversation with Secretary Thompson because there is 
tremendous savings for the taxpayers and Medicare beneficiaries 
if his agency would use the same techniques that the VA has 
done, and I would hope that he would be authorized and 
encouraged to do so.
    Let me ask just one short follow-up question. Are there any 
other areas in which the VA could use authority to negotiate to 
reduce costs?
    Secretary Principi. Nothing comes to mind at the moment, 
Senator Graham, but I would appreciate the opportunity to 
advise you in writing.
    Chairman Specter. Thank you very much, Senator Graham.
    Senator Murray.
    Senator Murray. Thank you, Mr. Chairman. I appreciate the 
accommodation.
    Mr. Secretary, I am really concerned that this budget 
request is low for major medical construction and it goes back 
to the CARES process, where we were told that we will get $5 
billion in new facilities for our veterans. Veterans were asked 
to accept some pretty significant changes to their health care 
system today in exchange for a future promise of funds for new 
clinics and hospitals and facilities in the future, and I don't 
think this budget request even comes close to meeting the CARES 
promises for new facilities.
    One of the areas that is slated for a new clinic is in 
Central Washington in my home State, and I am concerned that 
the $5 billion promise in new facilities is an empty promise 
and at the very least this budget sets us behind in meeting the 
CARES promise.
    Can you comment on this, and specifically whether the 
administration, do you believe, will request adequate funding 
for the CARES initiative?
    Secretary Principi. Yes, Senator. The construction portion 
of CARES has always been viewed as a 5- to 7-year effort, that 
would not all be funded in the first year. I really do believe 
that we have put forth a good down payment. It would be 
misleading to say we have all we need, but we have doubled the 
CARES money from $280 million to $540 million for 2005. We have 
increased major construction, I think, from about $180 to, 
what, to $382 or $362. So I think we are moving in the right 
direction and it will take additional funding in the out years 
to do what I hope to approve in the next couple weeks.
    Senator Murray. You can understand why people are really 
concerned. They are giving up a lot today on the hope that 
something big is going to happen tomorrow, and we have seen 
with budget deficits and cutback programs that that doesn't 
necessarily occur.
    Secretary Principi. Well, I think CARES is a very, very 
high priority and I certainly think so in the outpatient clinic 
arena, so----
    Dr. Roswell. If I could, Senator Murray, we have actually 
anticipated the CARES report, though we were unable to 
anticipate the specific recommendations. But to make sure that 
we are prepared, we have identified 41 projects for which we 
have begun the advanced planning. This would put them in a 
State of readiness so that when the Secretary makes a decision, 
those 41 projects, which we believe are the highest priority, 
would be ready to go into the design phase. That design phase 
requires 10 percent of the total project cost up front, or the 
typical cost is 10 percent.
    So even though it is a small amount of money, you are 
absolutely right that the promise has to go to $4.6 or $5 
billion. We believe that the amount of money that will be 
available to the Secretary in fiscal year 2004 and 2005 will be 
sufficient to get this thing jump-started with the expectation 
that the monies must follow after that.
    Senator Murray. Let me just ask a quick question and make a 
comment. Mr. Secretary, on December 6, President Bush signed 
the Veterans' Health Care Capital Assets and Business 
Improvement Act. There was a section in that, 231, requiring 
the VA to develop a plan for meeting the future hospital care 
needs of veterans who live in North Central Washington State. I 
know that that report is not due back until April 15, but I 
would like to know whether you have people who are conducting 
that study and whether or not my staff can be a resource to you 
as you do that.
    Secretary Principi. I assume they are, Senator. I don't 
know for certain, but I will certainly get back to you and make 
sure that is done.
    Senator Murray. Would you let me know on that?
    Secretary Principi. Yes.
    Senator Murray. And finally, Dr. Roswell, my colleague, 
Senator Cantwell, and I sent you a letter on December 19 
regarding our continued belief that the CARES initiative has 
not properly considered the current and future needs for 
veterans' health care service in VISN 20. We noted a number of 
things, including the relatively young veterans population as 
well as the low-market penetration in our home State. We just 
sent 3,500 troops off yesterday to Iraq from my State. We know 
we are going to have some of those new veterans back in our 
State and we want to make sure that this is part of that. I 
know you have the letter. I have a copy of it today, but I was 
hoping that we could get an answer back on that as quickly as 
possible.
    Dr. Roswell. We will do everything we can, Senator, to get 
you a prompt response.
    Senator Murray. Thank you. Thank you, Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Murray.
    Thank you, Secretary Principi, and thank you, gentlemen, 
for accompanying the Secretary. You have heard praise on your 
efforts. We recognize the work that you are doing. You have 
also heard a great many concerns about the ability of the 
Veterans Administration to deliver the necessary care within 
the confines of the budget.
    We would encourage you, Mr. Secretary and the others, to 
explore the Medicare subvention, or as you term it VA 
Advantage, and the insurance premiums and Category A. We hope 
there will be some way to not bar them from coverage.
    We now turn to our next panel, the veterans' service 
organizations, and ask Mr. Peter Gaytan, Mr. Paul Hayden, Mr. 
Rick Surratt, Mr. Richard Fuller, and Mr. Richard Jones to come 
forward.
    Thank you very much for coming, gentlemen. We have been 
asked to change the order to some extent because this 
distinguished group of witnesses has already had the wisdom to 
divide up the topic so as to make their words most effective. 
We regret the limitations on time, but that is one of the 
problems here in the Capitol, as you know.
    Our first witness is Mr. Peter Gaytan, Principal Deputy 
Director of Veterans Affairs and Rehabilitation in June 2002 
for the American Legion. He has a long, distinguished resume 
which we will have included in the record, but in the interests 
of time, may the record show a dismissive gesture from Mr. 
Gaytan to get on with the business at hand. So the floor is 
yours, Mr. Gaytan.
    Mr. Gaytan. Thank you, Mr. Chairman, and thank you for the 
opportunity to express the views of the 2.8 million members of 
the American Legion.
    Chairman Specter. I am going to have to interrupt you at 
the very outset because I have to excuse myself for a few 
minutes. I wonder in advance of your opening statements, 
Senator Graham, if we might yield to you for a round of 
questions if you would like. I will only be a few minutes, but 
I am going to have to have a brief adjournment of the meeting.
    Senator Graham. Or would you like to start the statements? 
You want to be here for the statements?
    Chairman Specter. I want to be here for the statements, but 
if you would like to question.
    Senator Graham. OK. Thank you.
    Chairman Specter. Senator Graham will proceed. He knows 
what to ask even though he hasn't heard your opening 
statements.
    [Laughter.]
    Senator Graham [presiding]. Thank you, gentlemen. We look 
forward to your statements, and as soon as the Chairman is able 
to return, we will turn to you. This is a little bit out of 
order, but let me ask a question that has been already 
discussed, and that is the potential for Priority 7 and 
Priority 8 veterans to not come to VA due to the $250 user fee 
and the increase in drug copayment from $7 to $15.
    What group of veterans do you think will be most affected 
by this, and what are the likely effects?
    Mr. Gaytan. Well, sir, let me just State that the American 
Legion has opposed the restriction of enrollment for Priority 
Group 8 veterans since it was announced last January, a year 
ago January. We also adamantly oppose the provisions in the 
2005 budget request that would implement a $250 enrollment fee 
for Priority Group 7s and 8s. We also oppose the increase in 
copayments for pharmaceuticals and the increase in copayments 
for outpatient care.
    Mr. Fuller. Senator Graham, I am Richard Fuller with 
Paralyzed Veterans of America. We, too, have opposed the 
increases in the fees, and what we basically have been seeing 
over the past several years is that the administration 
constantly proposes increasing the costs of health care on the 
backs of veterans, and more and more they are relying on these 
fees as part of their appropriations process to reduce 
appropriations and have one veteran paying for the health care 
of another veteran out of his own pocket.
    We also find it interesting that they keep lumping Category 
7s and Category 8s together by implicating that the Category 7s 
are somehow high-income veterans, whereas, this committee and 
the Congress a couple of years ago created that particular 
category to be able to capture people who fell just above the 
nationwide low income level but who lived in geographic areas 
of higher cost.
    Category 7 veterans are basically low-income Category 5 
veterans in some people's minds and in our minds, as well. To 
think that they can afford to pay these costs and user fees and 
copayments in the same fashion as, say, some high-income 
veteran in Category 8 can, we find rather implausible.
    Senator Graham. What is the range of income for a person 
who is designated as a Category 7?
    Mr. Fuller. The range is based on a HUD low-income index, 
which is really rather complicated, but HUD has been using it 
for gauging low-income housing payments. It varies from, 
actually from what I understand, even from county to county in 
the United States. But it is a formula and it is very easy to 
plug into that formula and find out what the income levels are.
    Senator Graham. In my opening statement, I made the 
statement that Category 7 went as low as $24,000 a year. Is 
that----
    Mr. Fuller. Twenty-four thousand is the national threshold 
if you are just looking at what the base means test is. Now, if 
you lived in Miami or you lived in San Francisco or Brooklyn, 
New York, I haven't seen the actual scales and studied them 
that closely myself, but you could get up to maybe $27,000, 
$28,000, something of that nature, but you are not going to be 
considered rich by any stretch of the imagination. You are 
basically going to be considered, if you are faced with a 
catastrophic illness, as medically indigent.
    Senator Graham. If I could move on to another question, and 
thank you for your comments on that first question, this is the 
issue of claims processing. This has been a very big issue in 
my State, where there has been a history of long delays.
    It is my understanding that this budget calls for cutting 
the claims processing staff nationwide by some 500-plus 
persons. I would be interested in what your assessment of the 
likely impact of that reduction would be and what do you 
consider to be the minimum appropriate level of claims 
processors in order to meet the demands and reduce the backlog 
on claims that have already been filed?
    Mr. Surratt. Senator, as you know, the VA has been 
struggling with claims backlogs for years. With some focus on 
fixing their deficiencies and some additional resources from 
the Congress, they made some gains. But I think VA's own budget 
projections speak for themselves here.
    We just finished fiscal year 2003, so that makes a good 
comparison with what they are asking for for 2005. Compensation 
claims, the VA projects they will have 178,966 more in 2005 
than they had in the fiscal year we just completed, yet they 
are reducing staffing. Now, 2004 has a reduced staffing and 
2005 goes even below that.
    Education, in the education department, they are going to 
have 10 percent more claims in 2005 than we had last year, some 
51,000. Yet again, they propose cutting the budget. It is the 
same way with voc rehab. They anticipate more claims and they 
just had a task force that is about to report, and if those 
task force recommendations are implemented, VA will get more 
into the employment business. It is vocational rehabilitation 
and employment, but they have very few people devoted to actual 
employment now for veterans.
    So finding increased efficiencies to stay even is one 
thing. That is a challenge. But finding increased efficiencies 
to do more with less, that is--I guess that is the kind of 
magic we see in Washington sometimes in budgets, but it doesn't 
seem realistic. We have made specific FTE recommendations and I 
have covered those in my written statement. But essentially, 
for most of the services, we have recommended that they keep 
their--that they have the fiscal year 2003 level. I think we 
ask for 200 more FTE in vocational rehabilitation and 
employment.
    Mr. Gaytan. Sir, if I may for the American Legion, we are 
very concerned about the wait times for benefit claims. We 
understand the mandated quotas implemented by the Secretary 
last year and it has improved some of the wait times and 
reduced the backlog of benefit claims. But we are cautious in 
this hurried rush to adjudicate claims in that we don't want to 
reduce the quality of the claims as they are processed the 
first time. We don't want them to have to come back as remands, 
and some of those will be going back as remands as these claims 
adjudicators are trying to meet these production quotas. We 
must be conscious that faster is not always better. We need the 
quality in the claims in the first process before they are sent 
back as a remand. We do not agree with reducing the number of 
FTEs to adjudicate these claims.
    Senator Graham. It has, again, been my experience in 
Florida that there is a relationship between the number of 
claims and the staff deciding the claims and then the 
percentage of those claims that denied and then appealed. I 
think it is the old adage that an ounce of prevention is worth 
a pound of care. If you do a good job at the front end, then 
you are less likely to have to replicate it.
    Let me raise a question that I asked the Secretary about, 
and that has to do with the fact that apparently there are 
approximately $3 billion in annually claims sent to private 
insurance carriers. I have been told that since the VA can't 
bill Medicare, none of that is Medicare related, and we are 
recovering now about $1 billion. I asked if there were any 
steps that the secretary thought VA could take to increase that 
level of recovery so as to loosen or reduce the demand on 
veterans for paying things like the $250 enrollment fee in 
order to make up the difference in claims that are not 
collected. Do any of you have any thoughts about that or 
suggestions?
    Mr. Fuller. Senator, historically, VA has done a very poor 
job in trying to collect these third-party reimbursements, as 
they are known. They are getting better. There are 
institutional challenges, however, which makes it difficult, if 
not impossible, for them to collect from, as the Secretary 
said, from HMOs and people who they need to negotiate and 
establish rates and exchange with. I believe that we have been 
discussing it for several years, that this problem existed and 
ought to be addressed undoubtedly through legislation and we 
were glad to hear that the Secretary thought so too so perhaps 
that can help.
    On the Medicare side, VA, of course, has been subsidizing 
Medicare for years and to great, great savings to the Medicare 
Trust Fund. There are difficulties involved in opening that 
door back up, not only institutional but also from the 
standpoint that every time we think of some way to fund VA 
health care from non-appropriated funds, what happens is that 
OMB offsets the appropriation by those collections the next 
year, so it is just a pass-through of money from one side to 
the other and is a constant battle.
    As we state in The Independent Budget--this is The 
Independent Budget for 2005, which was provided to all of you 
which we will be addressing here today. The Independent Budget 
has never counted the collections as being part of the funding 
mechanism for VA health care. Some people have said this is 
rather unrealistic, but we want to keep a pure marker as to 
what the appropriated dollar need is for the Congress to be 
aware of and not have the budget obscured by the fact that the 
collections are becoming an increasingly larger amount of the 
total that the Administration is asking for.
    Senator Graham. Any other comments on my question?
    Mr. Jones. May I retract the question, Senator? My concern 
is with the decision to ban Priority 8's access to VA 
hospitals. It was suggested when it was done, the year it was 
done, that the cost savings would be about $340 million by 
denying access. In the same year, we rescinded from the VA 
budget $225 million and we rolled over $650 million. Yet the 
decision was made that we didn't have enough money.
    If we did not roll over $650 million and kept that in the 
medical care system, that money would have provided access to 
over 300,000 veterans. That is more than was estimated by the 
VA that came to VA looking for access but were barred. They 
estimated it at 167,000. I am concerned about that.
    VA says that the average cost of the priority veterans is 
about $2,500 a year, and yet we have rolled over $600 million, 
we have rescinded $225 million, and we saved $339 million by 
barring their access. That is one of the things that concerns 
me, the decisionmaking.
    I think the law says that an assessment is supposed to be 
made with regard to the resources available. It seems that the 
decision is being made prior to resources being provided or 
even to resources being suggested. I am concerned about this. I 
am concerned about the law. I am concerned that money that is 
available isn't being used.
    The Congress is generous. Your generosity was spoken about 
earlier today, 11 percent-plus increase, far, way and above, 
what the President has suggested. But the money isn't being 
used. It is being rolled over. The estimate for fiscal year 
2005 is at $800 million that we rolled over into fiscal year 
2005's budget from fiscal year 2004.
    That is just what I wanted to say.
    Senator Graham. Let me move to a related subject, and that 
is access to prescription drugs. In the questions to Secretary 
Principi, I indicated the very significant savings that 
veterans secure by getting access to prescription drugs through 
the VA as opposed to through normal channels.
    One of the barriers for veterans getting access to 
prescription drugs is that VA requires an independent 
evaluation of the patient before the VA will make prescription 
drugs available to them, even though a non-VA provider has 
authorized a prescription. Of course, this restriction on 
Category 8 veterans getting access to health care means that 
they are also losing their access to the less-expensive 
prescription drugs.
    Is that an accurate assessment of the situation, and what 
do you think are the policy rationales of requiring veterans to 
have a second physical before they can get prescription drugs?
    Mr. Fuller. Historically, Senator, we have taken the 
position with an argument along these lines, that the VA health 
care system is a health care provider. It historically has been 
a provider of health care from the standpoint they want to have 
control over the patients, the patients' care, and what the 
patient is prescribed from the standpoint of both quality and 
medical interactions.
    The concept of veterans taking prescriptions from private 
physicians to the VA changes the role of the VA in a way that 
it becomes not a provider but it becomes a drug store. It loses 
control over that particular patient as being able to find out 
if there are complications in mixes of other prescriptions and 
other types of care that the individual might be getting.
    Indeed, it does cost money to be able to put these people 
into the system and examine them, but at the same time, I 
believe the Secretary a couple of years ago testified over on 
the House side that the cost of everybody going to the VA to 
get their prescriptions filled at such a modest rate would be 
in the neighborhood of $4 or $5 billion a year. You would be 
shifting a major part of VA costs from being a health care 
provider to being a prescription provider.
    Of course, if OMB wants to provide that $4 or $5 billion, 
we would love to have the VA turned into a pharmacy, but I 
can't quite see that money coming across when they aren't 
funding the health care system side adequately right now.
    Senator Graham. Any other comments on that issue?
    Mr. Jones. We know the Secretary did lift the ban earlier 
last year in order to address the waiting list problem. I 
haven't seen any costs of that or any studies or reports as to 
what happened. As you recall, the Secretary trying to address 
the waiting list offered the opportunity for those who had been 
on the waiting list for greater than 6 months an opportunity to 
bring their prescriptions to VA and have them filled if the 
prescription had been written by a private doctor.
    That, I believe, has been suspended at the time, but there 
was a brief time, a brief moment last year the Secretary used 
exactly what you are suggesting might be used and perhaps some 
data could be gained from requesting the Secretary to submit a 
study or some results from that activity.
    Senator Graham. To me, one of the ironies is that the 
typical veteran over the age of 65 prior to going to the VA 
probably was getting most of his or her health care financed 
through Medicare at a Medicare-approved physician. The Federal 
Government is paying for that cost through Medicare. Now the 
veteran comes to the VA and is required to spend more Federal 
money to get an examination before they can get prescription 
drugs in VA. There needs to be some better coordination, both 
for the benefit of the veteran, who shouldn't have to wait 6 
months to get access to prescription drugs, and for the 
taxpayers, who shouldn't have to pay twice to do the same 
essential examination of the patient. If anybody has any 
suggestions about how to do that better, I am sure we would all 
be interested.
    Another issue is funding for medical research. VA 
historically has not only provided a great service to American 
veterans, but to health care literally on a global scale by the 
quality of its medical and prosthetics research. That budget is 
now being suggested to be reduced by $50 million, which equates 
to 149 research projects and 500 VA employees. VA has indicated 
that the area of those lost projects will include aging, 
cancer, and heart disease research.
    How do the organizations that represent veterans, what 
value do you put on VA's research budget?
    Mr. Gaytan. Sir, on behalf of the American Legion, we are 
very concerned about the proposed cuts in the budget for 
research funding. Not only as you mentioned have the historical 
research advantages created through the VA benefited the 
veterans who seek their health care at the VA, it has also 
benefited all Americans nationwide.
    In addition to those benefits that are accrued the research 
that is carried forth in the VA, there is also the key factor 
of the affiliations, the medical schools that are affiliated 
with the VA who carry out some of these research projects 
through the VA facilities. Last year, the American Legion 
initiated a ``System Worth Saving,'' where our National 
Commander visited over 60 VA medical centers, and one of the 
areas he tried to focus on was the affiliations and the 
partnerships between the medical schools and the VA facilities 
and exactly how much the VA facilities benefited through these 
affiliations, through volunteers, through students, and mainly 
through the research, and the American Legion fears this 
decrease in funding for research and the detrimental effects it 
will have on not only the veterans who seek care at the 
facilities, but patients nationwide.
    Mr. Fuller. Senator, on behalf of Paralyzed Veterans of 
America, we were actually astonished at this budget request. 
This is totally unprecedented. Granted, as we have seen the 
administration and Congress almost double funding for NIH 
research, the VA research program sort of limps along with 
little increases every year of $5 or $10 million or something 
of that nature. But to swoop in in one stroke and to call for a 
reduction of $50 million, which we anticipate in both the grant 
money and the indirect support funding, would reduce VA 
research back to 1999 levels.
    When you are talking about losing 500 researchers, you are 
not talking about guys and gals who are just sitting in a 
laboratory. These are clinician researchers. These are doctors 
and nurses who work certainly in the laboratory doing research, 
but they are also there at the VA treating a veteran patient 
and this would be a stunning loss to a program which has 
received Nobel prizes and then TOP awards both nationally and 
internationally and we certainly hope that Congress can do 
something to set this straight.
    Mr. Jones. We agree, Senator. The research is clinical 
research. It is applied to veterans almost immediately on 
discovery. It is not theoretical or basic research, and that is 
one of the marks that makes the difference between VA research 
and National Institutes of Health research. It is applied at 
the base where delivery of health care is done. So it is an 
important element and could have adverse effects on the health 
of veterans.
    Senator Graham. If I could move to another issue, The 
Independent Budget raises some questions about VA's proposal 
for achieving management efficiencies. In this budget, those 
efficiencies are projected to result in a cost reduction of 
approximately $1 billion.
    Based on previous VA management efficiency programs, what 
do you think might result from the one that is suggested in 
this budget in terms of service to beneficiaries, cuts to 
employees, and reductions in particularly specialty programs?
    Mr. Fuller. When you look at a figure that large, Senator, 
of $1 billion, and you figure that the VA appropriation, the 
largest amount of it is in domestic discretionary funding, and 
the cost of VA health care is basically based upon the cost of 
FTE, of people, certainly there is equipment and construction 
and all those other things, but where you achieve the savings 
are through people. And, if you have to cut people, then you 
are cutting services to veterans and you are cutting both the 
quantity of the services you can provide but also the quality 
of those services.
    This, as you well know, is a standard trick of all 
administrations in every annual budget to try to force 
imaginary and unrealistic management efficiencies as just being 
part of their bottom line and they are never achieved.
    Senator Graham. This is especially true in my State, but it 
is also a national phenomenon that the veteran population is 
aging. My own brother, who was a radar operator on a B-29 in 
the Second World War, just had his 80th birthday. How well 
prepared do you think VA is for this increasingly older 
population in areas such as providing community care so that 
veterans don't have to be unnecessarily institutionalized, and 
where they do require institutionalization, having facilities 
that will be appropriate to their needs and provide a quality 
of service?
    Mr. Gaytan. I can say the American Legion is very concerned 
with the budget proposal that would reduce long-term care beds. 
We support first meeting the mandates of the Millennium Health 
Care Act, which they aren't doing, but then aside from not 
reaching those goals, to propose a budget that would reduce 
long-term care beds which are going to be needed by that very 
population of veterans that you mentioned, those aging veterans 
who are turning to long-term care, and when the VA can't supply 
it, then they are offering a budget that reduces the existing 
long-term care beds. The American Legion is very concerned that 
VA will be unable to meet the mandate of these aging veterans 
as they turn to long-term health care to the VA.
    Mr. Fuller. From PVA's standpoint, of course, long-term 
care issues are our great interest and a necessity of all our 
membership. Of course, the last thing in the world we want for 
anyone, any person with a disability, is to be 
institutionalized if there is an alternative to that 
institutionalization.
    That being said, of course, we have no real direct long-
term care policy in the United States, either in the public or 
private sector, and it is one of the embarrassments for our 
country, when we compare our system with other countries of the 
world.
    The VA could serve as the most shining example of how to 
put together an enlightened long-term care policy if they would 
provide the resources to do it. The Congress and this Committee 
required the VA a couple years ago by statute to maintain a 
floor for the number of nursing home beds. They have ignored 
that statutory requirement and this particular budget calls for 
a reduction of 5,000 nursing home beds. They claim, on the 
other hand, that they are going to be increasing their home and 
community-based programs, which is admirable, but, of course, 
they never really meet the targets that they say that they are 
going to meet. You wind up with a gap in the middle of services 
between inpatient and home and community-based programs. There 
really ought to be a way for the Congress to--and you have done 
yeoman work in this committee in trying to force the VA into 
doing the right thing as far as long-term care is concerned, 
but we have got a long way to go, still.
    Chairman Specter [presiding]. Senator Graham, thank you 
very much for holding the fort and thank you for your patience 
and the fact that you have been patient. It is hard to get our 
time to any extent, as you have found out, but now we will 
begin the testimony.
    Mr. Gaytan, I had introduced you, so if you will proceed.

