[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                     DEPARTMENT OF VETERANS AFFAIRS
                           BUDGET REQUEST FOR
                            FISCAL YEAR 2006
============================================================================

                                HEARING

                              before the

                               COMMITTEE 
                                   ON
                            VETERANS'AFFAIRS

                        HOUSE OF REPRESENTATIVES

                       one hundred ninth congress

                              first session

                                 -------

                            February 16, 2005

                                 -------

           Printed for the use of the Committee on Veterans' Affairs

                            Serial No. 109-1

                    U.S. GOVERNMENT PRINTING OFFICE
20-426                      WASHINGTON : 2005
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Department of Veterans Affairs
Budget Request for Fiscal Year 2006

Wednesday, February 16, 2005

House of Representatives
Committee on Veterans' Affairs,
Washington, DC

    The Committee met, pursuant to notice, at 10:08 a.m., in Room 334, Cannon House Office Building, Hon. Steve Buyer, [Chairman of the Committee] presiding.
    Present:  Representatives Buyer, Evans, Bilirakis, Filner, Brown of Florida, Moran, Baker, Michaud, Brown of South Carolina, Herseth, Miller, Strickland, Boozman, Hooley, Berkley, and Udall.
    The Chairman.  The full Committee on Veterans' Affairs will come to order on February 16, 2005.
    We would like to welcome everyone to the first official hearing of the 109th Congress, which is testimony on the Department of Veterans' Affairs budget request for fiscal year 2006.
    Our first witness is the Secretary of Veterans' Affairs, the Honorable R. James (Jim) Nicholson, the Secretary nominated by the President on December 9, 2004.  He was unanimously confirmed by the Senate on January 26, 2005, and he took office on February 1, 2005.
    Today is February 16th.  So in 16 days, he should have all the answers today.  Mr. Secretary, we welcome you.
    I would now like to recognize Mr. Evans for any opening statement that he may have.  Mr. Evans?


OPENING STATEMENT OF HON. LANE EVANS, RANKING 

    Democratic Member, Committee on Veterans' Affairs

    Mr. Evans.  Thank you, Mr. Chairman.
    This budget submitted to us on February 7th is one of the most dishonest and insensitive documents I have seen in over two decades in Congress.
    The administration's budget not only severely shortchanges the nation's sick and disabled veterans, it seeks to force hundreds of thousands of deserving veterans out of the VA health care system and to abandon its long-term care obligations.  This will force the Department of Veterans' Affairs to sustain and even broaden the practice of rationing care to veterans that has been a hallmark of this administration.
    The bottom line is this, this budget is at least $3.2 billion short in discretionary funding just to keep the VA shop afloat without forcing one veteran to pay for another veteran's health care.
    The administration wants to put a financial burden on veterans seeking care.  We cannot accept this.
    The administration intends to weaken the VA health care system through a staff reduction of more than 3,000 health care professionals, mostly nurses.  We can't accept this.
    The budget proposal would eviscerate VA's nursing home program and state home nursing programs.  We must not accept that, either.
    Under the Bush budget, there are no new initiatives to improve the administration of benefits to veterans.  This is inexcusable.
    I want to thank the veterans organizations that put together an independent budget.  I want to thank those organizations who will testify later today.  And I want to thank Secretary Nicholson.  We look forward to your testimony.
    Thank you, Mr. Chairman.
    [The statement of Hon. Lane Evans appears on p. 58]