        STATEMENT OF PETER S. GAYTAN, PRINCIPAL DEPUTY 
        DIRECTOR, VETERANS AFFAIRS AND REHABILITATION, 
                      THE AMERICAN LEGION

    Mr. Gaytan. Thank you, Mr. Chairman. The American Legion, 
as you know, continues a proud tradition of advocating for 
funding to ensure America's veterans receive the health care 
and benefits they have earned through their honorable service 
to this country. As American service members continue to fight 
for our freedom in a number of countries worldwide, it is the 
responsibility of this Congress to provide a budget that will 
allow VA to fulfill its mission.
    In the fiscal year 2005 budget request, there is a 
continued emphasis on the treatment of the core mission veteran 
population. The term ``core mission veteran population'' does 
not appear in Title 38. In 1998, eligibility reform ensured all 
eligible veterans could seek health care through VA, not simply 
those designated as the core mission veteran population. Since 
then, we have seen VA shut its doors to Priority Group 8 
veterans.
    Tailoring the patient population to meet the budget was not 
the intent of Congress when VA eligibility was reformed. The 
American Legion urges this committee to fund VA at a level that 
will ensure all veterans have access to the VA health care 
system. The VA budget must reflect the true demand for care.
    Today, veterans continue to suffer as a result of a system 
that has been routinely underfunded, is now ill-equipped to 
handle the large influx of veterans waiting to use their 
services. Veterans continue to experience long waiting times 
for medical appointments as well as long waiting times for 
claims adjudication.
    The American Legion applauds Secretary Principi for his 
efforts to reduce the extreme backlog of patients waiting to 
receive care at VA facilities and we urge VA to continue to 
implement practices that will eliminate the backlog systemwide.
    Last year, as I mentioned earlier, the American Legion 
initiated the ``System Worth Saving'' initiative. National 
Commander Ron Conley visited 60 Veterans' Affairs medical 
centers, and so far this year, a team of Legionnaires has 
visited more than 30 facilities. We are learning that one of 
the main issues of concern is the increased medical care 
collection fund targets. Medical center directors are concerned 
over the significant increases in their medical care collection 
fund goals and what impact the restriction on enrolling any 
Priority Group 8 veterans will have on their ability to meet 
these goals.
    The American Legion shares their concern and we are also 
concerned about the impact of certain proposals included in the 
fiscal year 2005 budget request. The American Legion opposes 
the continuation of the suspension of enrollment of new 
Priority Group 8 veterans. Denying veterans access to VA health 
care, particularly while the Nation is at war, is the wrong 
message to send, not only to the members of the all-volunteer 
force, but also to the young men and women who may be 
considering a life of service in the U.S. Armed Forces.
    The American Legion also opposes the implementation of a 
$250 annual enrollment fee for non-service connected Priority 
Group 7 and 8 veterans. The American Legion would urge Congress 
to once again reject this proposal, just as it did last year. 
While the American Legion applauds the initiative to exempt any 
hospice care from copayments and to exempt former POWs from 
copayments for extended care services, we do not support 
increasing the pharmacy copay from $7 to $15.
    Additionally, the American Legion opposes the proposed 
regulatory change that would increase outpatient primary care 
copayments from $15 to $20. The American Legion would rather VA 
seek reimbursement from CMS for all enrolled Medicare-eligible 
veterans being treated for non-service connected medical 
conditions before they try to balance the budget on the backs 
of Priority Group 7 and 8 veterans.
    The American Legion is very concerned with the proposed 
reduction in long-term care beds, as I mentioned earlier. VA 
must meet the mandates of the Millennium Health Care bill, and 
eliminating long-term care beds is not the answer.
    The American Legion recommends $30 billion for VA medical 
care without the inclusion of MCCF collections. The American 
Legion continues to advocate for all MCCF collections to be 
added to the budget numbers and not be treated as an offset to 
the budget.
    Regarding Veterans' Benefits Administration, the American 
Legion is committed to ensuring VA will adjudicate veterans' 
claims fairly and impartially within a reasonable amount of 
time, and I think I expressed that during our Q and A earlier.
    The American Legion is pleased, however, with the fiscal 
year 2005 budget request proposal to address the influx of 
claims resulting from returning service members from Operation 
Enduring Freedom and Operation Iraqi Freedom. These deserving 
veterans should not be told to wait in line when turning to 
VBA.
    Chairman Specter. Mr. Gaytan, would you mind summarizing?
    Mr. Gaytan. Yes.
    Chairman Specter. You are 50 percent over time now.
    Mr. Gaytan. Yes, sir. I apologize. I just want to mention 
or reaffirm the American Legion's support for mandatory 
funding. We fully support designating VA medical care as a 
mandatory funding item within the Federal budget.
    I apologize for extending my time and I appreciate your 
patience.
    Chairman Specter. Thank you. Thank you very much, Mr. 
Gaytan.
    [The prepared statement of Mr. Gaytan follows:]

   Prepared Statement of Peter S. Gaytan, Principal Deputy Director, 
        Veterans Affairs and Rehabilitation, the American Legion

    Mr. Chairman and Members of the Committee:
    Thank you for this opportunity to present the views of the 2.8 
million members of The American Legion regarding the Department of 
Veterans Affairs' (VA) fiscal year (FY) 2005 budget request. The 
American Legion continues to advocate adequate funding levels to ensure 
America's veterans receive the health care and benefits they have 
earned through their honorable service to this country. As America's 
soldiers, sailors, airmen, and Marines continue to fight in more than 
130 countries worldwide, this Nation must fulfill its obligation ``. . 
. to care for him who has borne the battle, and for his widow and his 
orphan.''
    In the fiscal year 2005 VA budget request, there is a continued 
emphasis on focusing resources for medical treatment of the core-
mission veteran population. The term core-mission veteran population 
does not appear in Title 38, United States Code. In 1996, Congress 
passed VA eligibility reform legislation. It was not until 1998 that VA 
finally established the rules to enforce the statute. Eligibility 
reform ensured all eligible veterans could seek health care through VA, 
not simply those designated as the core-mission veteran population. 
Tailoring the veteran population to meet the budget was not the intent 
of Congress when it reformed access eligibility. The American Legion 
believes VA must be funded at a level that will ensure all eligible 
veterans have access to the VA health care system. The VA budget must 
reflect the true demand for care.
    Once again, the Administration attempts to place the burden of 
financing VA health care on the backs of veterans. The fiscal year 2005 
budget request contains provisions that would increase prescription co-
payments and create an annual enrollment fee. These legislative 
initiatives target those Priority Group 7 and 8 veterans who are 
currently enrolled in the system. At the same time, VA continues to 
deny enrollment of any future Priority Group 8 veterans who could help 
shoulder this burden. These are the very veterans required to pay VA's 
co-payments and make third-party reimbursements for their health care. 
Rationing health care to America's veterans is not the solution to VA's 
accessibility crisis. The American Legion supports repealing the 
suspension of enrollment of Priority Group 8 veterans.
    We applaud the Administration efforts to alleviate co-payments for 
veterans receiving hospice care and former prisoners of war. The 
American Legion supports provisions within the budget request that 
would increase the income threshold from the Pensions level of $9,894 
to the aid and attendance level of $16,509 for certain Priority Group 
2-5 veterans. This would help reduce the pharmacy co-payment for those 
veterans struggling to meet the sky-rocketing cost of health care.
    In addition, The American Legion supports provisions to allow VA to 
pay for emergency room care at non-VA facilities for enrolled veterans. 
This will prevent any delays in treating life threatening injuries or 
illnesses for enrolled veterans not in close proximity to a VA 
facility. During visits to VA facilities under The American Legion's 
``System Worth Saving'' initiative, Past National Commander, Ronald 
Conley discovered many VA facilities operated under a ``divert'' policy 
that imperiled veterans by denying them immediate access to health 
care.
    The American Legion is equally concerned with VA's continued 
efforts to create the new ``VA Advantage'' Medicare plan that would 
offer limited health care services to Priority Group 8 veterans 65 or 
older with Medicare Part B. Keep in mind that only nonservice-connected 
veterans who fall above the geographical means test and are Medicare-
eligible will be considered under this proposal. Priority Group 8 
veterans who are not Medicare-eligible will simply continue to be 
denied access to VA medical care.
    Indian Health Services and TRICARE for Life are classic examples of 
effective Medicare and Medicaid Federal partners. Since over half of 
VA's enrolled patient population are Medicare-eligible veterans, The 
American Legion strongly believes Congress should consider passing 
legislation to ensure VA is reimbursed for treatment of Medicare-
eligible veterans for allowable, nonservice-connected medical 
conditions.
    The fiscal year 2005 budget request must provide an adequate level 
of funding to eliminate the backlog of veterans waiting to receive 
care, to meet the needs of returning servicemembers who must now 
receive health care from VA, and to once again allow Priority Group 8 
veterans to receive timely access to quality VA medical care through 
the very system created to meet their unique health care needs.

    THE AMERICAN LEGION'S BUDGET REQUEST FOR SELECTED DISCRETIONARY 
                  PROGRAMS FOR VA IN FISCAL YEAR 2005

    The American Legion strongly recommends Congress provide VA with 
the following specified funding in fiscal year 2005:


------------------------------------------------------------------------
                  Counts                           Budget Request
------------------------------------------------------------------------
Medical Care..............................  $30 billion*
Medical & Prosthetics Research............  $445 million
Construction:
  Major...................................  $325 million
  Minor...................................  $255 million
State Grants for Extended Care Facilities.  $120 million
State Grants for Veterans' Cemeteries.....  $40 million
National Cemetery Administration..........  $160 million
General Administration....................  $1.8 billion
------------------------------------------------------------------------
* Third-party reimbursements should supplement rather than offset
  discretionary funding.

                     VETERANS HEALTH ADMINISTRATION

Medical Care
    Over the past 20 years, VA has dramatically transformed its medical 
care delivery system from a struggling collection of hospitals and 
homes to an integrated health care system of excellence that leads 
private and other government health care providers in almost every 
measure. The quality of care that is provided through the VA health 
care system is exemplary. However, the quality of care is irrelevant 
when access to that care is impeded.
    Today, there are over 25 million veterans. As more veterans choose 
to use VA as their primary health care provider (over 8 million 
veterans enrolled or waiting to enroll), the strain on the system 
continues to grow. The American Legion fully supported the enactment of 
Public Law 104-262, the Veteran's Health Care Eligibility Reform Act 
that opened enrollment in the VA health care system. Many veterans who, 
until this time, were restricted from VA health care in the 1980's were 
once again able to gain access. Veterans recognize that the Veterans 
Health Administration provides affordable, quality care that they 
cannot receive anywhere else.
    The astronomical growth of Priority Groups 7 and 8 veterans seeking 
health care at their local VA medical facility resulted in over 300,000 
veterans being placed on waiting lists regardless of their assigned 
Priority Group. As mentioned earlier, fiscal year 2003 saw the 
suspension of enrollment of new Priority Group 8 veterans due to this 
growth in enrollees. The American Legion does not agree with the 
decision to deny health care to veterans simply to ease the backlog. 
Denying earned benefits to eligible veterans does not solve the 
problems resulting from an inadequate budget.
    The simple fact is VHA does not have the funding needed to treat 
all veterans seeking care from VA. VHA operates under a constant cloud 
of fiscal uncertainty. The fiscal year 2004 VA appropriations battle 
delayed much-needed funds until more than 5 months into the fiscal 
year. Future spending projections, staffing levels, equipment 
purchases, and structural improvements are all stalled if the funding 
is not a certainty. Delayed funding means delayed services for 
deserving veterans who rely on VA for their care.
    In an effort to provide a stable and adequate funding process, The 
American Legion supports mandatory funding for veterans' medical care, 
as well as Medicare reimbursement for VA.

              MANDATORY FUNDING FOR VETERANS MEDICAL CARE

    The American Legion believes that health care rationing for 
veterans must end. It is time to guarantee health care funding for all 
veterans. The American Legion has called for the current discretionary 
funding process, in which VA must compete with other agencies for 
scarce budget dollars, to be replaced by a mandatory funding formula 
for VA medical care. VA must be adequately funded to meet its own 
growth and end intolerable waiting periods.
    For over a decade, The American Legion has advocated allowing 
veterans to spend their health care dollars on the health care system 
of their choice. The American Legion believes the VHA can efficiently 
expand to meet the health care needs of the men and women who have 
honorably served this Nation in its armed forces--in war and in peace.
    When Congress opened access to the VA health care system, many 
veterans believed VA was their best health care option and newly 
eligible veterans began seeking care at VA. Since the Centers for 
Medicare and Medicaid Services (CMS), the nation's largest public 
health insurance program, does not offer its beneficiaries the full 
continuum of care or a substantive prescription benefit program, many 
Medicare-eligible veterans chose to enroll in VHA specifically to 
receive quality health care and access to an affordable prescription 
program. Although the Department of Defense's TRICARE and TRICARE for 
Life require military retirees to make co-payments or pay premiums, 
they do not provide for specialized care (like long-term care) many 
military retirees may need; therefore, many military retirees chose to 
also enroll for VA care to meet their unfulfilled medical needs.
    Veterans continue to suffer as a result of a system that has been 
routinely under funded and is now ill-equipped to handle the large 
influx of veterans waiting to use their services. Veterans continue to 
endure extensive waiting times for medical appointments, as well as 
unacceptably long waiting times for claims adjudication.
    Funding for VA health care currently falls under discretionary 
spending within the Federal budget. The VA health care budget competes 
with other agencies and programs for limited Federal dollars each year. 
The funding requirements of health care for service-disabled veterans 
are not guaranteed under discretionary spending. VA's ability to treat 
veterans with service-connected injuries is dependent upon 
discretionary funding approval from Congress each year.
    However, under mandatory spending, VA health care would be funded 
by law for all enrollees who meet the eligibility requirements, 
guaranteeing annual appropriations for the earned health care benefits 
of veterans.
    The American Legion believes it is disingenuous for the government 
to promise health care to veterans and then make it unattainable 
because of inadequate funding. Rationed health care is no way to honor 
America's obligation to the brave men and women who unselfishly put our 
nation's priorities in front of their own needs. Mandatory funding for 
VA health care will help ensure timely access to quality health care 
for America's veterans.
    Mandatory funding of VA medical care would not prohibit the use of 
other revenue streams to meet fiscal obligations, such as co-payments 
and third-party reimbursements from all health care insurers, both 
public and private.

      THIRD PARTY REIMBURSEMENT AND MEDICAL CARE COLLECTION FUNDS

    Public Law 105-33, the Balanced Budget Act of 1997, established the 
VA Medical Care Collections Fund (MCCF) and requires that amounts 
collected or recovered after June 30, 1997, be deposited into this 
fund. The MCCF is a depository for collections from third party 
insurance, outpatient prescription copayments and other medical charges 
and user fees. The funds collected may only be used for providing VA 
medical care and services and for VA expenses for identification, 
billing, auditing and collection of amounts owed the Government.
    Technically, the MCCF is not considered a Treasury offset because 
the funds collected do not actually go back to the Treasury account, 
but remain within VHA and are used as operating funds. Instead, in 
developing a budget proposal, the total appropriation request is 
reduced by the estimate for MCCF for the fiscal year in question. We 
fail to see the difference in the net effect to the VISN's and VAMC's. 
Offsetting estimated MCCF funds largely defeats the purpose of 
realigning VHA's financial model to more closely approximate the 
private sector. The American Legion adamantly opposes offsetting annual 
VA discretionary funding by the MCCF recovery.
    Implementation by VHA of the Revenue Cycle Enhancement Plan has a 
dramatic effect on the amount of revenue collected. Resuming in early 
fiscal year 2002 it has resulted in significantly higher receipts than 
projected. VHA doubled the amount expected in fiscal year 2004 from 
$1.3 billion to 2.1 billion. However, any system can stand improving 
and agency models are available that clearly illustrate the 
efficiencies that can be gained through practical application. 
Considering that VA is prohibited from collecting third-party 
reimbursements from the nation's largest health care insurer--CMS--and 
the vast majority of VA enrolled patient population are Medicare-
eligible, VA's MCCF program has the potential of becoming even more 
effective in the recovery of third-party reimbursements.

                     MEDICARE REIMBURSEMENT TO MCCF

    As do all working citizens, veterans pay into the Medicare system 
without choice. A portion of each earned dollar is allocated to the 
Medicare Trust Fund. Although veterans must pay into the Medicare 
system, they cannot use their Medicare benefits at any VA health care 
facility. VA cannot bill Medicare for the treatment of Medicare-
eligible veterans. The American Legion does not agree with this policy 
and supports Medicare reimbursement for VHA for the treatment of 
allowable, nonservice-connected medical conditions of enrolled 
Medicare-eligible veterans. As a Medicare provider, VHA should be 
authorized to bill and collect allowable third-party reimbursements 
from the Medicare Trust Fund for the treatment of nonservice-connected 
medical conditions of enrolled Medicare-eligible veterans.
    Since VA is working with CMS contractors for the purpose of 
providing VA with a Medicare-equivalent remittance advice (MRA) for 
veterans who are using VA services and are covered by Medicare, the 
American Legion recommends including all Medicare-eligible veterans 
assigned to Priority Groups 7 and 8. Under the Veterans Equitable 
Resource Allocation (VERA) formula, enrolled Priority Group 7 and 8 
veterans are not included in the current VERA formula that ultimately 
results in an inequitable distribution in resources.
    The fiscal year 2005 budget optimistically projects a $2.4 billion 
revenue stream attributed to third-party collections, but still 
supports the suspension of Priority Group 8 veterans from enrolling in 
VA.
    As The American Legion continues to visit VA facilities nationwide 
as part of the ``System Worth Saving'' initiative, we are hearing 
first-hand from facility leadership of the problems that exist with 
increased third-party collection rates. During a recent visit to a 
VAMC, the facility staff stated that their fiscal year 2004 MCCF 
collection goal was ``not realistic''. They added that the goal is 
probably ``not attainable as long as Category 7 & 8 veterans who bring 
in the MCCF dollars are excluded from using the system''.
    The American Legion recommends $30 billion for Medical Care in 
fiscal year 2005 in addition to MCCF collections, as well as 
eliminating the MCCF offset and authorizing VA to collect third-party 
reimbursements from Medicare for the treatment of allowable, 
nonservice-connected medical conditions.

                    MEDICAL AND PROSTHETICS RESEARCH

    VA Medical and Prosthetic Research has a history of productivity in 
advancing medical knowledge and improving health care, not only for 
veterans, but all Americans. VA research has led to the creation of the 
cardiac pacemaker, nicotine patch, and the Computerized Axial 
Tomography (CAT) scan, as well as other medical breakthroughs. Over 
3800 VA physicians and scientists conduct more than 9,000 research 
projects each year involving more than 150,000 research subjects.
    The VA Medical and Prosthetic Research budget has not kept pace 
with inflation during the past 15 years. It is essential that Congress 
and the Administration support strong medical and prosthetic research 
programs within VA so that veterans and all citizens continue to 
benefit from the exceptional research capability of the Department.
    The American Legion supports adequate funding for VA biomedical 
research activities. Congress and the Administration should encourage 
acceleration in the development and initiation of needed research on 
conditions that significantly affect veterans--such as prostate cancer, 
addictive disorders, trauma and wound healing, post-traumatic stress 
disorder, rehabilitation, and others--jointly with the Department of 
Defense (DoD), the National Institutes of Health (NIH), other Federal 
agencies, and academic institutions.
    The American Legion recommends $445 million for Medical & 
Prosthetics Research in fiscal year 2005.

            MEDICAL CONSTRUCTION AND INFRASTRUCTURE SUPPORT

Major Construction
    Over the past several years, The American Legion has testified on 
the inadequacy of funding for VA's major and minor construction 
programs. Buildings continue to be neglected and the persistent 
deterioration results in unsafe environments similar to unsanitary 
conditions discovered at the VAMC in Kansas City, Missouri. Of course, 
those that pay the price of this neglect are the veterans who are 
receiving care at these facilities.
    A 1998 study recommended that VA fund two to 4 percent of Plant 
Replacement Value (PRV) per year to reinvest in new facilities to 
replace aging facilities. The conclusion of this analysis was that VA's 
reinvestment rate of .84 percent was significantly lower than the 
benchmark of 2 percent. This equates to hundreds of millions of dollars 
that conceivably could be used for major construction projects. Private 
consultants have been warning for years that dozens of VA patient 
buildings were at the highest level of risk for earthquake damage or 
collapse yet funding continues to be woefully short of what is actually 
needed to correct this problem.
    The American Legion supports legislation that would provide $1.8 
billion over the next three fiscal years to improve, replace, update, 
renovate or establish facilities within the existing VA infrastructure. 
These funds would be exempt from 38 USC Sec. 8103 (a)(2) which requires 
enabling legislation for construction procurements in excess of $4 
million or leases in excess of $600,000 per year. This money would be 
available at the discretion of VA for:
     Seismic protection;
     Life safety upgrades;
     Utility improvements; and
     Accommodations for disabled persons.
    Facilities eligible for improvements include:
     Blind rehabilitation centers;
     Inpatient and residential programs for seriously mentally 
ill veterans and veterans with substance abuse disorders;
     Physical medicine and rehabilitation activities;
     Long term care including adult day care, nursing 
facilities and geriatric research and education facilities;
     Amputation care facilities including prosthetics and 
orthotics and sensory aids;
     Spinal cord and traumatic brain injury centers;
     Women's veterans' health programs; and
     Hospice and palliative care facilities.
    The American Legion is concerned that veterans are needlessly being 
placed in harm way within existing VA facilities. There are over 60 
patient care and other related use buildings in danger of collapse or 
heavy damage in the event of an earthquake. The sorely needed seismic 
corrections, along with the necessary ambulatory care and patient 
safety projects, will require a significant increase in funding to 
address VHA's current major construction requirements. This legislation 
will go a long way toward correcting these deficiencies.
    The American Legion further supports legislation that would 
authorize the following major medical construction projects at the 
amounts specified:
     Construction of two bed towers to consolidate inpatient 
sites in inner-city Chicago at the West Side Division in an amount not 
to exceed $98.5 million.
     Construction in Clarke County, Nevada of a multi-specialty 
outpatient clinic to replace the leased Las Vegas ambulatory care 
center and a satellite office for the Veterans Benefits Administration 
in an amount not to exceed $97.3 million.
     Seismic corrections to strengthen Medical Center Building 
1 at VA health Care System at San Diego, California not to exceed $48.6 
million.
     Renovation of all inpatient care wards at the VA West 
Haven, Connecticut healthcare facility at a cost not to exceed $50 
million.
    The American Legion recommends $325 Million for Major Construction 
in fiscal year 2005.

                           MINOR CONSTRUCTION

    Similar to VA's major construction program, VA's minor construction 
program has likewise suffered significant neglect over the past several 
years. The requirement to maintain the infrastructure of VA's buildings 
is no small task. When combined with the added cost of the CARES 
program recommendations and the request for minor infrastructure 
upgrades in several research facilities, it is easy to see that a major 
increase is crucial.
    The American Legion recommends $255 Million for Minor Construction 
in fiscal year 2005.

              STATE EXTENDED CARE FACILITY GRANTS PROGRAM

    State Veterans Homes were founded for indigent and disabled Civil 
War veterans beginning in the late 1800's and have continued to serve 
subsequent generations of veterans for over one hundred years. Under 
the provisions of 38 USC, VA is authorized to make payments to states 
to assist in the construction and maintenance of State Veterans Homes. 
Today, there are 109 State Veterans Homes facilities in 47 states with 
over 23,000 beds providing nursing home, hospital, and domiciliary 
care. The State Veterans Home Program has proven to be a cost-effective 
provider of quality care to many of the nation's veterans and this 
program is an important adjunct to VA's own nursing, hospital, and 
domiciliary programs. The Grants for Construction of State Veterans 
Home Program provides funding for 65 percent of the total cost of 
building new veterans homes. VA has not been able to keep pace with the 
number of grant applications; and currently there is over $120 million 
in unfunded new construction projects pending.
    Recognizing the growing long-term health care needs of older 
veterans, it is essential that the State Veterans Home Program be 
maintained as a viable and important alternative health care provider 
to the VA system. The American Legion supports increasing the amount of 
authorized per diem payments (40 percent) for nursing home and 
domiciliary care provided to veterans in State Veterans Homes. The 
American Legion also supports the provision of prescription drugs and 
over-the-counter medications to State Homes Aid & Attendance patients, 
along with the payment of authorized per diem to State Veterans Homes. 
Additionally, VA should allow for full reimbursement of nursing home 
care to 70 percent service-connected veterans or higher, if the veteran 
resides in a State Veterans Home. The National Association of State 
Veterans Homes and VA should develop mutual planning efforts, enhanced 
medical sharing agreements, and enhanced-use construction contracts 
with qualified providers.
    The American Legion recommends $120 Million for the State Extended 
Care Facility Grants Program in fiscal year 2005.

                           NURSING HOME CARE

    Except for the occasional congressional initiative to build nursing 
homes in individual states or congressional districts and some CARES 
planning initiatives, VA has no plans to expand its own nursing home 
capacity.
    VA has failed to fulfill the promise of its landmark mid-1980's 
study, Caring for the Older Veteran. That study recommended large 
increases in both inpatient and alternative programs, such as respite, 
hospice, adult-day and home-based care, so that VA could approach the 
needs of World War II veterans with meaningful, health and end-of-life 
care programs, on both institutional and non-institutional bases. This 
has not been achieved.
    Millennium Act required VA to maintain its in-house NHU bed 
capacity at the 1998 level of 13,391. This capacity has significantly 
eroded rather than been maintained. In 1999, there were 12,653 VA NHU 
beds, 11,812 in 2000, 11,672 in 2001 and 11,969 in 2002. VA estimates 
it will have only 9,900 beds in 2003 and 8,500 in 2004. VA has claimed 
that it cannot maintain both the mandated bed capacity and implement 
all the non-institutional programs required by the Millennium Act.
    VA should be required to maintain its nursing home capacity as 
intended by Congress. VA must create incentives and receive appropriate 
funding to maintain its NHCU beds rather than abandon them to 
alternative sources. These beds are a vital component of the VA Long 
Term Care (LTC) continuum of care, and they are essential in addressing 
the needs of the aging veteran population.
    According to VA's fiscal year 2002 Annual Accountability Report 
Statistical Appendix, in September 2002, there were 93,071 World War II 
and Korean War era veterans receiving compensation for service-
connected disabilities rated seventy percent or higher. The American 
Legion opposes provisions in the fiscal year 2005 budget request that 
would reduce funding for VA nursing homes by $270.5 million and reduce 
staffing by 2,500 full time employees. VA should comply with the intent 
of Congress to maintain an adequate LTC nursing home capacity for those 
disabled veterans who are in the most resource intensive groups; 
clinically complex, special care, extensive care and special 
rehabilitation case mix groups. The Nation has a special obligation to 
these veterans. They are entitled to the best care that the VA has to 
offer.

        CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

    The CARES process was designed to take a comprehensive look at 
veterans' health care needs and services. However, because of problems 
with the model in projecting long-term care, domiciliary, and 
outpatient mental health care needs into the future, specifically to 
2012 and 2022, these critical health care services were omitted from 
the CARES planning. An extensive look, such as that proposed by the 
CARES initiative, cannot possibly be accomplished when an assessment of 
need for those services is missing from the process.
    The Draft National Plan contains several proposals to realign 
campuses and consolidate services. These realignments were introduced 
in the eleventh hour, with no stakeholder input sought by VA. There are 
13 such realignments proposed in the plan. The American Legion does not 
support the closing of a VA facility just for the sake of saving money 
while veterans are denied care.
    The Draft National CARES Plan expects substantial renovations and 
expansions as consolidations happen. A great deal of money will have to 
be allocated up front to ensure the new construction and renovations 
are completed. The American Legion understands that CARES is an ongoing 
process and when dealing with vacant space and renovations, incremental 
changes may have to take place. The price tag for all of the 
construction and renovations proposed is in the billions of dollars. 
With the proposed consolidations and transferring of services, it is 
imperative that veterans not experience delays in the delivery of their 
care. No facilities should be closed, disposed of, or downsized until 
the proposed movement of services is complete and veterans are being 
treated in the new locations.
    Funding should be provided to ensure that any realignment resulting 
from the CARES initiative does not lead to the suspension of services 
for veterans seeking care.

                    VETERANS BENEFITS ADMINISTRATION

    Over the years, Congress has established a system of laws that 
provide veterans and their survivors a spectrum of the services and 
benefits earned by virtue of the veteran's service in the Armed Forces 
of the United States. Since 1938, VA has had the responsibility of 
implementing these laws in a pro-claimant, informal, ex parte, and 
nonadversarial manner. The American Legion continues to closely monitor 
the programs and policies of the Veterans Benefits Administration (VBA) 
and assess whether or not these are truly meeting the needs of veterans 
and their families. The American Legion has a number of concerns about 
the current State of claims adjudication and the level and quality of 
service being provided by VBA and the Board of Veterans Appeals.
    The American Legion emphasizes that it is committed to ensuring 
that VA carries out its historic and statutory responsibility to 
provide medical care and benefits to those who have served and 
sacrificed in the defense of this nation. Veterans have the right to 
expect that VA will adjudicate their claims fairly and impartially 
within a reasonable period of time. We believe there are still too many 
instances where veterans and other claimants are being arbitrarily 
denied the benefits to which they are entitled.
    Over the course of fiscal year 2002 and fiscal year 2003, VBA has 
been able to make notable progress toward realizing Secretary 
Principi's often stated goal of the reducing the number of pending 
cases down to 250,000 and cutting the average processing time down to 
100 days by the end of this month. This has been a major challenge for 
VBA. In March 2002, at its peak, the regional offices had a backlog of 
over 423,000 cases that required rating action. Of these, 40 percent 
were over 6 months old. There were another 147,000 cases in which some 
other type of action was pending. In addition, there were approximately 
107,000 pending appeals, which included over 22,000 cases that had been 
remanded by the Board of Veterans Appeals. In human terms, thousands of 
these sick and disabled veterans or their survivors were waiting a year 
or more for a regional office to make a decision on their claim. If the 
claim was denied and they pursued an appeal, their wait could extend 
another two to 3 years or more. Such delays caused increased stress as 
well as serious financial hardship. The American Legion has commended 
the Secretary for his commitment to improving the regional office 
claims adjudication process. Recognizing the fact that many of these 
backlogged claims were from elderly veterans, one of the Secretary's 
first service improvement initiatives was the establishment of the 
Tiger Team at the Cleveland VA Regional Office. This unit has been 
primarily responsible for expedited action on the claims of older 
veterans, particularly those aged 70 and older, whose cases have been 
pending for a year or more.
    The Tiger Team initiative has been a success and they too should be 
commended for their efforts and dedication. However, it is regrettable 
that a sick and disabled veteran has to wait months, if not a year or 
more for action on their claim for benefits. Because of processing 
delays and necessity of an appeal to the Board of Veterans Appeals (the 
Board or BVA) or the Federal courts, many veterans have died before 
receiving a final decision on their case. In the view of The American 
Legion, the regional offices should be more concerned with people than 
process.
    It is clear that there has been a dramatic reduction in the claims 
backlog in the past year and a half. This decline means that regional 
offices are taking less time to adjudicate claims than in the past. 
Last year at this time, there were some 358,000 claims awaiting final 
action. Of these, almost 36 percent were over 6 months old. At the end 
of August, VBA reported there were about 265,000 pending claims and, of 
these, about 20 percent are over 6 months old. The average processing 
time has been reduced from 224 days in June 2002 to about 160 days 
currently. However, given the complexities of the claims adjudication 
process and requirements of the law, numbers do not tell the whole 
story and ``faster'' is not always ``better.''
    In its annual budget request over the past several years, VBA has 
reported a steady decrease in claims adjudication error rate. At the 
end of 1997, the error rate had been 36 percent. In 1998, it was 30 
percent. It increased slightly in 1999 to 32 percent. In 2000, there 
was a dramatic increase to 41 percent. The reported error rate declined 
to 22 percent in 2001. It was 20 percent in 2002 and, in 2003, it had 
declined to only 12 percent. The error rate goal for fiscal year 2004 
is 10 percent. Over this same period, The American Legion's regional 
office quality review visits do not confirm a substantial and dramatic 
improvement in the overall error rate.
    There is little doubt that the vast majority of regional office 
adjudicators are dedicated, hardworking men and women. They continue to 
operate under tremendous stress to meet the Department's and veterans' 
expectations. However, The American Legion believes the effectiveness 
of VBA's quality improvement efforts has been severely compromised by 
the drive to achieve the Secretary's mandated production quotas. 
Veterans and other claimants are being short-changed by VBA policies 
and procedures that tend to promote less than adequate claims 
development, premature denials, and under-evaluations.
    The lack of proper and appropriate action on thousands of claims 
continues to result in a high level of claimant dissatisfaction and a 
steady influx of new appeals to the regional offices. There are now 
over 134,000 pending appeals with some 111,500 requiring adjudicative 
action. Even though there is a concerted effort to resolve appeals at 
the regional office through the Decision Review Officer program, most 
of these cases will eventually go to the Board of Veterans Appeals for 
a final decision on the merits of the claim.
    The straight line staffing level requested for fiscal year 2004 is 
based on the assumption that, with the accomplishment of the 
Secretary's backlog reduction goals, VBA would be able to refocus its 
efforts to more effectively address the quality-related problems and 
other long-standing issues. Given past performance, The American Legion 
continues to believe that this is an unrealistic policy and will not 
afford VBA the flexibility to cope with current workload demands, let 
alone some unanticipated contingency, such as supporting the Department 
of Defense new Combat-related Special Compensation Program and the 
additional resources that will be required to comply with the Huston 
decision. The American Legion recognizes that VBA has made a concerted 
effort to hire additional staff in the last several years. This policy 
of continuing growth is both prudent and necessary, given the 
increasingly complex nature of the claims and appeals process, the 
heavy volume of new claims, and the ongoing need to buildup the core 
adjudication staff in anticipation of the retirement of the more 
experienced regional office decisionmakers.
    The American Legion is concerned with support in the budget request 
for legislation that would reverse the Allen vs. Principi court 
decision. Clearly, the intent of this proposal is to overturn the 2001 
decision of the United States Court of Appeals for the Federal Circuit 
(the Federal Circuit or the Court) in Allen v. Principi 237 F.3d 1368 
(Fed. Cir., 2001). The Court held that Congress, in enacting P.L. 96-
466, the ``Omnibus Budget Reconciliation Act of 1990'' (OBRA 90), did 
not intend to preclude compensation for an alcohol or drug-related 
disability resulting from or secondary to a non-willful misconduct 
service-connected disability. Prior to OBRA 90, VA considered 
alcoholism and drug abuse disabilities unrelated to a service connected 
psychiatric disorder as willful misconduct. The term ``willful 
misconduct'' was defined in VA regulations as a deliberate and 
intentional act involving conscious wrongdoing or known prohibited 
action, with knowledge of or wanton and reckless disregard of the 
probable consequences.
    However, the definition noted that the mere technical violation of 
police regulations and ordinances would not, per se, constitute willful 
misconduct unless it is the proximate cause of injury, disease, or 
death. VA's policy was that the misconduct bar to benefits did not 
apply to those veterans whose alcohol or drug addiction was secondary 
to a service connection mental or physical disability. OBRA 90 
specifically provided in 38 U.S.C. Sec. Sec. 1110 and 1131, that an 
injury or disease resulting from the abuse of alcohol or drugs is not 
considered to have been incurred in the line of duty and VA may not pay 
compensation for disabilities that are the result of ``the veteran's 
own willful misconduct or alcohol or drug abuse.'' Under OBRA 90, VA as 
a matter of policy and practice, would not grant secondary service 
connection for substance abuse, but would, where appropriate, 
incorporate the symptoms of alcohol and drug abuse into the overall 
evaluation of the primary service connected disability. As an example, 
a veteran may have been rated for ``PTSD with alcoholism.'' In 1998, 
the United States Court of Appeals for Veterans Claims (CVAC), in 
Barela v. West (11 Vet. App. 280) (1998), held that, while OBRA 90 
provided for service connection of alcohol and drug-related 
disabilities as being secondary to a service connected disability, VA 
could not pay compensation for such disabilities.

                       BOARD OF VETERANS APPEALS

    The reduction in the number and the average processing time of 
pending claims represents only one aspect of VA's overall case backlog, 
since not all claims can or should be approved. When a veteran or other 
claimant receives an unfavorable decision either denying the claim in 
whole or in part, they have the right to appeal. The number of appeals 
filed each year is a direct reflection of the level of claimant 
satisfaction with the quality of the regional office adjudication. The 
action taken by the Board of Veterans Appeals (BVA) is a further 
reflection and commentary on the quality of regional office 
decisionmaking. Of those appeals decided in the first 10 months of 
fiscal year 2003, the Board affirmed the decisions of the regional 
office only 38 percent of the time and rejected their decision in about 
59 percent of the cases. Such poor performance by the regional office 
adjudicators is of grave concern to The American Legion, since it 
represents a tremendous waste of time and taxpayers' money, and a 
hardship for thousands of veterans and their families. Clearly, VBA's 
efforts to date have not effectively addressed the persistent systemic 
problems that adversely affect regional office claims processing and 
adjudication.