OPENING STATEMENT OF CHAIRMAN BUYER

    The Chairman.  Thank you, Mr. Evans.
    Mr. Secretary, I'm glad you could be with us here today to share with the Committee the President's proposed budget for 2006.
    Those of us on this Committee take very seriously our responsibility to ensure that the VA provides the highest quality health care for those who are enrolled now and those who will be enrolled in the future.  We are honored by the trust placed in us by our respective caucuses.  Capitol Hill can be a very partisan place.  Sometimes we can also hear the politics of extreme, not only by members but perhaps even worse, by some organizations that associate themselves here in the Capitol.
    When we walk through this hearing room door, our effort is to leave the partisanship aside.  That does not mean we will always agree.  We do not.  We communicate, and sometimes it is hard, but we work together so that we can provide the best possible services to those who have left freedom in their footsteps.  Our guiding principles are no different than those who serve.
    Last Friday I had an off-site meeting with many of the veteran and military service organizations in Charleston, South Carolina on the campus of the Citadel.
    I took with me the Subcommittee Chairman, and the staff directors.  We met with the top ten of the veterans service and military service organizations.
    We discussed how and where each participant who has served in the military took the oath of enlistment or of commissioning.
    The Vice Chairman of this Committee, Mr. Bilirakis, I'm sure can also remember where he took his oath for the Air Force.  I am also quite certain that, Mr. Brown, you can remember where you took your oath for your enlistment in the South Carolina National Guard.  I'm also quite certain it is true for Mr. Evans on where he took his oath in the United States Marine Corps, or Corporal Vic Snyder, who took his oath before he was shipped out to Vietnam with the United States Marines.
    Service in the Armed Forces does not make one person more patriotic than another.  Actually, I have always found that offensive.  We all serve this country in many different ways and many different capacities, and we all in an effort to do it with selfless service.
    One might have a father who served and now works on behalf of veterans at a veterans' hospital or a veterans' service organization, where they volunteer in some capacity to help a veteran.
    Another may not have served in the military but they also serve here in Congress.  They serve on the congressional staffs here for the Veterans' Affairs Committee.
    Mr. Secretary, I'm sure you have many loyal employees who work in your administration, many of whom perhaps never served in the military, but, because of their intent, their service I don't believe is much different from those who had served.
    I hope in your opening, I'm quite curious, I'd like to know where you took your oath.  You went to a military academy.  You took one there.  You also took another one upon your commissioning.
    Those of us who have been instilled with certain values, we call them our military values.  In the Navy and Marine Corps, it is honor, courage, commitment.  In the Army, it's loyalty, duty, respect, service, honor, integrity and courage.  In the Air Force, it's integrity first, service before self, excellence in all we do.  In the Coast Guard, it is honor, respect, devotion to duty.  In the Merchant Marine, it is integrity from within, respect for others, courage in diversity, and service above self.
    On Friday at the retreat in Charleston, we all agreed that these are the same values for which we serve now and will define our commitment to care for those veterans with Service-connected disabilities, those with low incomes and those with special health care needs.
    It is our job to receive this budget today, to listen and learn about how this administration seeks to better the VA and ensure that our health care resources continue to be concentrated on care for the enrolled veterans most in need of VA services.
    To make certain that our research continues to push the bounds of science in prosthetics; to have a seamless transition from DOD to VA to provide for timeliness of compensation and pension claims, and also to make sure that they are accurate and consistent; and to make sure that those men and women who come back receive not just governmental assistance, but receive an opportunity to live and to raise their quality of life above a paycheck.
    Mr. Secretary, several weeks ago, we met and discussed these very same issues.  We talked about how our role is not to provide just governmental assistance.  Many of us have been to Walter Reed and Bethesda.
    I know firsthand the significant challenges those men and women face.  Some of them need mental health care. Some may need physical therapies.  Some will need to learn to walk or to learn even how to throw a ball.
    We stand in amazement at their sacrifice and those willing and eager to join back with their unit, even though they have disabilities.  For those who cannot go back but instead go home, it is our job to make sure they have the ability to go home and be productive members of society and to live their lives, to have every opportunity to succeed.
    Mr. Secretary, I note from our conversation that you will join Mr. Evans, this Committee, and me in this endeavor to make the VA the best it possibly can be.
    I thank you again for your service to country, both as an Army Ranger, not only for your service in peace but also in war.  I also thank you for your service to this country as ambassador to the Vatican and for answering the call of this President to serve as the Secretary of Veterans' Affairs.
    We look forward to hearing your testimony today, and we look forward to working with you in the future.
    Mr. Secretary, if you would begin by introducing the staff who is accompanying you at the table, and then you may proceed with your opening statement.