 COURT OF APPEALS FOR VETERANS CLAIMS AND THE COURT OF APPEALS FOR THE 
                            FEDERAL CIRCUIT

    The regulations and procedures of both the VBA and the BVA will be 
fundamentally changed by several recent court decisions. The courts 
have held that VA, as a matter of policy, had promulgated regulations 
that were misleading, basically unfair, and a violation of claimants' 
right to full due process.
    In 2002, there was a combined effort by the Board of Veterans 
Appeals and VBA to try and improve the timeliness and quality of action 
on remanded appeals. By alleviating some of the regional offices' 
appellate workload, this would enable the regional offices to devote 
more resources to resolving previous remands and further reduce the 
backlog of pending claims. This initiative was prompted by the fact 
that remands often sat in a regional office for months or even years 
with little or no action taken. In many instances, the development that 
was done would be inadequate or incomplete and the Board had to remand 
the case two or three times, which meant greater delay and hardship for 
the appellant. Rather than sending a case back to the regional office, 
a unit was established within the Board to undertake the development 
specified in the remand decision. If the decision included a benefit 
grant, the unit could initiate the award, so there would be no delay in 
payment. The American Legion supported the intent of this service 
improvement effort.
    In a decision early last summer, the United States Court of Appeals 
for the Federal Circuit held that the BVA's Development Unit was 
unlawful. As a result, there are about 8,000 remands plus new remands 
that are in the process of being transferred from the BVA Development 
Unit to VBA's Appeals Management Center (AMC), which is located at the 
Washington VA Regional Office, for further development and 
readjudication. While generally supportive of the effort to try and 
improve the handling of remands, there are problems in handling cases 
where the Board has awarded benefits. The lack of action by the AMC to 
expedite payment action has prompted several veterans to contact The 
American Legion for assistance. We are hopeful that appropriate steps 
have now been taken by VBA to ensure this type of problem does not 
recur. The AMC is projected to be fully staffed and operational by 
December 2003. In the interim, remands are being referred to the 
Huntington, West Virginia Regional Office and the Tiger Team in 
Cleveland for action. However, the prior BVA Development Unit 
initiative and the current AMC leave unaddressed the larger and more 
difficult issues relating to poor regional office decisionmaking, 
incomplete development, inadequate VCAA notices, and premature denials. 
Furthermore, there does not appear to be any incentive for the regional 
offices to improve their case development, nor is there any 
disincentive to keep them from certifying cases, because the AMC have 
to do what they should have done. VBA must ensure that the AMC does not 
become a dumping ground for the regional offices.
    In a system with tens of thousands of claims to be processed, there 
is a constant tension between management's need to have cases decided 
as quickly as possible and the statutory need to protect the claimant's 
right by ensuring that any decision made is proper and consistent with 
the law and regulations. For the past two and a half years, VBA 
management has been emphasizing speed and production volume. Under such 
pressure, there has been a tendency among some VBA managers and 
adjudicators to ignore the law and VA's own regulations and put 
bureaucratic convenience ahead of quality decisionmaking and the 
welfare and well being of the individual veteran and his or her family.
    In the opinion of The American Legion, one of the key impediments 
to progress on improving the quality of regional office decisionmaking 
and, thereby, claimant satisfaction, has been VBA's lack of compliance 
with both the letter and spirit of the ``Veterans' Claims Assistance 
Act of 2000'' (PL 106-475) (VCAA). The American Legion was actively 
involved in the development of this landmark legislation. It was 
designed to overcome the deficiencies and lack of clarity in the way 
VBA communicated with claimants and the way in which it developed 
claims. It made clear the exact nature and extent of VA's obligations 
and responsibilities to notify and to assist claimants. The idea was 
that, if claims were better developed, they could be promptly and more 
accurately adjudicated, thereby improving service to claimants. In the 
long run, these improvements should also reduce the overall appeals 
workload for the regional offices and the Board of Veterans Appeals. It 
was to be a ``win/win'' situation for all parties. However, as we have 
seen thus far, VBA has generally given lip service to the requirements 
of VCAA.
    While claimants are provided what is termed a ``VCAA'' letter, 
little time or effort goes into trying to help the individual veteran 
understand his or her claim and what evidence is going to be needed and 
who is responsible for developing it. Such letters usually lack 
essential information regarding the individual's claim and the evidence 
needed to grant the benefit sought in the particular case. These are 
unnecessarily long, confusing, nonspecific letters, which are filled 
with bureaucratic jargon. In some of the cases reviewed during The 
American Legion's regional office quality review visits, the 
information in many VCAA letters was found to be incorrect or not even 
appropriate to the claim. Rather than facilitating the adjudication 
process, as they were intended, these notice letters set the stage for 
an appeal to the BVA and the Federal courts.
    The American Legion's concerns regarding the deficiencies in the 
VCAA letters have been brought to Secretary Principi's attention as 
well as discussed in testimony before the Veterans' Affairs Committees 
on a number of occasions. Despite these efforts, VBA policy on the use 
of this type of letter remained unchanged. However, as a result of the 
July 2003 decision by the United States Court of Appeals for Veterans 
Claims (CVAC), in Huston v. Principi, VBA will now be forced to comply 
with the duty to notify and duty to assist provisions of title 38, 
United States Code, sections 5103(a) and 5103A. VA will now be 
obligated to clearly tell the claimant what evidence to submit in order 
to obtain the benefits claimed. The American Legion is disappointed 
that it took a court order to make VBA do what it should have been 
doing since the enactment of the VCAA. We will be watching very closely 
how VBA and Board of Veterans Appeals implement the Huston decision. 
Continued strong oversight by the Veterans' Affairs Committees will 
also be important in ensuring the VBA is, in fact, meeting its historic 
and statutory responsibilities to the veterans of this nation.

                      GI BILL EDUCATIONAL BENEFITS

    The American Legion commends the 108th Congress for its actions to 
improve the current Montgomery GI Bill (MGIB). A stronger MGIB is 
necessary to provide the Nation with the caliber of individuals needed 
in today's Armed Forces. The American Legion appreciates the efforts 
that this Congress has made to address the overall recruitment needs of 
the Armed Forces and to focus on the current and future educational 
requirements of the All-Volunteer Force.
    Over 96 percent of recruits currently sign up for the MGIB and pay 
$1,200 out of their first year's pay to guarantee eligibility. However, 
only one-half of these military personnel use any of the current 
Montgomery GI Bill benefits. This is directly related to the fact that 
current GI Bill benefits have not kept pace with the increasing cost of 
education. Costs for attending the average 4-year public institution, 
as a commuter student during the 1999-2000 academic year was nearly 
$9,000. PL 106-419 recently raised the basic monthly rate of 
reimbursement under MGIB to $650 per month for a successful 4-year 
enlistment and $528 for an individual whose initial active duty 
obligation was less than 3 years. The current educational assistance 
allowance for persons training full-time under the MGIB--Selected 
Reserve is $263 per month.
    The Servicemen's Readjustment Act of 1944, the original GI Bill, 
provided millions of members of the Armed Forces an opportunity to seek 
higher education. Many of these individuals may not have been afforded 
this opportunity without the generous provisions of that act. 
Consequently, these servicemen and servicewomen made a substantial 
contribution not only to their own careers, but also to the economic 
well being of the country. Of the 15.6 million veterans eligible, 7.8 
million took advantage of the educational and training provisions of 
the original GI Bill. Between 1944 and 1956, when the original GI Bill 
ended, the total educational cost of the World War II bill was $14.5 
billion. The Department of Labor estimates that the government actually 
made a profit because veterans who had graduated from college generally 
earned higher salaries and therefore paid more taxes. Today, a similar 
concept applies. The educational benefits provided to members of the 
Armed Forces must be sufficiently generous to have an impact. The 
individuals who use MGIB educational benefits are not only improving 
their career potential, but also, making a greater contribution to 
their community, state, and nation.
    The American Legion recommends the following improvements to the 
current MGIB:
     The dollar amount of the entitlement should be indexed to 
the average cost of a college education including tuition, fees, 
textbooks, and other supplies for a commuter student at an accredited 
university, college, or trade school for which they qualify.
     The educational cost index should be reviewed and adjusted 
annually.
     A monthly tax-free subsistence allowance indexed for 
inflation must be part of the educational assistance package.
     Enrollment in the MGIB shall be automatic upon enlistment, 
however; benefits will not be awarded unless eligibility criteria have 
been met.
     The current military payroll deduction ($1,200) 
requirement for enrollment in MGIB must be terminated.
     If a veteran enrolled in the MGIB acquired educational 
loans prior to enlisting in the Armed Forces, MGIB benefits may be used 
to repay those loans.
     If a veteran enrolled in MGIB becomes eligible for 
training and rehabilitation under Chapter 31, of Title 38, United 
States Code, the veteran shall not receive less educational benefits 
than otherwise eligible to receive under MGIB.
     A veteran may request an accelerated payment of all 
monthly educational benefits upon meeting the criteria for eligibility 
for MGIB financial payments, with the payment provided directly to the 
educational institution.
     Separating service members and veterans seeking a license, 
credential, or to start their own business must be able to use MGIB 
educational benefits to pay for the cost of taking any written or 
practical test or other measuring device.
     Eligible veterans shall have 10 years after discharge to 
utilize MGIB educational benefits.
     Eligible members of the Select Reserves, who qualify for 
MGIB educational benefits shall receive not more than half of the 
tuition assistance and subsistence allowance payable under the MGIB and 
have up to 5 years from their date of separation to use MGIB 
educational benefits.

                       HOME LOAN GUARANTY PROGRAM

    The American Legion believes that the current limit of VA Home Loan 
Guarantee of $252,500 should be raised to $300,000 and that higher 
limits be established for areas of the country where justified by 
prevailing real estate market conditions. In San Francisco, California 
in 2002 the median price of a home was $482,300, an actual decrease of 
.3 percent from 2001. In Boston, Massachusetts the median price of a 
home was $358,000; in the New York City Metro area, 285,600; and here 
in Washington D.C. the median home cost $229,100 in 2002, up 19.8 
percent from $183,700 in 2001. Clearly, in these cities, the difference 
between many veterans being able to secure financing for a decent home 
for his or her family and being shut out of the market is due to the 
inadequate levels of the VA Home Loan Guarantee Program.
    The American Legion also supports the recognition of VA Home Loan 
Guaranty benefits in cases where both members of a married couple are 
eligible for the benefit. If both members are eligible to receive the 
benefit, both members should be allowed to use the benefit.
    The American Legion is also concerned with a provision in the 
budget request supporting legislation that would limit the VA Home Loan 
program to one-time use for military members who separate after the 
legislation is passed and for all current veterans 5 years after 
enactment. Veterans have earned the right to this benefit and it should 
not be limited to one-time usage.
    The VA Home Loan program is one of the core elements of the 
original Servicemen Readjustment Act of 1944, the GI Bill of Rights. 
This legislation is often referred to as ``one of the most important 
pieces of social legislation ever enacted.'' Successful participation 
in the VA Home Loan program should be rewarded, not restricted or 
terminated. Due to the transient nature of our society, many Americans 
may experience several relocations based on business opportunities or 
upgrades in their financial situations. Living the American dream of 
homeownership should be encouraged and promoted as continuous economic 
stimulus opportunity.

  NATIONAL CEMETERY ADMINISTRATION (NCA) THE NATIONAL CEMETERY SYSTEM

    VA's National Cemetery Administration (NCA) is comprised of 120 
cemeteries in 39 states and Puerto Rico as well as 33 soldiers' lots 
and monuments. NCA was established by Congress and approved by 
President Abraham Lincoln in 1862 to provide for the proper burial and 
registration of graves of Civil War dead. Since 1973, annual interments 
in NCA have increased from 36,400 to over 84,800. Annual burials are 
expected to increase to more than 115,000 in the year 2010 as the 
veteran population ages. Currently 59 national cemeteries are closed 
for casket burials. Most of these can accept cremation burials, 
however, and all of them can inter the spouse or eligible children of a 
family member already buried. Another 22 national cemeteries are 
expected to close by the year 2005, but efforts are underway to 
forestall some of these closures by acquiring adjacent properties.
    Maintaining cemeteries as National Shrines is one of NCA's top 
priorities. This commitment involves raising, realigning and cleaning 
headstones and markers to renovate gravesites. The work that has been 
done so far has been outstanding, however, adequate funding is key to 
maintaining this very important commitment. At the rate that Congress 
is funding this work, it will take twenty-eight years to complete. The 
American Legion supports the Under Secretary for Memorial Affairs in 
his goal of completing the NCA's National Shrine Commitment in 5 years. 
This Commitment includes the establishment of standards of appearance 
for national cemeteries that are equal to the standards of the finest 
cemeteries in the world. Operations, maintenance and renovation funding 
must increased to reflect the true requirements of the National 
Cemetery Administration to fulfill this Commitment.
    Congress must provide sufficient major construction appropriations 
to permit NCA to accomplish its stated goal of ensuring that burial in 
a national or State cemetery is a realistic option by locating 
cemeteries within 75 miles of 90 percent of eligible veterans.
    P.L. 107-117 required NCA to build six new National Cemeteries. 
Fort Sill opened in 2001 under the fast-track program, while the 
remaining five (Atlanta, Detroit, South Florida, Pittsburgh and 
Sacramento) are in various stages of completion. Additional acreage is 
currently under development in 10 national cemeteries, columbaria are 
being installed in 4 and additional land for gravesite development has 
been acquired at national cemeteries in 5 states. 9 national cemeteries 
are expected to close to new interments between 2005 and 2010. The rate 
of interments in national cemeteries has increased from 36,400 in 1978 
to 84,800 in 2001. This rate is expected to rise to 115, 000 in 2015.
    The average time to complete construction of a national cemetery is 
7 years. The report of a study conducted pursuant the Millennium Bill 
concluded that an additional 31 national cemeteries will be required to 
meet the burial option demand through 2020. Legislation is currently 
pending in this session that will authorize the establishment of 10 new 
national cemeteries in areas of the country facing a shortage of burial 
space. Together with the 6 national cemeteries under development, this 
will go a long way toward fulfilling this need. NCA will be able to 
keep pace with current demand for burial space if this legislation is 
enacted and fully funded this year.
    The American Legion urges Congress to provide sufficient major 
construction appropriations to permit NCA to accomplish its mandate of 
ensuring that burial in a national cemetery is a realistic option for 
90 percent of our nation's veterans.
    The American Legion recommends $156 Million for the National 
Cemetery Administration in fiscal year 2005.

                     STATE CEMETERY GRANTS PROGRAM

    The National Cemetery Administration (NCA) administers a program of 
grants to states to assist them in establishing or improving state-
operated veterans cemeteries through VA's State Cemetery Grants Program 
(SCGP). Established in 1978, the matched-funds program helps to provide 
additional burial space for veterans in locations where there are no 
nearby national cemeteries. Through fiscal year 2002, more than $169 
million in grants has been awarded to states and the Territories of 
Guam and the Northern Marianas, including 5 new State cemeteries and 
the improvement and/or expansion of 9 existing ones.
    Under the Veterans Programs Enhancement Act of 1998, PL 105-261, VA 
may now provide up to 100 percent of the development cost for an 
approved project. For establishment of new cemeteries, VA can provide 
for operating equipment. States are solely responsible for the 
acquisition of the necessary land.
    The American Legion recommends $40 Million for the State Cemetery 
Grants Program in fiscal year 2005.
    Mr. Chairman, this concludes my testimony. I again thank the 
Committee for this opportunity to express the views of The American 
Legion on VA's fiscal year 2005 Budget Request and look forward to 
working with you and the members of the Committee to ensure VA is 
funded at a level that will allow all veterans to receive the care they 
have earned through their service.

    Chairman Specter. Our next witness is Mr. Richard Fuller, 
National Legislative Director of the Paralyzed Veterans of 
America. Thank you for joining us, Mr. Fuller, and your full 
biographical resume will be placed in the record.

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

    Mr. Fuller. Thank you, Mr. Chairman. The balance of the 
panel here represent the four organizations who co-authored The 
Independent Budget every year. This year's 2005 Independent 
Budget is available for every member of the committee and will 
be sent to every member of the Senate.
    [The Independent Budget follows:]

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    Mr. Fuller. What we do in the interest of time and also so 
we don't repeat ourselves is that each organization takes a 
certain segment of The Independent Budget to testify on, and 
for the past 18 years, Paralyzed Veterans of America has worked 
on the health care portion. I will address my comments to that 
today.
    The Administration's budget request for health care is a 
shocking one, providing once again a woefully inadequate 
funding level for sick and disabled veterans. Calling for only 
a $310 million increase in appropriated dollars is a mere 1.2 
percent increase over fiscal year 2004. This is the smallest 
health care appropriation request of any Administration in 
nearly a decade.
    Indeed, the VA Under Secretary for Health testified just 
last year that the VA requires a 13 to 14 percent increase just 
to keep its head above water each year. Once again, we are 
faced by a request that relies too heavily on budgetary 
gimmicks and accounting sleight-of-hand rather than on real 
dollars that veterans need.
    The Administration is again resurrecting its user fee and 
increased copayment schemes, proposals that were soundly 
rejected before and we hope they will be rejected again. Once 
again, we see unrealistic management efficiencies utilized to 
mask how truly inadequate this budget is.
    For fiscal year 2005, The Independent Budget recommends a 
medical amount of $29.8 billion. This amount represents an 
increase of $3.2 billion over the amount provided in 2004. For 
medical and prosthetic research, The Independent Budget is 
recommending $460 million. This represents a $54 million 
increase over the 2004 amount. Sadly, the Administration has 
proposed cutting research grants alone by approximately $21 
million, which is absolutely unprecedented in recent history. 
Accepting this level of funding would set the research grant 
program back to fiscal year 1999 levels. This also needs to be 
corrected.
    In closing, the VA health care system faces two chronic 
problems. The first is underfunding, which I have already 
outlined, and the second is a lack of consistent funding. The 
budget and appropriations process over the last number of years 
demonstrates conclusively how the VA labors under the 
uncertainty of not only knowing how much money it is going to 
get, but more equally important, when it is going to get that 
money. No Secretary of Veterans' Affairs, no VA hospital 
director, no doctor running an outpatient clinic knows how to 
plan and even provide care on a daily basis without the 
knowledge that the dollars needed to operate those programs are 
going to be there when they need them.
    The only solution we can see is for this committee and the 
Congress as a whole to approve legislation removing VA health 
care from the discretionary side of the budget process and 
making annual VA budgets mandatory. The health care system can 
only operate when it knows how much it is going to get and when 
it is going to get it.
    This concludes my testimony. I will be happy to answer any 
questions you may have.
    Chairman Specter. Thank you. Thank you very much, Mr. 
Fuller. Your full statements will all be made a part of the 
record and we will have a chance to review them in some detail 
and staff will analyze them. We appreciate this very impressive 
booklet. I thought you would probably read it in 3 minutes, but 
you couldn't do it.
    [Laughter.]
    [The prepared statement of Mr. Fuller follows:]

Prepared Statement of Richard B. Fuller, National Legislative Director, 
                     Paralyzed Veterans of America

    Mr. Chairman and members of the Committee, as one of the four 
veterans services organizations publishing The Independent Budget, 
Paralyzed Veterans of America (PVA) is pleased to present the views of 
The Independent Budget regarding the funding requirements for the 
Department of Veterans Affairs (VA) health care system for fiscal year 
2005.
    This is the eighteenth year, PVA, along with AMVETS, Disabled 
American Veterans and Veterans of Foreign Wars have presented The 
Independent Budget, a policy and budget document that represents the 
true funding needs of the Department of Veterans Affairs. The 
Independent Budget uses commonly accepted estimates of inflation, 
health care costs and health care demand to reach its recommended 
levels. This year, the document is endorsed by 32 veterans service 
organizations, and medical and health care advocacy groups.
    Mr. Chairman, we are becoming increasingly troubled by the delays 
in enacting VA appropriations. In fiscal year 2000, VA appropriations 
were not enacted until October 20th, in fiscal year 2001 October 27th, 
in fiscal year 2002 November 26th, in fiscal year 2003 February 20th, 
and this year, January 23rd. For the past 2 years alone, the VA health 
care system has had to struggle along at previous year's inadequate 
funding levels for nearly one-third of each year. This is unacceptable. 
These delays directly affect the health care received by veterans. This 
deplorable State further points to the importance of a mandatory 
funding mechanism for VA health care. But until that happens, we ask 
that this Congress move expeditiously to put the necessary funding 
levels in place by the start of fiscal year 2005. We also are 
disappointed in the practice of using rescissions as a budgetary 
mechanism in the omnibus spending bills that have become far too 
common. These cuts also have real consequences for veterans and their 
families.
    This year, as we did last year, The Independent Budget is presented 
in the traditional account format. The VA is once again presenting its 
budget in the format it unveiled last year, a format that did not find 
wide acceptance. The House Appropriations Committee has adopted its own 
format, a format adopted in the recently enacted Omnibus spending bill. 
Until this format dispute is settled, and until we have adequate data 
in which to analyze the VA health care system under whichever format is 
adopted, we will continue to utilize the traditional account structure. 
It can become confusing amid the din of competing dollar amounts based 
upon these different formats, but we ask you to compare oranges to 
oranges and to bear in mind that attractive numbers may not exactly 
match reality.
    The Administration's budget request for health care is a shocking 
one, providing once again a woefully inadequate funding level for sick 
and disabled veterans. Calling for only a $310 million increase in 
appropriated dollars, a mere 1.2 percent increase over fiscal year 
2004, this is the smallest health care appropriation request of any 
Administration in nearly a decade. Indeed, the VA Under Secretary for 
Health testified just last year that the VA requires a 13 to 14 percent 
increase just to keep its head above water.
    In addition, we once again are faced by a request that relies far 
too heavily on budgetary gimmicks and accounting sleight of hand rather 
than on real dollars that veterans need. The Administration is again 
resurrecting its enrollment fee and increased co-payment schemes, 
proposals soundly rejected by both the Senate and the House of 
Representatives. And once again we see unrealistic ``management 
efficiencies'' utilized to mask how truly inadequate this budget is. 
The VA must be accorded real dollars in order to care for real 
veterans. Shifting costs onto the back of other veterans is not the way 
to meet this Federal responsibility. Punitive co-payments and charges 
are designed not so much to swell projected budget increases as they 
are to deter veterans from seeking their care at VA medical facilities. 
Imagine the effect of these additional costs on those who have no other 
choice but to get care at VA. We may indeed have the greatest health 
care system in the world, but if you cannot get in the door we might as 
well have the worst.
    Mr. Chairman, The Independent Budget makes a strong statement in 
opposition to co-payments. The Congress gave the Secretary of Veterans 
Affairs the authority to set and raise fees. What was once thought of 
as only an administrative function has now become, in times of tight 
budgets, an easy way to try and find the dollars to fund health care 
for veterans. When appropriations are in short supply and demand for 
health care is high, co-payments have become the new way to fund the VA 
out of the pockets of the veteran patient.
    For fiscal year 2005, The Independent Budget recommends a Medical 
Care amount of $29.791 billion. This figure does not include funds 
attributed to MCCF, which we believe should be used to augment a 
sufficient appropriated level of funding. This amount represents an 
increase of $3.2 billion over the amount provided in fiscal year 2004.
    The Independent Budget recommendation is a conservative one. The VA 
health care system, in order to fully meet all of its demands and to 
ameliorate the effects of chronic under-funding, could use many more 
dollars. The Independent Budget recommendation provides for the impact 
of inflation on the provision of health care, and mandated salary 
increases of health care personnel. It provides resources to begin 
funding the VA's critical fourth mission to back up the Department of 
Defense health care system. Make no mistake about it, the VA will be 
spending money to comply with its new responsibilities in this area, 
and if specific funding is not included, then these resources will have 
to come directly from dollars used to care for sick veterans. It 
provides increased prosthetics funding and long-term care funding, and 
provides enough resources, we believe, to enroll Priority 8 veterans. 
With the VA's decision to cease enrolling Priority 8 veterans, 
undertaken only because of the lack of resources, we are losing an 
entire class of veterans, veterans who are an integral part of the VA 
health care system.
    Of course, these recommendations are only estimates, and our 
crystal ball is often cloudy. Health care inflation may be higher, or 
lower than we have estimated. Demand may increase, or decrease. The 
implications, as they pertain to VA health care funding estimates, of 
the 2-year grant of health care eligibility to recently discharged or 
released active duty personnel as provided in P.L. 105-363, are 
difficult to account for. But what we must account for, and provide 
for, are the necessary resources for the VA to meet its 
responsibilities, and this Nation's responsibilities, to sick and 
disabled veterans. These resources must be provided in hard dollars, 
and not dollars magically realized out of the thin air of ``management 
efficiencies'' and other budgetary gimmicks.
    For Medical and Prosthetic research, The Independent Budget is 
recommending $460 million. This represents a $54 million increase over 
the fiscal year 2004 amount. Sadly, the Administration has proposed 
cutting research by approximately $21 million. Accepting this level of 
$385 million would set the research grant program back 6 years to 
fiscal year 1999 funding levels. This program is a vital part of 
veterans' health care, and an essential mission for our national health 
care system. We must provide additional dollars for VA research as we 
provide additional funding for our other national research endeavors. 
Over the course of 5 years, the budget for the National Institutes of 
Health was doubled. We should seek a similar commitment for VA 
research.
    In closing, the VA health care system faces two chronic problems. 
The first is underfunding which I have already outlined. The second is 
a lack of consistent funding.
    The budget and appropriations process over the last number of years 
demonstrates conclusively how the VA labors under the uncertainty of 
not only how much money it is going to get, but, equally important, 
when it is going to get it. No Secretary of Veterans Affairs, no VA 
hospital director, and no doctor running an outpatient clinic knows how 
to plan and even provide care on a daily basis without the knowledge 
that the dollars needed to operate those programs are going to be 
available when they need them.
    Health care delayed is health care denied. If the health care 
system cannot get the funds it needs when it needs those funds the 
resulting situation only fuels efforts to deny more veterans health 
care and charge veterans even more for the health care they receive.
    The only solution we can see is for this Committee and the Congress 
as a whole to approve legislation removing VA health care from the 
discretionary side of the budget process and making annual VA budgets 
mandatory. The health care system can only operate properly when it 
knows how much it is going to get and when it is going to get it.
    We look forward to working with this Committee in order to begin 
the process of moving a bill through the Senate, and the House, as soon 
as possible.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

    Chairman Specter. Our next witness is Mr. Rick Surratt, the 
Deputy National Legislative Director for the Disabled American 
Veterans. Thank you for joining us, Mr. Surratt, and your full 
resume will be placed in the record.

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

    Mr. Surratt. Thank you, Mr. Chairman. On behalf of the DAV 
and The Independent Budget, I am pleased to present our views 
on the President's fiscal year 2005 budget and to highlight our 
recommendations for resources and program improvements.
    Other than a cost-of-living adjustment for compensation and 
reinstatement of the 1-year period for filing death pension 
claims, the President's budget contains no positive 
recommendations for improvements to the benefit programs. It 
does, however, include two objectionable recommendations to 
eliminate entitlement to benefits.
    It again requests the Congress eliminate entitlement to 
compensation for any portion of a service-connected disability 
attributable to the effects of alcohol or drug abuse. Under 
current law, alcohol abuse, for example, is not itself a 
compensable disability. However, when it is a secondary product 
and part and parcel of the manifestations of a service-
connected psychiatric disorder, for example, its effects are 
properly for consideration in assessing the overall level of 
disability for compensation purposes.
    There is a great difference between a veteran who uses 
alcohol for its pleasurable intoxicating effects and one who 
suffers from such unbearable and unremitting psychological 
distress or physical pain that he or she resorts to alcohol to 
escape the agony. Current law recognizes this distinction. 
Congress should again reject VA's recommendation.
    The President's budget also proposes legislation to 
eliminate a veteran's entitlement to a home loan guarantee 
after its initial use, despite the benefits of the repeat use 
to the veteran and to the American economy and despite the 
apparent lack of any good reason for this adverse action 
against veterans. The IB urges you to reject this 
recommendation.
    The IB recommends a number of beneficial adjustments in 
veterans' benefits programs. We hope you will favorably 
consider those recommendations this year as you have many of 
our recommendations in past years.
    Veterans deserve good benefit programs and also have every 
right to expect to receive their benefits when they need them. 
The proper and timely delivery of benefits requires, among 
other things, resources that match the workload. Here again, we 
must disagree with the President's budget request.
    The President's budget proposes to reduce staffing in the 
Veterans' Benefits Administration by 540 full-time employees. 
Because of the war and other factors, VBA's workload can only 
be expected to increase. VBA has been laboring for several 
years to improve proficiency and efficiency, but it has not 
historically achieved gains at a rate that would allow it to 
make up for such a large loss of personnel in a single year.
    The improvident reductions in staffing suggested by the 
President's budget may very well make VA lose those gains and 
return to the entirely unacceptable situation that existed 
before. We urge you to reject the President's recommendation to 
reduce VBA's staffing. In the IB, we recommend staffing levels 
more consistent with VBA's workload.
    Mr. Chairman, that concludes my statement and I will be 
happy to answer any questions you may have.
    Chairman Specter. Thank you very much, Mr. Surratt.
    [The prepared statement of Mr. Surratt follows:]

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

    Mr. Chairman and Members of the Committee:
    Thank you for inviting the Disabled American Veterans (DAV) and our 
partners in The Independent Budget (IB)--AMVETS, the Paralyzed Veterans 
of America (PVA), and the Veterans of Foreign Wars of the United States 
(VFW)--to present our views on the budget for the upcoming fiscal year.
    As with the President's budget submission, the IB is a broad plan 
for veterans' programs and includes recommendations for legislation to 
improve the benefits and services our Government provides to meet 
veterans' special needs. Consistent with DAV's primary responsibility 
in preparing the IB, and to avoid unnecessarily duplicating the 
testimony of my colleagues from the IB, my testimony will focus 
predominantly on the benefit programs, the administrative operations 
and resource requirements for delivering those benefits, and the 
judicial appeals process for veterans' claims.
    The importance of an adequate budget for veterans' programs cannot 
be overstated. All else that the veterans' community seeks and this 
Committee undertakes during the year ahead is influenced to a large 
degree on available resources. Fortunately, the President's budget only 
provides a discussion document to begin deliberations. It does not 
dictate what Congress does for veterans. Likewise, support from the 
Budget Committee and appropriators is important but not entirely 
indispensable to what you, the authorizing committee, determine is 
appropriate for our Nation's veterans. Unfortunately, the 
Administration's budget request for fiscal year (FY) 2005 does fall 
short in many respects, and we are disappointed with its meager 
recommendations for benefit improvements.
    The President's budget contains few recommendations for legislation 
to improve the benefit programs. For compensation, it includes the 
usual recommendation for a cost-of-living adjustment (COLA) based on 
the increase in the cost of living during the current year, projected 
to be 1.3 percent for fiscal year 2004. This increase for disability 
compensation would include dependency and indemnity compensation and 
the clothing allowance provided to veterans whose service-connected 
disabilities tend to increase wear and tear of their clothing.
    To prevent the purchasing power of compensation from falling behind 
the cost of living as it increases, the IB also recommends a 
compensation COLA. However, to maintain the value of compensation in 
relation to the cost of living, the IB urges Congress to repeal 
provisions that require rounding down the COLA to the nearest whole 
dollar. Though this rounding down may erode the value of compensation 
very slightly for 1 year, rounding down year after year, with its 
compounding effect, eventually amounts to a significant degradation of 
the modest compensation veterans rely on to purchase the necessities of 
life.
    The Administration's budget seeks legislation to bar compensation 
altogether for the effects of the added disability that results when 
veterans resort to alcohol to escape the extreme distress and 
disturbing symptoms of some service-connected mental disorders and 
other disabilities. This request reveals a callous disregard and 
insensitivity to the true nature of these secondary disabilities and 
how severely disabled veterans are victimized by them. It ignores the 
cause-and-effect relationship between the primary service-connected 
disability and the secondary effects. By using alcohol to ameliorate 
the psychological pain of these disabilities, veterans are attempting 
to quell their symptoms rather than choosing to be more disabled. In 
many of these instances, the underlying illness is so debilitating by 
itself that any additional disability attributable to alcohol accounts 
for no greater rate of compensation or is so inextricably intertwined 
with other psychiatric symptoms as to be essentially indistinguishable 
from them. Current law resolves these unfortunate circumstances 
equitably. Congress rejected VA's request for this legislation last 
year, and the IB urges Congress to respond with an emphatic ``no'' 
again this year.
    Similarly, the IB is resolute in its opposition to any repeat of 
last year's misplaced scheme to fundamentally alter the bases for 
establishing service connection for service-related disabilities. 
Military service is not merely a job where an individual spends his or 
her regular working hours. Military service requires the service-
member to be at the disposal of the military authorities 24 hours a day 
7 days a week and encompasses, indeed dictates, directly or indirectly 
all of a service-
member's life activities. Military service is inherently hazardous, and 
it involves physical and mental stresses beyond those experienced by 
civilian society. Current law therefore equitably treats disabilities 
that occur during service as service connected, without requiring a 
showing of cause and effect between particular activities or factors of 
service and the disability.
    Because of the full-time, extraordinarily rigorous, and dangerous 
nature of service in the Armed Forces, and rather than becoming mired 
in the problematic nuances of causation in such a unique environment, 
causation is presumed. No other fair, foolproof, and practical method 
exists for determining service connection. The scheme devised last year 
for inclusion in the defense authorization bill would have been 
anything but fair, foolproof, and practical, although it would have 
been expedient for its self-serving purpose of permitting the 
Government to dishonorably disavow its obligation to care for our 
Nation's sons and daughters who are disabled in service to their 
country. By excluding from eligibility for service connection 
essentially all accidental injuries and diseases incurred during 
military service except those caused directly by work-related 
activities of servicemembers' military occupations, few would meet the 
extremely restrictive terms of service connection, and many would have 
insurmountable difficulties in producing evidence to isolate the cause 
to the direct performance of military duties.
    The Department of Veterans Affairs (VA) projected that 
approximately two-thirds of the disabled veterans now entitled to 
disability compensation would not have qualified for service connection 
under these criteria. Obviously, the proposed scheme was calculated to 
achieve just that result. The action was brazen and reprehensible. 
Because its proponents were so shameless and unrestrained, we may very 
well see the same or similar action repeated. It will be no less 
repugnant, and no less objectionable to the veterans' community. We 
appreciate the decisive stand against this plan taken by the Chairman 
and other members of this Committee last year, and we urge you to again 
flatly reject any similar efforts this year.
    The IB makes three additional recommendations to improve the 
disability compensation program. We recommend legislation:
     to exclude compensation as countable income for Federal 
programs;
     to repeal the prohibition of service connection for 
disabilities related to tobacco use; and
     to repeal delayed effective dates for payment of increased 
compensation based on temporary total disability.
    The President's budget submission suggests legislation to make 
awards of death pension effective the first day of the month in which 
death occurred if the claim is filed within 1 year of the date of 
death. Prior amendments reduced this period from 1 year to 45 days. We 
have no recommendation for this legislation in the IB, but we note that 
it would be beneficial to needy widows of wartime veterans, and it 
would bring this effective date provision back into line with effective 
date provisions applicable to other disability benefit payments, 
simplifying the law for VA adjudicators.
    Service-connected disabilities result in functional impairments 
that not only adversely impact upon veterans' ability to perform job 
functions but also adversely impact upon their ability to perform the 
everyday activities of living. For veterans suffering from service-
connected blindness and physical disabilities that require special 
fixtures and modifications to allow them mobility and independence 
within the home, VA provides grants for the purchase or construction of 
specially adapted housing. For veterans with service-connected 
disabilities that interfere with their ability to operate motor 
vehicles, VA provides grants for the purchase and special modification 
of automobiles. Like other benefits that are subject to the effects of 
rising costs, the grants for specially adapted housing and automobiles 
must be increased regularly to match increases in costs of homes and 
vehicles. The value of these benefits has fallen substantially behind 
rising costs because there have been long periods between adjustments. 
Congress increased these grants last year, but the increase did not 
equal their cumulative loss in value and therefore did not fully 
restore them to the value they had when first established. To remedy 
this deficiency and to improve these programs, the IB recommends that 
Congress enact legislation:
     to increase the amount of the grants for specially adapted 
housing and to provide for automatic annual adjustments for increased 
costs;
     to provide a grant for adaptations to a home that replaces 
the first specially adapted home; and
     to increase the amount of the automobile grant and to 
provide for automatic annual adjustments for increased costs.
    For the education programs, the President's budget includes 
suggestions for legislation to make three minor ``technical'' changes, 
although one of the amendments would make a substantive change to 
prohibit education benefits for servicemembers who are incarcerated for 
crimes and whose character of service upon discharge following their 
release from prison will be disqualifying. The IB has no position on 
these suggested legislative changes. However, for the education 
programs, we make two recommendations for legislation:
     to expand Montgomery GI Bill eligibility to persons who, 
but for service on or before June 30, 1985, would be eligible for 
education benefits under this program; and
     to authorize refund of contributions to veterans who 
become ineligible for the Montgomery GI Bill by reason of discharges 
characterized as ``general'' or ``under honorable conditions''.
    Although we have come to expect the Administration to propose 
actions to reduce or eliminate benefits and services for veterans, we 
were surprised by this year's suggestion in the President's budget for 
VA that Congress enact legislation to restrict veterans' use of home 
loan guaranties to one time. When they return to civilian life from 
military service, veterans often have very limited means to achieve the 
American dream of owning a home. They purchase ``starter'' homes. As 
their economic situation improves and families grow, they, like many 
other Americans, want to expand and improve their housing. In today's 
mobile society, veterans may be required to move to new locations to 
follow their jobs or the job market. If a veteran is in good standing 
with VA, his or her purchase of another home can be made easier by a VA 
guaranteed loan. Because of the limits on VA loans, veterans who use VA 
loan guaranty are those who must purchase moderately priced homes, and 
the repeat use of this benefit provides no unwarranted windfall for 
veterans. At the same time, it is no great burden on the Government. 
The ability of veterans to use their loan guaranty more than once can 
be very beneficial to them and to the American economy, without any 
undue cost to the Government. Therefore, this proposal to limit 
veterans to one loan seems to have as its object the reduction of 
veterans' benefits merely for the sake of reducing them, without any 
reciprocal benefit to the Government. In any event, this suggested 
legislation is unwarranted, and the IB urges you to soundly reject it.
    The IB makes positive recommendations to improve the home loan 
guaranty program for veterans and other eligible beneficiaries. We 
recommend that Congress enact legislation:
     to increase the maximum VA home loan guaranty and provide 
for automatic annual indexing to 90 percent of the Federal Housing 
Administration-Federal Home Loan Mortgage Corporation loan ceiling; and
     to repeal funding fees imposed upon certain home loan 
guaranties.
    For the insurance programs, the President's budget proposes 
legislation for technical amendments ``to clarify certain points such 
as defining an insurable dependent, terms of coverage and premiums.'' 
According to the budget, these changes require no additional funds. 
Without more specifics, we have no position on the proposed legislation 
at this time.
    The insurance programs for veterans are in need of added 
protections and revisions to replace long outdated rates and increase 
the maximum coverage available. Often, a veteran's life insurance 
policy is all that a veteran has to pay for his or her last expenses 
and burial. Yet, for nursing home care under Medicaid, the Government 
forces veterans to surrender their Government life insurance polices 
and apply the cash value toward nursing home care as a condition for 
Medicaid coverage.
    Because of service-connected disabilities, disabled veterans have 
difficulty getting or are charged higher premiums for life insurance on 
the commercial market. VA therefore offers disabled veterans life 
insurance at standard rates under the Service Disabled Veterans' 
Insurance (SDVI) program. When this program began in 1951, its rates, 
based on mortality tables then in use, were competitive with commercial 
insurance. Commercial rates have since been lowered to reflect improved 
life expectancy shown by current mortality tables. VA continues to base 
its rates on mortality tables from 1941, however. Consequently, SDVI 
premiums are no longer competitive with commercial insurance, and SDVI 
therefore no longer provides the intended benefit for eligible 
veterans.
    When life insurance for veterans had its beginnings in the War Risk 
Insurance program first made available to members of the Armed Forces 
in October 1917, coverage was limited to $10,000. A $10,000 life 
insurance policy provided sufficiently for the loss of income from the 
death of an insured in 1917. Today, some 87 years later, maximum 
coverage under the base SDVI policy is still $10,000. Given that the 
annual cost of living is many times what it was in 1917, the same 
maximum coverage, well over three quarters of a century later, clearly 
does not provide meaningful income replacement for the survivors of 
service-disabled veterans.
    Similarly, the maximum coverage under the Veterans' Mortgage Life 
Insurance (VMLI) program has fallen behind current needs. The maximum 
VMLI coverage was last increased in 1992. Since then, housing costs 
have risen substantially. Because of the great geographic differentials 
in the costs associated with accessible housing, many veterans have 
mortgages that exceed the maximum face value of VMLI. Thus, the current 
maximum coverage amount does not cover many catastrophically disabled 
veterans' outstanding mortgages. Moreover, severely disabled veterans 
may not have the option of purchasing extra life insurance coverage 
from commercial insurers at affordable premiums.
    These deficiencies substantially reduce the effectiveness of the 
insurance programs. To correct these shortcomings, the IB recommends 
legislation:
     to exempt the dividends and proceeds from, and cash value 
of, VA life insurance policies from consideration in determining 
entitlement under other Federal programs;
     to authorize VA to use modern mortality tables instead of 
1941 mortality tables to determine life expectancy for purposes of 
computing premiums for SDVI;
     to increase the maximum protection available under the 
base policy of SDVI from $10,000 to $50,000; and
     to increase the maximum coverage under VMLI from $90,000 
to $150,000.
    Veterans' benefits are for veterans, not others who have no right 
to them. Congress has been careful to ensure veterans receiving 
benefits are not easy prey for persons seeking to divert these benefits 
away from veterans and into their own pockets. Congress has placed 
restrictions on attorney fees, and Congress has included broad and 
sweeping protections in the law to prohibit the assignment of veterans' 
benefits and to protect them against the claims of third parties. 
Existing law provides:

          ``Payments of benefits due or to become due under any law 
        administered by the Secretary shall not be assignable except to 
        the extent specifically authorized by law, and such payments 
        made to, or on account of, a beneficiary shall be exempt from 
        taxation, shall be exempt from the claim of creditors, and 
        shall not be liable to attachment, levy, or seizure by or under 
        any legal or equitable process whatever, either before or after 
        receipt by the beneficiary.''