STATEMENT OF THE HONORABLE R. JAMES NICHOL-
    SON, SECRETARY,  DEPARTMENT OF VETERANS AF-
    FAIRS;  ACCOMPANIED BY:  JONATHAN B. PERLIN, 
    M.D., ACTING UNDER SECRETARY FOR HEALTH;
   VICE ADMIRAL DANIEL L. COOPER, U.S. NAVY 
    (RETIRED), UNDER  SECRETARY FOR BENEFITS; 
    RICHARD A. WANNEMACHER, ACTING UNDER SEC-
    RETARY FOR MEMORIAL AFFAIRS; TIM McCLAIN, 
    GENERAL COUNSEL, RITA A. REED, DEPUTY ASSIST-
    ANT SECRETARY FOR BUDGET

    Secretary Nicholson.  Thank you, Mr. Chairman.  It is a pleasure for me to introduce my colleagues at this table.
    I will start with the gentleman to my far left, who is Tim McClain, who is General Counsel for the Department of Veterans Affairs.  To my immediate left is Dr. Jonathan Perlin, who is the Acting Under Secretary of the Veterans' Health Administration.
    To my far right, Dick Wannemacher, who is the Acting Under Secretary for The National Memorial Administration.  Coming this way is Admiral Dan Cooper, who is the Under Secretary for Benefits for the VA, and on my immediate right is Ms. Rita Reed, who is the Deputy Assistant Secretary for Budget.
    Mr. Chairman and members of the Committee, it is a pleasure for me to be here today.  It is the first time I've had the opportunity to appear before you.  I have now been in this job - this is the third day of my second full week.  As you will see, I have not become an expert in every aspect of this vast and wonderful organization, I will assure you and probably make obvious to you.
    It is a tremendous privilege for me to have the opportunity to be serving my fellow veterans and my country men in this capacity with this responsibility at this time.
    Mr. Chairman, I do remember when I took my oath.  I grew up in a town of 99 people in Northwest Iowa.  I got a telegram by Morse Code.  I'm not as old as Abe Lincoln, but it sounds like that.  I did.  It said I was admitted to West Point.
    I headed out, went to New York City from a town of 99 people way up the Hudson River.  On July 2, 1957, I took my oath and was sworn in as a member of the Corp Cadets and then was commissioned on June 7, 1961, where I also took my oath as a commissioned officer.  It was the best thing that ever happened to me in my life.
    I would ask that my written statement be submitted for the record and that I be allowed to offer some brief remarks.
    The Chairman.  Without objection, it will be entered.
    [The statement of Hon. R. James Nicholson appears on p. 72 ]