    Despite the prohibition against assignment, some commercial 
entities were enticing vulnerable veterans into arrangements whereby 
the veterans traded their future compensation payments for lump sums 
amounting to a fraction of the value of the compensation. Last year, 
Congress added language to the prohibition against assignment to leave 
no room for convenient interpretation of the law as permitting that 
practice. Despite the clear and emphatic language in the law shielding 
veterans' benefits from the claims of third parties, the courts have 
conveniently interpreted the law to permit what it unquestionably 
prohibits. As a result, veterans' benefits have become an easy target 
for former spouses seeking alimony. The courts show little reverence 
for the principle that veterans' benefits were created for veterans and 
little regard for congressional intent that a disabled veteran, and not 
someone else, should be compensated for the effects disability. Courts 
seem to have no hesitation in ordering disabled veterans to pay part of 
their disability compensation to able-bodied former spouses. This 
situation is appalling. The IB therefore recommends legislation to 
reinforce existing law so there can be no doubt that it means what it 
says.
    While not under the jurisdiction of this Committee, we also call 
for legislation to remove, for all service-connected disabled military 
longevity retirees, the offset between their military retired pay and 
disability compensation. As you know, the legislation enacted near the 
end of the last session of Congress provides for removal of this 
inequitable offset for some disabled veterans. In so doing, it left the 
injustice in place for many other veterans. We also recommend 
legislation to extend the 3-year limitation on recovery of taxes 
withheld from disability severance pay and military retired pay later 
determined to be exempt from taxable income.
    Although they need fine tuning from time to time, the benefit 
programs have been carefully crafted by Congress to alleviate the 
disadvantages veterans suffer as a result of disabilities and as a 
result of educational and vocational opportunities forgone by young men 
and women who chose to serve their country before personal advancement. 
These programs are effective only to the extent the benefits and 
services are delivered to entitled veterans when they need them. 
Efficiently and proficiently administering this broad range of programs 
for millions of veterans naturally and unquestionably presents 
formidable management challenges. Small mistakes can have major 
consequences for large numbers of veterans. Management and process 
deficiencies, and insufficient resources, have consequences that are 
directly revealed through poor service to veterans.
    Although such poor service frustrates veterans who must deal with a 
massive and complex bureaucracy, it causes more than mere 
inconveniences. Incorrect decisions deprive entitled veterans of the 
benefits they need, and long delays due to incorrect decisions and 
insufficient resources deprive entitled veterans of the benefits they 
need when they most need them. Of course, the correct and timely 
payment of disability compensation is imperative for veterans who must 
rely on compensation for food and shelter.
    In fulfilling its mission of effective management of the benefit 
programs and effective delivery of benefits and services, the Veterans 
Benefits Administration (VBA) has a checkered history, especially in 
accurate and timely delivery of the core veterans' benefit, disability 
compensation. Some of the failures were self-inflicted and the product 
of a wrong-headed institutional mindset, others were due to more 
innocent mistakes, and many were caused or compounded by insufficient 
resources or other factors beyond VA's control.
    With a focus and decisive action directed to real reforms and 
improvement, current management has made some headway in overcoming 
systemic deficiencies in the delivery of benefits. Congress has helped 
by providing the additional resources necessary to bring the workforce 
and technology to the capacity required. To continue on the course of 
restoring VBA to acceptable levels of performance and service to 
veterans--indeed, to avoid losing the gains made thus far--VBA must 
continue to devote its full energies to the process, and Congress must 
continue to provide the resources required to get the job done. The IB 
makes specific recommendations in both of these areas.
    To enable it to more effectively enforce agency policy and 
performance standards, we have recommended that VBA make changes to 
remedy some weak links in its management structure. We have called for 
improvements in VA rulemaking to make VA's regulations more fairly 
serve veterans and to avoid litigation over challenged regulations. For 
VBA's Compensation and Pension Service (C&P), we have urged VA to 
devote more effort to attacking the root causes of errors in claims 
adjudication.
    To ensure that VBA has the personnel and tools necessary to carry 
out its mission, we have made several recommendations regarding 
staffing and appropriations to support ongoing initiatives to develop 
and install modern information technology systems. Unfortunately, the 
President's budget request appears to seriously undermine VBA's 
systematic efforts to correct its deficiencies, employ better 
information technology, and improve its production and service to 
veterans.
    The President's budget submission for VA clearly does not remain 
fixed on the objective of strengthening VBA to make it better able to 
fulfill its responsibilities to veterans. Due to the war in Iraq and 
the many hostilities in which our Armed Forces are engaged today, we 
can only expect an influx of new veterans needing VA benefits and 
services. Logically, more resources will be needed in some areas just 
to stay even with the workload. However, the President's budget 
proposes major reductions in resources for the delivery of benefits and 
services to veterans. For VBA, the President's budget requests 829 
fewer full-time employees (FTE) for fiscal year 2005 than authorized at 
the end of the fiscal year we have just finished, fiscal year 2003. The 
request is 540 FTE below the fiscal year 2004 level. We note, 
incidentally, that the difference between the fiscal year 2003 and 
fiscal year 2005 FTE for VBA is apparently greater than the 829 
employees indicated by the budget submission because, at the beginning 
of fiscal year 2004, the responsibilities and the 31 FTE of the 
Evidence Development Unit of the Board of Veterans' Appeals (BVA) were 
reassigned from BVA to VBA, without any corresponding request to 
increase VBA's authorized FTE by an equal amount.
    Under the President's budget request, every benefit line except 
Insurance Service would lose employees. Even with all-out efforts, 
VBA's progress in reducing the backlog of work and the waiting times 
for benefits has been gradual and fairly slow-paced, representative of 
deliberate efforts within the limits of its abilities under the 
resource levels available in the past few years. We seriously doubt 
that VBA can suddenly accelerate and achieve enough productivity 
improvements to offset such a substantial loss of resources, especially 
against the weight of added work. The President's budget would also 
substantially scale back investments in ongoing programs to modernize 
VBA's essential information technology. These two proposed reductions 
strike the core of the veterans' benefits delivery system.
    The President's budget proposes 7,270 FTE, or 487 fewer direct 
program FTE for C&P Service in fiscal year 2005 than in fiscal year 
2003. In addition, the President's budget requests 185 fewer FTE for 
management direction and support and information technology in C&P 
Service for fiscal year 2005 than it had in fiscal year 2003. We also 
understand that the additional FTE for the Evidence Development Unit 
assumed by VBA from BVA are charged to C&P Service. With those FTE 
absorbed by C&P and without any equal increase in the FTE requested for 
C&P, that number of employees must be calculated as an additional net 
reduction of FTE for C&P Service when comparing the fiscal year 2003 
staffing with the request for fiscal year 2005.
    We recommend in the IB that C&P Service be authorized 7,757 FTE for 
fiscal year 2005. VA had projected that its workload would allow it to 
draw down its FTE in fiscal year 2005 by approximately 268 below its 
staffing level of 7,757 FTE at the end of fiscal year 2003. However, 
those projections did not take into account additional work VA now 
expects incident to legislation that expanded eligibility for Combat 
Related Special Compensation and authorized concurrent receipt of 
military retired pay and disability compensation for certain veterans. 
VA projects that this legislation will generate 391,000 new claims and 
52,869 appellate cases over the next 5 years. In addition, VA projects 
it will have to rework approximately 48,000 claims to meet the 
requirements of a court decision invalidating VA procedures that placed 
unlawful requirements upon veterans. Though most of that work should be 
done during fiscal year 2004, this additional volume will likely delay 
work on some of C&P's inventory and carry some extra caseload over into 
fiscal year 2005. This additional workload requires that VA, at least, 
have approximately the same direct program staffing levels for fiscal 
year 2005 that it had at the end of fiscal year 2003.
    Just as VA must have sufficient staffing to match its compensation 
and pension claims workload, it must continue to have efficient 
procedures and technology for processing claims and related 
information. To aid in accuracy and uniformity in claims adjudication, 
and to achieve the greater efficiencies of modern information 
technology, VA began its Compensation and Pension Evaluation Redesign 
(CAPER) initiative during 2001. To determine and implement its optimum 
performance in record development, disability examinations, and claims 
decisions, VA is undertaking a review of its claims process with the 
goal of developing and deploying an integrated electronic format to aid 
in uniform and correct application of procedures and substantive rules 
and to allow for the electronic transmission of data from its source 
into the claims data base. VA now hopes to have this system fully in 
place by September 2006. To achieve that goal, VA needs approximately 
$3.5 million in fiscal year 2005 to continue development of this 
system. The IB recommends that Congress provide this essential funding 
to VA. The President's budget requests only $2.7 million for this 
project.
    Another aspect of systems modernization is the use of electronic 
files to replace manual paper transfer and storage of claims records. 
With the necessary imaging and other equipment, VA can acquire, store, 
and process claims data much more timely and efficiently, reducing task 
times and staffing needs. VA's project, known as ``Virtual VA,'' has 
been deployed at VA's Pension Maintenance Centers and is undergoing 
evaluation and assessment based on experience at these three sites. 
With eventual full implementation, all VBA regional offices will have 
document imaging capabilities, and VA medical centers will have 
electronic access to veterans' claims folders for review in connection 
with disability examinations ordered by claims adjudicators. 
Accordingly, the IB recommends that Congress provide VA the $8 million 
it needs in fiscal year 2005 to continue document preparation and 
scanning at the Pension Maintenance Centers and to continue development 
of the system for application nationwide. The President's budget 
requests only $1.6 million for Virtual VA.
    As with C&P Service, VBA's Vocational Rehabilitation and Employment 
Service (VR&E) faces major challenges in meeting its responsibilities 
to disabled veterans under circumstances of heavy workloads and limited 
resources. The impact of the worldwide war on terrorism, hazardous duty 
in other locations around the world, and major combat operations in 
Iraq and Afghanistan, will undoubtedly be felt by VR&E when these 
veterans begin pouring into the system with the need for rehabilitation 
training and employment suitable to their service-connected 
disabilities. To sustain current levels of performance with its 
projected workload, VR&E needs to retain the staffing strength it had 
at the end of fiscal year 2003. In addition, the VA Secretary's VR&E 
Task Team has made a number of recommendations to improve vocational 
rehabilitation and employment services for veterans. It is projected 
that approximately 200 additional FTE will be needed to implement these 
substantial reforms in the programs, organization, and work processes 
of the VR&E program. At the end of fiscal year 2003, VR&E direct 
program staffing was 931 FTE. The IB therefore recommends that Congress 
authorize 1,131 direct program FTE for VR&E in fiscal year 2005. The 
President's budget requests only 876 FTE for fiscal year 2005, and 
seeks 21 fewer FTE for management direction and support and information 
technology than VR&E had in fiscal year 2003.
    Similarly, VBA's Education Service expects some increase in its 
workload, due to legislation last year that expanded coverage of the 
program to include additional types of training. VA is striving to 
provide more timely and efficient service to claimants seeking 
education benefits. Education Service reports gains in these areas 
during fiscal year 2003. To continue on the course of improvement and 
to meet the added workload projected, Education Service must at least 
maintain its fiscal year 2004 staffing level. In fiscal year 2004, 
Education Service had 766 direct program FTE authorized, and the IB 
recommends that Congress authorize 766 FTE for Education Service in 
fiscal year 2005.
    For veterans who do not receive a correct disposition of their 
benefit claims from VA's administrative claims adjudication processes, 
judicial review is available. Because the United States Court of 
Appeals for Veterans Claims is not a part of the VA or the executive 
branch, its funding is not included under the budget for veterans' 
benefits and services. The Court is nonetheless an integral part of the 
system of benefits for veterans, and this Committee does, of course, 
have oversight responsibilities and jurisdiction over any authorizing 
legislation pertaining to the Court and its functioning. Additionally, 
the United States Court of Appeals for the Federal Circuit has 
jurisdiction to hear appeals from decisions of the Court of Appeals for 
Veterans Claims and has jurisdiction to hear direct challenges to VA 
regulations. This Committee has jurisdiction over laws that govern 
review of these appeals and challenges to regulations in the Federal 
Circuit. For this area of great importance to veterans, the IB includes 
several recommendations.
    In previous years, we have recommended in the IB that Congress 
amend the standard under which the Court of Appeals for Veterans Claims 
reviews the propriety of factual findings by VA's administrative 
appellate board, BVA. Under the ``clearly erroneous'' standard, the 
Court was essentially upholding any finding of fact against a VA 
claimant that had some ``plausible basis'' in the record although the 
law mandates that VA decide a factual question in a claimant's favor 
unless the evidence against the claim outweighs the evidence supporting 
it. This mandate in law is known as the ``benefit-of-the-doubt'' rule. 
This rule is based on the time-honored principle that we owe veterans 
greater considerations than ordinary citizens litigating in court or 
seeking government assistance from other agencies and that a veteran 
claiming benefits is therefore entitled to the benefit of the doubt 
when the evidence neither proves nor disproves his or her claim. With 
the Court upholding adverse factual findings for which there is merely 
some plausible basis, BVA was completely free to ignore the law and 
deny a claim for VA benefits even though the supporting evidence was 
much stronger than, or at least as strong as, the evidence against it. 
The Court was turning a blind eye to erroneous and unjust denials of 
meritorious claims, making the benefit-of-the-doubt rule unenforceable 
and meaningful only to the extent VA chose to observe it. Appeals to 
the Court often follow from arbitrary decisions in which VA chose to 
ignore the rule, but these appeals were essentially futile, with 
meritorious claims and justice denied. To correct this grave injustice, 
the IB recommended that Congress amend the law to require the Court to 
reverse any BVA factual finding against a claimant that was clearly 
inconsistent with the benefit-of-the-doubt rule. To accomplish this, we 
recommended that the clearly erroneous standard be replaced with an 
instruction that the Court must reverse any finding of fact adverse to 
a claimant that was not reasonably supported by a preponderance of the 
evidence, which is weight of the evidence required for such adverse 
finding under the benefit-of-the-doubt rule.
    Seeking to continue its immunization from meaningful judicial 
review of its factual findings, VA opposed this change, and the 
veterans' committees compromised with less definite changes than the IB 
had recommended and thought necessary. As a result, the Court has 
construed the new legislation as making no change whatsoever. Indeed, 
VA itself argued to the Court that Congress made no substantive change 
in the law by these amendments. Deserving veterans are still left with 
no remedy for outright violations of the law. That is unacceptable. We 
therefore renewed in this year's IB our previous recommendation that 
Congress replace the clearly erroneous standard with the requirement 
that the Court reverse factual findings not reasonably supported by a 
preponderance of the evidence. Certainly, you should not again be 
persuaded to accept any compromise proposed by VA that will enable VA 
to once more argue to the Court that you did nothing. We want to 
reiterate here that this issue is one that remains very important to 
veterans and their rights.
    When Congress ended the longstanding absence of judicial review for 
veterans' claims, it was very concerned that the formalities typical of 
judicial proceedings not change the informalities of VA's 
administrative claims processes. The legislative history for judicial 
review legislation emphasizes repeatedly congressional intent to 
preserve this informality and the pro-veteran procedures at the 
administrative level. Congress maintained in the law provisions that 
put the obligation on VA to develop the claims record and afford 
consideration to all possible theories of entitlement under all 
relevant laws, regulations, and other legal authorities. The veteran is 
not required to know or argue the legal technicalities of benefits 
laws. Thus, failure of BVA to consider all points of law bearing on a 
claim is legal error, an error of omission. Yet, the Court has refused 
to consider these points in appeals on the grounds that the veteran 
failed to argue them before BVA. In effect, the Court is relieving VA 
of its obligations under the law and shifting them to veterans. The 
Court is imposing upon veterans the very thing Congress did not intend, 
the obligation to formally plead all the finer points of law that are 
often very complex and poorly understood by average laypersons. To 
prevent the Court from further imposing the formalities of adversarial 
judicial proceedings upon the non-adversarial veterans' claims process, 
the IB recommends legislation to prohibit judicial imposition of formal 
pleading or so-called ``exhaustion'' requirements upon the VA claims 
system.
    Though veterans have deep frustration with some of the Court's 
actions, judicial review and many of the Court's precedents have added 
legitimacy to the process and forced VA to follow the law more 
carefully. Judicial review exposed deeply ingrained unlawful practices 
and deficiencies in VA's claims adjudication, and more than any other 
factor, forced VA to acknowledge these systemic defects and make 
fundamental reforms. As a result of the availability of judicial review 
and enforcement of the law by the Court, veterans stand a much better 
chance of getting a fair decision today than they did before judicial 
review was authorized by your landmark legislation in 1988. We still 
need to make adjustments to bring the process closer to that envisioned 
by Congress in its 1988 legislation, however.
    The Chief Judge has begun exploratory steps toward securing a site 
and authority for construction of a courthouse and justice center. 
After an appropriate site is located, Congress must enact authorizing 
legislation and provide necessary funding if the project is to be 
undertaken. The IB fully supports the project to construct a courthouse 
for the veterans' court. We seek the support and essential assistance 
of the members of this Committee in securing a site, enacting the 
necessary legislation, and working with your colleagues in Congress to 
obtain the funding required to build this courthouse and justice center 
for veterans.
    When Congress authorized judicial review of VA's claims decisions, 
it also authorized judicial review of VA's regulations. However, 
Congress exempted one area of VA's rulemaking from review by the 
courts. Congress expressly deprived the courts of jurisdiction to 
review VA's Schedule for Rating Disabilities. We agree with the 
reasoning that the courts should not be empowered to intervene in VA's 
application of its special expertise and the exercise of its discretion 
in formulating criteria for evaluating the effects of disabilities. 
However, we believe the United States Court of Appeals for the Federal 
Circuit should be authorized to review and invalidate rating schedule 
provisions that are, on their face, contrary to the laws enacted by 
Congress or are arbitrary and capricious. Such narrow review would not 
interfere with VA's lawful and legitimate exercise of its broad 
discretion, and would empower the Federal Circuit to intervene in only 
the most egregious abuses of discretion and invalidate only the 
unequivocally unlawful rating schedule provisions. Today, VA is totally 
immune to any remedy for flatly unlawful or arbitrary and capricious 
actions in adopting or revising its rating schedule. The IB therefore 
recommends expanding Federal Circuit jurisdiction to permit that court 
to review challenges to VA's rating schedule on these narrow grounds.
    Finally, I want to join with our IB witness who is covering 
veterans' medical care in this hearing in stressing the importance of 
putting a mechanism in place to end what has unquestionably proven to 
be an inadequate process for funding veterans' medical care. Year after 
year, the President's budget request falls well below the minimum 
needed to maintain medical services for sick and disabled veterans 
seeking those services from the medical care system established to 
serve them. Year after year, we must fight an uphill battle to get more 
realistic appropriations, and that annual battle is getting ever more 
difficult despite the strong advocacy of the members of this Committee, 
who know what resources VA really needs. To get funding to continue 
operation of their medical programs, veterans should not have to 
compete with all the many other interests who seek part of the limited 
discretionary dollars. Veterans and VA should not have to face the 
yearly uncertainty of whether there will be sufficient funding provided 
to continue essential medical care services for disabled veterans. 
Veterans should not have to wait months to be treated for their 
illnesses. VA should not have to continue operating the largest medical 
care system in this country on the shoestring of annual appropriations 
and without any means to plan strategically for long-term efficiencies. 
We have thoroughly tested the discretionary appropriations process 
whereby political will, rather than actual resource needs, determines 
how much funding veterans' medical care receives each year. With 
consistent experience that funding veterans' medical care under that 
process has repeatedly failed, and will only continue to be 
unsatisfactory, the remedy is to guarantee adequate and stable funding 
through a permanent authorization that uses a reliable formula to 
project resource needs. Among all the meritorious issues to be 
addressed by this Committee this year, this issue is the most urgent 
and therefore the most important to veterans. We need strong bipartisan 
support from the members of this Committee to get legislation for 
mandatory funding, and we renew our earnest request for your support 
this year.
    In closing, I want to acknowledge and express the DAV's sincere 
appreciation for the advocacy and support veterans have received from 
this Committee. The Committee has acted favorably on many of the 
recommendations of the IB in past years, and many of the recommended 
changes are now in law, making the programs more effective for our 
veterans. Working together, the IB and this Committee have made 
numerous improvements in the benefits and the delivery system. We hope 
you will again find our recommendations meritorious and will shepherd 
legislation through this year to adopt more of them.

    Chairman Specter. Our next witness is Mr. Paul Hayden, 
National Legislative Service, Veterans of Foreign Wars of the 
United States. Thank you for coming in today, Mr. Hayden, and 
we will put your whole resume in the record.

    STATEMENT OF PAUL A. HAYDEN, DEPUTY DIRECTOR, NATIONAL 
  LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS OF THE UNITED 
                             STATES

    Mr. Hayden. Thank you, Mr. Chairman, Ranking Member Graham. 
As a member of The Independent Budget for VA, the VFW is 
responsible for the construction portion of the VA budget, so I 
will limit my testimony to that area.
    The President's fiscal year 2005 budget indicates that 
along with gross funding deficiencies in practically every VA 
account, VA construction is to be dramatically and most 
detrimentally shortchanged, as well. In fact, since 1993, VA 
construction funding has been in steady decline. The fiscal 
year 1993 combined major and minor construction total was $600 
million, and the fiscal year 2005 proposal is only $170 
million.
    VA's history of low construction budgets the last 12 years 
is an explicit indication of poor stewardship of the system's 
facility capital assets. It also flies in the face of statutory 
mandates to provide for the short- and long-term care needs of 
our most seriously service-connected veterans.
    Once again, the administration is proposing counting State 
nursing home beds as part of its long-term care capacity. We 
view this as an attempt to circumvent both the letter and 
intent of the law with a number of our most deserving and 
vulnerable veterans suffering as a consequence.
    Further, there continues to be a major resistance to fund 
an adequate construction budget before the CARES process has 
been completed. We have been supportive of the CARES process 
from the beginning as long as the primary emphasis is on the 
ES, enhanced services. However, we believe that it is poor 
policy to defer all VA construction needs until the CARES 
process is complete.
    We agree with the findings of the President's Task Force to 
Improve Health Care Delivery for Our Nation's Veterans. The VA 
must accomplish three key objectives. No. 1, invest adequately 
in the necessary infrastructure to ensure safe, functional 
environments for health care delivery. No. 2, right-size the 
respective infrastructures to meet projected demands for 
inpatient, ambulatory, mental health, and long-term care 
requirements. And finally, create abilities to respond to a 
rapidly changing environment using strategic and master 
planning to expedite new construction and renovation efforts.
    In order to accomplish these objectives, we recommend that 
Congress appropriate $571 million to the major construction 
account for fiscal year 2005, not the totally inadequate $97 
million asked for by the administration. This amount is needed 
for seismic correction, clinical environmental improvements, 
National Cemetery Administration construction, and land 
acquisition.
    We also call on Congress to appropriate $545 million to the 
minor construction account for fiscal year 2005 while rejecting 
the administration proposal of $69 million. These funds 
contribute to construction projects costing less than $7 
million while providing for inpatient and outpatient care and 
support, infrastructure, physical plant, and historic 
preservation projects.
    Mr. Chairman and members of this committee, this concludes 
my statement and I will be happy to answer any questions.
    Chairman Specter. Thank you. Thank you very much, Mr. 
Hayden.
    [The prepared statement of Mr. Hayden follows:]

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

    Mr. Chairman and Members of the Committee:
    On behalf of the 2.7 million men and women of the Veterans 
of Foreign Wars of the United States (VFW) and our Ladies 
Auxiliary, I would like to take this opportunity to thank you 
for being included in today's important hearing regarding the 
Department of Veterans Affairs (VA) budget. As a member of The 
Independent Budget for VA, the VFW is responsible for the 
Construction portion of the VA budget, so I will limit my 
testimony to that area.
    The VA construction budget includes major construction, 
minor construction, grants for construction of State extended 
care facilities, grants for State veterans' cemeteries and the 
parking garage revolving fund.
    The President's fiscal year 2005 budget indicates that, 
along with gross funding deficiencies in practically every VA 
account, VA construction is to be dramatically and most 
detrimentally short-changed as well. In fact, since 1993, VA 
construction funding has been in steady decline. The fiscal 
year 1993 combined total was $600 million and the fiscal year 
2005 proposal is only $200 million once the Capitol Asset 
Realignment for Enhanced Services (CARES) is backed out. VA's 
history of low construction budgets the last 12 years is an 
explicit indication of poor stewardship of the system's 
facility capital assets. It also flies in the face of moral as 
well as statutory mandates to provide for the short- and long-
term care needs of our most seriously service connected 
veterans. Once again, the administration is proposing counting 
State nursing home beds as part of its own long-term capacity. 
We view this as an attempt to circumvent both the letter and 
intent of the law with a number of our most deserves and 
vulnerable veterans suffering as a consequence.
    Further, there continues to be major resistance to fund an 
adequate construction budget before the CARES process has been 
completed. We have been supportive of the CARES process from 
the beginning, as long as the primary emphasis is on the 
``ES''-enhanced services; however, we believe that it is poor 
policy to defer all VA construction needs until CARES is 
complete.
    Currently, most VA medical centers, with an average age of 
54 years, are in critical need of repair. Sadly, the prospect 
of system-wide capital asset realignment through the CARES 
process has been used as an excuse to hold all construction 
projects hostage. These projects are essential to patient 
safety; moreover, they will eventually pay for themselves 
through future savings as a result of modernization. The 
ongoing reconfiguration of the system through CARES must not 
distract VA from its obligation to protect its current assets 
by postponing needed funding for the construction, maintenance 
and renovations of VA facilities.
    While we still believe the CARES process should proceed, we 
perceive a need for further data to support various 
recommendations that would close or change missions of certain 
VA long-term care and small-size facilities. These data should 
include such items as a cost analysis associated with these 
changes to include the costs of transferring patients and 
staff; the cost associated with contracting for care in the 
community; the cost related to shutting down and disposing of 
property to include asbestos removal; the cost to build or 
lease new facilities like community-based clinics and patient 
bed towers to include associated site elements to make the 
building functional, such as equipment, relocation, and 
activation costs; and updating facility infrastructures to 
handle additional patient workloads while maintaining privacy 
and safety requirements.
    We acknowledge that the VA Office of Facilities Management 
has assembled construction cost data for various functional 
building types; however, the inclusion of the aforementioned 
cost could provide the rationale for reconsidering some 
decisions.
    In addition, the assumption that Congress will adequately 
fund all CARES proposed changes must be questioned. The VFW and 
other Independent Budget Veterans Service Organizations (IBVSO) 
are concerned that when CARES implementation costs are factored 
into the appropriations process, Congress will not fully fund 
the VA system, further exacerbating the current obstacles 
impeding veterans' access to quality health care in a timely 
manner. It is our opinion that VA should not proceed with CARES 
changes until sufficient funding is appropriated for the 
construction of new facilities and renovation of existing 
hospitals is approved.
    We recommend that Congress appropriate $571 million to the 
Major Construction Account for fiscal year 2005, not the 
totally inadequate $97 million asked for by the administration. 
This amount is needed for seismic correction, clinical 
environment improvements, National Cemetery Administration 
construction, land acquisition, and claims. Allocated as 
follows: Seismic Improvements--$285,000; Clinical 
Improvements--25,000; Patient Environment--10,000; Research 
Infrastructure Upgrade and Replacement--50,000; Advance 
Planning Fund--60,000; Asbestos Abatement--60,000; National 
Cemetery Administration--81,000; IB Recommended fiscal year 
2005 Appropriation--$571,000.
    We also call for the Congress to appropriate $545 million 
to the Minor Construction Account for fiscal year 2005 while 
rejecting the administration proposal of $69 million. These 
funds contribute to construction projects costing less than $7 
million. This appropriation also provides for a regional office 
account, National Cemetery Administration account, improvements 
and renovation in VA's research facilities, a staff office 
account, and an emergency fund account. Increases provide for 
inpatient and outpatient care and support, infrastructure, 
physical plant, and historic preservation projects. Allocated 
as follows: Inpatient Care Support--$130,000; Outpatient Care 
and Support--100,000; Infrastructure and Physical Plant--
150,000; Historic Preservation Grant Program--25,000; Other--
25,000; VBA Regional Office Program--35,000; National Cemetery 
Program--35,000; and VA Research Facility Improvement and 
Renovation--45,000; IB Recommendation fiscal year 2005 
Appropriation--$545,000.
    Annually, the VHA submits a list of Top 20 Priority Major 
Medical Construction Projects to Congress, which identifies the 
major medical construction projects that have the highest 
priority within VA. This list includes buildings that have been 
deemed as ``significant'' seismic risk and buildings that are 
at ``exceptionally high risk'' of catastrophic collapse or 
major damage. Currently, 890 of VA's 5,300 buildings have been 
classified as significant seismic risk, and 73 VHA buildings 
are at exceptionally high risk.
    The IBVSO's believe, as we have indicated in the past, that 
there is ill-advised resistance to funding any major 
construction projects before the CARES process has been 
completed, and this includes correcting seismic deficiencies in 
VHA facilities. Regardless of the recommendations of the CARES 
program on facility realignments, it is our contention that VA 
must maintain and improve its existing facilities to support 
the delivery of health-care services in a risk-free environment 
for veterans and VA employees alike.
    Most seismic correction projects should include patient-
care enhancements as part of their total scope. Also, 
consideration must be given to enhanced service recommendations 
provided for in CARES. Due to the lengthy and widespread 
disruption to ongoing hospital operations that are associated 
with most seismic projects, it would be prudent to make 
qualitative medical care upgrades at the same time.
    We contend that Congress should appropriate $285 million to 
correct seismic deficiencies. Further, VA should schedule 
facility improvement projects and CARES recommendations 
concurrently with seismic corrections.
    In The Independent Budget for Fiscal Year 2004, we cited 
the recommendations of the interim report of The President's 
Task Force to Improve Health-Care Delivery for Our Nation's 
Veterans (PTF). That report was made final in May 2003. To 
underscore the importance of this issue, we will cite the 
recommendation of the PTF again this year.
    VA's health-care facility major and minor construction over 
the 1996 to 2001 period averaged only $246 million annually, a 
recapitalization rate of 0.64 percent of the $38.3 billion 
total plant replacement value. At this rate, VA will 
recapitalize its infrastructure every 155 years. When 
maintenance and restoration are considered with major 
construction, VA invests less than 2 percent of plant 
replacement value for its entire facility infrastructure. A 
minimum of 5 percent to 8 percent investment of plant 
replacement value is necessary to maintain a healthy 
infrastructure. If not improved, veterans could be receiving 
care in potentially unsafe, dysfunctional settings. 
Improvements in the delivery of health care to veterans require 
that VA and DOD adequately create, sustain, and renew physical 
infrastructure to ensure safe and functional facilities.
    It was also recommended by the PTF that ``an important 
priority is to increase infrastructure funding for 
construction, maintenance, repair, and renewal from current 
levels. The importance of this initiative is that the physical 
infrastructure must be maintained at acceptable levels to avoid 
deterioration and failure.''
    The PTF also indicated that ``Within VA, areas needing 
improvement include developing systematic and programmatic 
linkage between major construction and other lifecycle 
components of maintenance and restoration. VA does not have a 
strategic facility focus, but instead submits an annual top 20 
facility construction list to Congress. Within the current 
statutory and business rules, VA can bring new facilities 
online within 4 years. However, VA facilities are constrained 
by reprogramming authority, inadequate investment, and lack of 
a strategic capital-planning program.''
    The PTF believes that VA must accomplish three key 
objectives:
    (1) invest adequately in the necessary infrastructure to 
ensure safe, functional environments for healthcare delivery;
    (2) right-size their respective infrastructures to meet 
projected demands for inpatient, ambulatory, mental health, and 
long-term care requirements; and
    (3) create abilities to respond to a rapidly changing 
environment using strategic and master planning to expedite new 
construction and renovation efforts.
    Additionally, it was recommended by the PTF that ``an 
important priority is to increase infrastructure funding for 
construction, maintenance, repair, and renewal from current 
levels.''
    In a study completed in 1998, Price Waterhouse was asked to 
determine the spending level required to ensure that the 
Veterans Health Administration's (VHA) investment in facility 
assets would be adequately protected against adverse 
deterioration and to keep the average condition of facilities 
at an appropriate level. Price Waterhouse concluded that the 
VHA was significantly underfunding its construction spending, 
and based on their observations across the industry, 
appropriate annual spending should be between 2 percent and 4 
percent of the plant replacement value (PRV) on reinvestment to 
replace aging facilities. Price Waterhouse considered 
reinvestment to be improvements funded from the major and minor 
construction appropriations. PRV for the VHA is approximately 
$35 billion. The 2 percent-4 percent range would therefore 
equate to annual funding of $700 million to $1.4 billion.
    The VFW supports the Price Waterhouse recommendation that 
VA spend at least 2 percent of the value of its buildings or 
$700 million annually on upkeep. Together with the IBVSO's, we 
believe that $400 million should be appropriated in fiscal year 
2005 with continued increases in the following years until an 
appropriate level of funding, that will forestall the continued 
deterioration of VA properties, is achieved.
    Congress should appropriate no less than $400 million for 
nonrecurring maintenance in fiscal year 2005 to provide for 
adequate building maintenance. VA should direct no less than 
$400 million for nonrecurring maintenance in fiscal year 2005. 
VA should also make annual increments in nonrecurring 
maintenance in the future until 2 percent of the value of its 
buildings is budgeted and utilized for nonrecurring 
maintenance.
    Good stewardship demands that VA facility assets be 
protected against deterioration and that an appropriate level 
of building services be maintained. Given VA's construction 
needs, such as seismic correction, compliance with the 
Americans with Disabilities Act (ADA) and Joint Commission of 
Accreditation of Healthcare Organization (JCAHO) standards, 
replacing aging physical plant equipment, and CARES, VA's 
construction budget continues to be inadequate.
    In addition, it has been suggested that the VA medical 
system has vast quantities of empty space that can be cost 
effectively reused for medical services. It has also been 
suggested that unused space at one medical center may help 
address a deficiency that exists at another. Although the space 
inventories may be accurate, the basic assumption regarding 
viability of space reuse is not.
    Medical facility planning is a complex task because of the 
intricate relationships that must be provided between 
functional elements and the demanding technical requirements of 
the sophisticated equipment that must be accommodated. For 
these reasons, space in medical facilities is rarely 
interchangeable--except at a prohibitive cost. Unoccupied rooms 
located on a hospital's eighth floor, for example, cannot 
offset a space deficiency in a second floor surgery because 
there is no functional adjacency. Medical space has very 
critical inter- and intra-departmental adjacencies that must be 
maintained for efficient and hygienic patient care. In order to 
maintain these adjacencies, departmental expansions or 
relocations usually trigger extensive ``domino'' impacts on the 
surrounding space. These secondary impacts greatly increase 
construction costs and patient care disruption.
    Some permanent features of medical space, such as floor-to-
floor heights, column-bay spacing, natural light, and 
structural floor loading, cannot be altered. Different medical 
functions have different technical requirements based on these 
permanent characteristics.
    Laboratory or clinical space, for example, is not 
interchangeable with patient ward space because of the need for 
different column spacing and perimeter configuration. Patient 
rooms need natural light and column locations that are 
compatible with patient room layouts. Laboratories should have 
long structural bays and function best without windows. If the 
``shell'' space is not appropriate for its purpose, renovation 
plans will be larger and more inefficient and therefore cost 
more.
    Using renovated space rather than new construction yields 
only marginal cost savings. Build out of a ``gut'' renovation 
to accommodate medical functions usually costs approximately 85 
percent of the cost of similar new construction. If the 
renovation plan is less efficient, or the ``domino'' impact 
costs are greater, the small potential savings are easily lost. 
Renovation projects often cost more and produce a less 
satisfactory result. Renovations are sometimes appropriate to 
achieve desirable functional adjacencies, but they are rarely 
economical.
    Early VA medical centers used flexible campus-type site 
plans with separate buildings serving different functions. 
Since World War II, however, most main hospitals have been 
consolidated into large, tall ``modern'' structures. Over time, 
these central medical towers have become surrounded by 
radiating wings and connecting corridors leading to secondary 
structures. Many current VA medical centers are built around 
prototypical ``Bradley buildings.'' These structures were 
rapidly constructed in the 1940's and 1950's for returning 
World War II veterans.
    Fifty years ago, these brick facilities were easily site-
adapted and inexpensive to build, but today they provide a very 
poor chassis for a modern hospital. Because most Bradley 
buildings were designed before the advent of air conditioning, 
for example, the floor-to floor heights are very low. This 
makes it almost impossible to retrofit modern mechanical 
systems. The older hospital's wings are long and narrow (in 
order to provide operable windows) and therefore provide 
inefficient room layouts by contemporary standards. The Bradley 
hospital's central service core with a few small elevator 
shafts is inadequate for the vertical distribution of modern 
medical services.
    In addition, much of the currently vacant space is not 
situated in prime locations. If the space were, it would have 
been previously renovated or demolished to clear the way for 
new additions. Unused space is typically located in outlying 
buildings or on upper floor levels. Its permanent 
characteristics often make it unsuitable for modern medical 
functions.
    VA should perform a comprehensive analysis of its excess 
space and deal with it appropriately. Some of this space is 
located in historic structures that must be preserved and 
protected. Some space may be appropriate for enhanced use. Some 
may be appropriate for demolition. While it is tempting to 
focus on unused space, it should not be a major determinant in 
CARES realignments. Each medical center should develop a plan 
to find appropriate uses for its vacant properties.
    Mr. Chairman and members of this Committee, this concludes 
my statement and I will be happy to respond to any questions 
you may have.

    Chairman Specter. Our final witness in this round is Mr. 
Rick Jones, National Legislative Director of AMVETS. Thank you 
for being with us, Mr. Jones, and the floor is yours.

  STATEMENT OF RICHARD JONES, NATIONAL LEGISLATIVE DIRECTOR, 
                             AMVETS

    Mr. Jones. Thank you, Mr. Chairman, Ranking Member Graham. 
It is an honor to be here with you today and I would like to 
note appreciation for your strong leadership and continuing 
support.
    Last year, Mr. Chairman, you played a critical role in 
terminating a dark-of-night proposal to make future disabled 
veterans pay the compensation of past veterans for their 
service-connected injury and we applaud you for your stand up, 
stand out defense of veterans. Thank you very much.
    Mr. Chairman, without your strong commitment, Congress may 
fall short of providing the appropriations necessary to ensure 
that burial space for millions of veterans and their eligible 
dependents will be provided. The Independent Budget Veterans 
Service Organizations do work together and we work to ensure 
that the National Cemetery Administration remains a world 
class, quality service that honors veterans and recognizes 
their contribution to the security and development of our 
nation.
    The members of The Independent Budget recommend Congress 
provide $175 million in fiscal year 2005 for the operational 
requirements of the National Cemetery Administration, the 
National Shrine Initiative, and the backlog of repairs. We 
recommend your support for a budget that would be consistent 
with NCA's growing demands and in concert with the respect that 
is due every man and woman who ever wore the uniform of the 
Armed Service of the United States. This is an increase of 
nearly $30 million over current year funding.
    Funding for the State Cemetery Grants program, the members 
of The Independent Budget recommend $37 million in the new 
fiscal year. The intent of the State Cemetery Grants program is 
to develop a true complement to, not a replacement of, the 
National Cemetery System and it is a vital program. It has 
greatly assisted States to increase burial service to veterans, 
especially those living in more rural areas, less densely-
populated areas that are not currently served by the National 
Cemetery System. For example, in the current year, the IBO's 
anticipate fast track opening in Idaho, Kansas, Massachusetts, 
and the Tidewater area of Virginia, where over 200,000 veterans 
reside.
    The IB VSO's also recommend a series of upgrades on a 
number of burial benefits that have eroded over time since 
their initiation in 1973. The legislative proposals are part of 
the fiscal year 2005 Independent Budget and we ask for 
consideration of these proposals.
    Mr. Chairman, I would just note one thing. On the cover of 
The Independent Budget, you will note that in the bottom left 
hand corner there is an individual in a wheelchair who has lost 
a leg who is sitting with his family. The picture above is also 
a picture of the same individual standing with his comrades 
prior to injury. I think this is important for us to note, that 
individuals who we expect to return, in full health as Priority 
8 veterans may return otherwise. But in each case, it's a 
Priority 8 veteran who needs to step forward when a fellow 
soldier is injured, hurt, or, unfortunately, killed. We don't 
win our battles and we don't have victory without that 
commitment.
    Thank you, sir, and God bless America.
    Chairman Specter. Thank you. Thank you very much, Mr. 
Jones.
    [The prepared statement of Mr. Jones follows:]

  Prepared Statement of Richard Jones, National Legislative Director, 
                                 AMVETS

    Mr. Chairman, Ranking Member Graham, and members of the Committee:
    AMVETS is honored to join fellow veterans service organizations at 
this hearing on the VA's budget request for fiscal year 2005. We are 
pleased to provide you our best estimates on the resources necessary to 
carry out a responsible budget for the fiscal year 2005 programs of the 
Department of Veterans Affairs. AMVETS testifies before you today as a 
co-author of The Independent Budget. This is the 18th year AMVETS has 
worked with the Disabled American Veterans, the Paralyzed Veterans of 
America, and the Veterans of Foreign Wars to produce a working document 
that sets out our spending recommendations on veterans' programs for 
the new fiscal year. Indeed, we are proud that over 30 veteran, 
military, and medical service organizations endorse these 
recommendations. In whole, these recommendations provide decisionmakers 
with a rational, rigorous, and sound review of the budget required to 
support authorized programs for our nation's veterans.
    In developing this document, we believe in certain guiding 
principles. Veterans must not be forced to wait for the benefits 
promised them. Veterans must be assured of access to high quality 
health care. Veterans must be guaranteed access to a full continuum of 
healthcare services, including long-term care. And, veterans must be 
assured burial in a State or national cemetery in every state.
    It is our firm belief that the mission of the VA must continue to 
include support of our military in times of emergency and war. Just as 
this support of our military is essential to national security, the 
focus of the VA medical system must remain centered on specialized 
care. VA's mission to conduct medical and prosthetics research in areas 
of veterans' special needs is critical to the integrity of the veterans 
healthcare system and to the advancement of American medicine.
    In addition, the budget must recognize that VA trains most of the 
nation's healthcare workforce. The VA healthcare system is responsible 
for great advances in medical science, and these advances benefits all 
Americans. The Veterans Health Administration is the most cost-
effective application of Federal healthcare dollars, providing benefits 
and services at 25 percent lower cost than other comparable medical 
services. In times of national emergency, VA medical services can 
function as an effective backup to the DoD and FEMA.
    Noting the mission of the VA, it is important to understand the 
areas where VA funding must be increased. The VA budget must address 
the pending wage increases for VA employees. It must address the 
continuing backlog in veterans waiting for health care and it must 
address, as well, VA's benefits casework backlog. There are severely 
disabled veterans and those needing home-based healthcare in those 
backlogs, and I think we can all agree that this situation should be 
addressed and corrected.
    As we look to fiscal year 2005, we watch a live lesson about the 
challenges inherent to inadequate funding. Due to a lack of resources, 
VA took action on January 17, 2003, to ban healthcare access to 164,000 
veterans who could have enrolled last year. This ban remains in force, 
despite substantial increases in healthcare funding over the past 2 
years. It is remarkable that after blocking entry to these so-called 
``high income'' veterans, VA issued a healthcare directive (VHA 
Directive 2003-003, January 17, 2003) telling workers to send banned 
veterans to Community Social Work for assistance.
    It is hoped that recently passed provisions contained in the fiscal 
year 2004 appropriations bill, which aim to overcome VHA Directive 
2003-003, will remedy this breach of faith. When an individual commits 
to the defense of the rest of us, undertakes training that is 
inherently more dangerous than the typical civilian occupation, and 
stands ready to go into harm's way so that others need not, this 
country's gratitude should not be demonstrated with a simple referral, 
however courteous and sincere, to the welfare line.
    Looking to the new year, The Independent Budget recommends Congress 
provide $29.8 billion to fund VA medical care for fiscal year 2005, an 
increase of nearly $3.1 above fiscal year 2004. We ask Congress to 
recognize that the VA healthcare system is an excellent investment for 
America. It can only bring quality health care, however, if it receives 
adequate funding.
    We also ask Congress to understand that there are other potential 
challenges regarding veterans health care especially in regard to a new 
generation of veterans returning from Iraq, Afghanistan and the war on 
terrorism. By last year's count, more than 80,000 veterans who returned 
from the war have sought VA health care. And, it is likely the demand 
will remain strong for the foreseeable future. To facilitate their 
care, it is important that Congress work with the administration to 
accelerate the development of a seamless, transferable lifetime medical 
record between the DoD and VA.
    It is also important to clearly State that AMVETS along with its IB 
partners strongly support shifting VA healthcare funding from 
discretionary funding to mandatory. Mandatory funding would give some 
certainty to healthcare services. VA facilities would not have to deal 
with the uncertainty of discretionary funding, which has proven 
inconsistent and inadequate. Mandatory funding would provide a 
comprehensive solution to the current funding problem. Once healthcare 
funding matched the actual average cost of care for veterans enrolled 
in the system, the VA can fulfill its mission.

                  THE NATIONAL CEMETERY ADMINISTRATION

    Before I address budget recommendations for the National Cemetery 
Administration, I would like members of the Committee to know that 
AMVETS fully appreciates the strong leadership and continuing support 
demonstrated by members of the Senate Veterans' Affairs Committee. 
AMVETS is truly grateful to those who serve on this important 
committee. Through your work, you have distinguished yourselves as 
willing to lead the country in addressing issues important to veterans 
and their families.
    Since its establishment, the National Cemetery Administration (NCA) 
has provided the highest standards of service to veterans and eligible 
family members in the system's 120 national cemeteries.
    Currently, the National Cemetery Administration maintains more than 
2.6 million gravesites on approximately 14,000 acres of cemetery land, 
while providing nearly 90,000 interments annually.
    VA is scheduled to open new cemeteries in Atlanta, GA; Oklahoma 
City, OK; Pittsburgh, PA; Detroit, MI; Miami, FL; and Sacramento, CA. 
Also under legislation passed last year (P.L. 108-109), VA is directed 
to design and construct cemeteries at six new national locations in 
Philadelphia, Pennsylvania; Birmingham, Alabama; Jacksonville, Florida; 
Bakersfield, California; Greenville, South Carolina; and Sarasota 
County, Florida.
    The strong effort to build new cemeteries recognizes the dramatic 
increases in the interment rate of veterans. NCA requires increases in 
funding if it is to carry out its statutory mandates. Without the firm 
commitment of Congress and its authorizing and appropriations 
committees, VA would likely fall short of burial space for millions of 
veterans and their eligible dependents.
    The members of The Independent Budget urge Congress and the 
administration to significantly boost NCA resources for fiscal year 
2005. It should be recognized that not only is the interment rate 
increasing and the construction of new facilities accelerating, but 
also there are repair and upgrades needed. The Study on Improvements to 
Veterans Cemeteries, a comprehensive report submitted in 2002 by VA to 
Congress on conditions at each cemetery, identified nearly $300 million 
in over 900 projects for gravesite renovation, repair, upgrade, and 
maintenance.
    As any public facilities manager knows, failure to correct 
identified deficiencies in a timely fashion results in continued, often 
more rapid, deterioration of facilities and increasing costs related to 
necessary repair. The IBVSO's agree with this assessment and believe 
that Congress needs to carefully consider this report to address the 
condition of NCA cemeteries and ensure they remain respectful settings 
for deceased veterans and visitors. We recommend that Congress and VA 
work together to establish a timeline for funding these projects based 
on the severity of the problems.
    Volume 3 of the Study describes veterans cemeteries as national 
shrines saying that one of the most important elements of veterans 
cemeteries is honoring the memory of America's brave men and women who 
served in the Armed Forces. ``The commitment of the nation,'' the 
report says, ``as expressed by law, is to create and maintain national 
shrines, transcending the provisions of benefits to the individual even 
long after the visits of families and loved ones.''
    Indeed, Congress formally recognized veterans cemeteries as 
national shrines in 1973 stating, ``All national and other veterans 
cemeteries'' shall be considered national shrines as a tribute to our 
gallant dead.'' (P.L. 93-43) Moreover, many of the individual 
cemeteries within the system are steeped in history and the monuments, 
markers, grounds and related memorial tributes represent the very 
foundation of these United States. With this understanding, the 
grounds, including monuments and individual sites of interment, 
represent a national treasure that deserves to be protected and 
nurtured.
    Unfortunately, despite NCA continued high standards of service and 
despite a true need to protect and nurture this national treasure, the 
system has and continues to be seriously challenged. The current and 
future needs of NCA require continued adequate funding to ensure that 
NCA remains a world-class, quality operation to honor veterans and 
recognize their contribution and service to the Nation.
    The members of The Independent Budget recommend that Congress 
provide $175 million in fiscal year 2005 for the operational 
requirements of NCA, the national Shrine initiative, and the backlog of 
repairs. We recommend your support for a budget consistent with NCA's 
growing demands and in concert with the respect due every man and woman 
who wears the uniform of the United States Armed Forces. This is an 
increase of nearly $30 million over current year funding.
    Clearly, the aging veteran population has created great demands on 
NCA operations. Nearly 655,000 veterans deaths are estimated in 2005 
with the death rate peaking at 690,000 in 2009; of these, it is 
expected that 109,000 will seek burial in a national cemetery. As 
veteran deaths accelerate, it is obvious the demand for veterans' 
burial benefits will increase.

                   THE STATE CEMETERY GRANTS PROGRAM

    For funding the State Cemetery Grants Program, the members of The 
Independent Budget recommend $37 million for the new fiscal year. The 
intent of the State Cemetery Grants Program is to develop a true 
complement to, not a replacement for, our Federal system of national 
cemeteries.
    With enactment of the Veterans Programs Enhancement Act of 1998, 
the NCA has been able to strengthen its partnership with States and 
increase burial service to veterans; especially those living in less 
densely populated areas not currently served by a national cemetery.
    During fiscal year 2004, the IBVSO's anticipate fast-track openings 
at new cemeteries under construction--Boise, Idaho (the last State in 
the United States without a veterans cemetery); Wakeeny, Kansas (300 
miles east of Denver and west of Kansas City, serving rural areas in 
western Kansas); Winchendon, Massachusetts (serving the densely 
populated northern part of the State); and Suffolk, Virginia (serving 
200,000 veterans in the Tidewater area).
    To augment support for veterans who desire burial in State 
facilities, members of The Independent Budget support increasing the 
plot allowance to $725 from the current level of $300. The plot 
allowance now covers less than 6 percent of funeral costs. Increasing 
the burial benefit to $725 would make the amount nearly proportional to 
the benefit paid in 1973. In addition, we firmly believe the plot 
allowance should be extended to all veterans who are eligible for 
burial in a national cemetery not solely those who served in wartime.
    The Independent Budget veterans service organizations (IBVSO's) 
also request Congress review a series of burial benefits that have 
seriously eroded in value over the years. While these benefits were 
never intended to cover the full costs of burial, they now pay for only 
a fraction of what they covered in 1973, when they were initiated.
    The IBVSO's recommend an increase in the service-connected benefits 
from $2,000 to $4,000. Prior to action in the last Congress, increasing 
the amount to $2,000, the benefit had been untouched since 1988. The 
request would restore the allowance to its original proportion of 
burial expense.
    The IBVSO's recommend increasing the nonservice-connected benefit 
from $300 to $1,225, bringing it back up to its original 22 percent 
coverage of funeral costs. This benefit was last adjusted in 1978, and 
today covers just 6 percent of burial expenses.
    The IBVSO's also recommend that Congress enact legislation to index 
these burial benefits for inflation to avoid their future erosion.
    Mr. Chairman, this concludes my statement. I thank you again for 
the privilege to present our views, and I would be pleased to answer 
any questions you might have.

    Chairman Specter. I would like to ask just a few questions 
at the moment. I would like each of you to comment on the 
proposals for mandatory funding. That has been a subject under 
discussion for a considerable period of time which would avoid 
the discretionary consideration each year, but the other side 
of it is it might not produce the kind of analysis and 
thoughtful examination depending upon the circumstances.
    I would just like you to go down the row and tell me if you 
would like to see mandatory funding.
    Mr. Gaytan. Thank you for the question, first off. The 
American Legion fully supports mandatory funding and it is 
going to be key for the equation that reaches the amount needed 
for VA health care to be adequate. The equation that is used 
must ensure that the cost for each veteran is an adequate cost 
when determining exactly what the overall funding for VA would 
be under a mandatory funding mechanism.
    Chairman Specter. Mr. Fuller, before you respond, Senator 
Graham would like to make a brief comment.
    Senator Graham. I apologize that I am going to have to 
leave for another 5 o'clock appointment, but I want to thank 
each of you for your contribution not only today, but with the 
excellent independent analysis that you have given to the VA's 
budget. That is very helpful to all the Members of the Congress 
and I thank you for that and appreciate your very helpful 
responses to the questions that I ask. Thank you very much.
    Chairman Specter. Thank you, Senator. Thank you very much, 
Senator Graham.
    Mr. Fuller, what do you think about mandatory funding?
    Mr. Fuller. Paralyzed Veterans of America fully supports 
the concept of mandatory funding. We have become increasingly 
frustrated year after year after year when it is a constant 
battle, the budget fight that goes on. You hardly get one 
appropriation taken care of and you are already battling for 
the next year's budget request. We think that it is not only 
the question of how much you get, as I said in my statement, 
but when you get it. In the past 2 years alone, VA has----
    Chairman Specter. Mr. Surratt, your view?
    Mr. Surratt. The DAV is one of the nine organizations, I 
believe, that is in the coalition supporting mandatory funding. 
We have a problem. We know what that problem is. We have a 
solution. There have been questions raised about whether a 
mandatory formula and the law would be flexible enough, but we 
project funding for discretionary appropriations and I believe 
that Congress can come up with a formula that makes necessary 
adjustments by making funding mandatory in law.
    Chairman Specter. Mr. Hayden.
    Mr. Hayden. VFW fully supports mandatory funding, sir.
    Chairman Specter. Mr. Jones, do you dissent?
    Mr. Jones. No, sir. No, sir.
    Chairman Specter. On the issue of copays or entrance fees, 
is there any level that there would be any support for the VA 
proposals and their ways sprinkled all through the VA budget to 
try to raise some revenues, any means testing at all which 
would be acceptable to the veterans' organizations?
    Mr. Jones.
    Mr. Jones. We have a means test, sir. The interesting thing 
is that these user fees seem more intended to drive veterans 
away. VA projections last year on user fees suggested up to 1.2 
million veterans who were currently enrolled would not re-
enroll if they had to pay a user fee. The current projections 
with this smaller user fee is that over 300,000 veterans would 
not return and 200,000 would have trouble returning. That is 
about a half-a-million.
    Chairman Specter. So you are opposed to all the user fees?
    Mr. Jones. I think the user fees are intended to go about 
it in the wrong way, sir. Yes, we are opposed.
    Chairman Specter. Mr. Hayden.
    Mr. Hayden. The VFW is opposed to user fees, as well, sir.
    Chairman Specter. Mr. Surratt.
    Mr. Surratt. The DAV is opposed to user fees.
    Chairman Specter. Mr. Fuller.
    Mr. Fuller. The PVA is opposed to user fees.
    Mr. Gaytan. The American Legion is, as well.
    Chairman Specter. Mr. Gaytan, it is up to you.
    Mr. Gaytan. Yes, sir. We oppose it, as well.
    Chairman Specter. The final question, and the hour is 
growing late and you have been very patient, the VA customer 
performance satisfaction rating remains low at 55 percent, 
despite stated increases in performance. First of all, do you 
think that there have been increases or improvement in 
performance? Does anybody think that is so in the VA?
    Mr. Gaytan. Sir, if you are mentioning performance as 
quality of care, yes, the American Legion recognizes the 
improvement in quality of care over the past 20 years. But as I 
stated earlier----
    Chairman Specter. How would you account, Mr. Gaytan, for 
the fact that the customer satisfaction remains low at 55 
percent?
    Mr. Gaytan. I think it would be due to wait times. Wait 
times for care----
    Chairman Specter. Wait times?
    Mr. Gaytan. Yes, sir. Not only the extended wait times for 
months to get into the facility, but those wait times within 
the waiting rooms themselves. As I stated earlier, the American 
Legion has put together the System Worth Saving Task Force and 
we are out there visiting these facilities. Just this past 
week, we visited six different facilities in three different 
States and we are accruing that information. We are going to 
present that again to you this year, sir.
    Chairman Specter. Does anybody else care to comment on that 
question?
    Mr. Jones.
    Mr. Jones. Well, it is an anomaly. It is hard to figure 
out, because what we hear is that once you are in, veterans are 
very pleased with the care. Fifty-five percent expression of 
performance and quality, that is interesting. I had not seen 
that. I thought that the performance and quality was way up and 
those who were in the system were well pleased with the care 
they received.
    Chairman Specter. Mr. Fuller, what do you think?
    Mr. Fuller. I think that we have a double-edged sword here. 
What we have always heard is that once you got into the VA, you 
said this was the greatest thing since sliced bread and I 
really love the VA. I am really surprised to see those figures. 
I would have assumed that they would have been higher, as well. 
I would be very interested in seeing a copy of that and also 
seeing if the committee staff could follow up on that for us in 
being able to find out from the VA what is going on here, 
because that is really rather astonishing.
    Chairman Specter. Mr. Surratt.
    Mr. Surratt. I really don't have anything to add to that, 
Mr. Chairman. Our impression has been that veterans appreciate 
the care they get and think it is very good.
    Chairman Specter. Mr. Hayden.
    Mr. Hayden. I agree with my colleagues at the table.
    Chairman Specter. The hearing ran a lot longer than we 
would ordinarily expect. You had eight Senators here today. 
That constituted a quorum. We haven't had a--I can't recall 
when we had a quorum with this hearing before, but I think that 
attests to the tremendous interest that the United States, this 
committee, and the whole Senate and the whole Congress have 
about veterans' issues.
    We are looking at a very, very difficult budget. There is 
no doubt about the need for more homeland security and there 
has been a 9.7 percent increase there, more for national 
defense, 7 percent without even accounting for Iraq and 
Afghanistan, which is later, and the discretionaries are 
overall less than a half-a-percent. So the Veterans 
Administration did better than most.
    But we will take a very, very close look at it, and I was 
pleased, as I said, to see Secretary Principi very candidly 
tell the House that they thought they ought to have more money, 
$1.2 billion, and we admire the work that your service 
organizations are giving. We are going to submit detailed 
questions and we will take into account your full statements 
and staff will be in touch with you further. Thank you for 
providing some bedtime reading.
    [Laughter.]
    Chairman Specter. One very short story. When I was one of 
the younger stories--and I say younger because I am still a 
young lawyer--for the Warren Commission staff, we had to 
produce 400 pages every Friday for Earl Warren because he was 
an insomniac and he couldn't fall asleep unless he had more to 
read than he could possibly read. So our assignment--this is a 
serious point, not the only serious point today but a serious 
point--we had to provide 400 pages for Warren every Friday. So 
thank you for providing some pages for me.
    [Laughter.]
    Mr. Surratt. Mr. Chairman, we are disappointed to learn 
that the independent budget is a cure for insomnia.
    [Laughter.]
    Chairman Specter. Thank you all. The hearing is adjourned.
    [Whereupon, at 5:08 p.m., the committee was adjourned.]
  

                                  
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