    Secretary Nicholson.  Mr. Chairman and members of the Committee, for the better part of a year, health care, benefits, and burial experts at the Department of Veterans' Affairs have worked closely with the President's team to assess the VA's future resource needs.
    Their goal was to ensure that VA continues to care for those veterans who count on us the most.  The President's fiscal year 2006 budget proposal for $70.8 billion meets that need.  $37.4 billion is proposed for entitlement programs, and $33.4 billion for discretionary programs.
    This total represents a 2.2 percent increase over the fiscal 2005 enacted level.
    The discretionary funding level would represent an increase of $880 million or 2.7 percent over the enacted level for 2005.
    The proposed mandatory spending level represents a $639 million or 1.7 percent increase over the 2005 level.
    When compared to the fiscal year 2001 enacted budget, this budget represents a total increase of about 47 percent in medical care funding, with a 44 percent increase in discretionary funding alone.  
    The President's 2006 proposal will allow us to do the following:  meet the health care and benefit needs of all newly separated veterans of the conflicts in Iraq and Afghanistan.  Maintain the high standards of health care quality for which the VA is now nationally recognized, while treating over 5.2 million patients, about one million more patients than in 2001.
    It will allow us to follow through on a historical realignment of our health care infrastructure, reduce the backlog of disability compensation and pension claims, and continue the largest expansion of the national cemetery system since the Civil War.
    In the health care field, in recent years, the Department's successes in delivering top notch health care have been stunning.  The VA now exceeds the performance of private sector and medical care providers for all measurable key health care quality indicators.
    This is all the more impressive when you consider the explosive growth in VA health care usage.
    The VA expects to treat about one million more patients in 2006, for a total of 5.2 million then was done in 2001.
    The President's 2006 budget asks that you enact two important provisions affecting only Priority 7 and Priority 8 veterans, an annual enrollment fee of $250 and an increase in the pharmacy co-payments from $7 to $15 for a 30 day supply of drugs.
    The proposed enrollment fee is similar to the fee legally required of military retirees enrolled in the TRICARE system, and some would argue even more justified.
    As you know, most TRICARE enrollees have served on active duty for at least 20 years, and are former enlisted personnel with modest retirement incomes.
    The proposed enrollment fee would affect those veterans who may have served as few as two years and who have no Service-connected disabilities.
    In addition, some of these veterans, those in Priority Group 8, have incomes above the HUD geographic means test.
    This budget proposal also ensures the following highest priority veterans receive the long term care they need -- those injured or disabled while on active duty, including veterans who served in Operations Iraqi Freedom and Enduring Freedom, those catastrophically disabled, patients requiring short term care subsequent to the hospital stay, and those needing hospice or respite care.
    These eligibility criteria would be applied to VA sponsored long term care services, including VA, community and state nursing homes.  This would save approximately $496 million that would be redirected toward our high priority veterans.
    The Department would continue to expand access to non-institutional long term care with an emphasis on community based and in home care.  In many cases, this approach allows veterans to receive these services in comfortable, familiar settings of their homes surrounded by their families.
    In order to be more prepared to care for our veterans returning from OIF and OEF, VA's 2006 medical care request includes $1.2 billion, which is $100 million over the fiscal year 2005 enacted level, to support the increasing workload associated with the purchase and repair of prosthetics and sensory aides to improve veterans' quality of life, and includes $2.2 billion or $100 million over the 2005 level to standardize and further improve access to mental health services across the system.
    We are also proposing a number of program enhancements to cover out of pocket costs for emergency care that veterans receive at non-VA facilities, to exempt former POWs from co-payments for VA extended care services, and to exempt veterans from co-payments for hospice care delivered in hospitals or at home.
    We have projected increased health care management efficiencies of two percent in 2006, which will yield about $600 million in savings.
    The $750 million requested for CARES, Capital Asset Realignment for Enhanced Services, in fiscal 2006 is $172 million more than the 2005 enacted level.  At its core, CARES means greater access to higher quality care for more veterans closer to where they live.
    Its impact is already being felt in Chicago, where the proceeds from an enhanced use lease of VA's Lakeside Hospital property are being reinvested in the VA's Westside facility.  This will lead to a new modern bed tower for Chicago's veterans.
    Finally, the $786 million proposed in support of VA's medical and prosthetic research program would fund about 2,700 high priority research projects to expand knowledge in areas critical to veterans' health care needs.
    The combination of VA appropriations and funding from other sources would bring our 2006 research budget to nearly $1.7 billion.
    Veterans' benefits.  The President's request includes $37.4 billion for the entitlement costs mainly associated with all entitlement benefits.  Our request also includes $1.26 billion for the management of the Department's benefits programs, which is a 6.6 percent increase over the 2005 enacted level.
    The VA takes seriously its obligation that every veteran's claim must be treated fairly and equitably.  We must be consistent.
    Our Inspector General has been directed to conduct a review of our disability claims adjudication process.  The results will identify areas of inconsistency, and will help us formulate steps to remove to the maximum degree possible inconsistencies which obviously exist today in a difficult, complicated process.
    In addition to this independent system wide review, the Veterans' Disability Benefits Commission has been established to carry out a study of the statutory benefits that are provided to compensate and assist veterans and their survivors for disabilities and deaths attributable to their military service.
    The President's request would also permit us to continue the benefits delivery at discharge or BDD program. This program enables active duty Servicemembers to file disability compensation claims with VA staff at military bases, complete their physical exams there, and have their claims evaluated before or closely following their military separation.
    The President's 2006 budget includes $290 million in discretionary funding for VA's burial program, which includes operating and maintenance expenses for the National Cemetery Administration, its capital programs, the administration of mandatory burial benefits, and the state cemetery grants program.
    This total is nearly $17 million or 6.4 percent over the 2005 enacted level.  It includes $90 million for cemetery construction projects.
    Consistent with the provisions of the National Cemetery Expansion Act of 2003, we are also requesting $41 million in major construction funding for land acquisition for six new national cemeteries and $32 million for the state cemetery grants program.
    We believe veterans should have the option to be buried in a veterans' cemetery located within 75 miles of their home.  More than 80 percent will have that option under this budget proposal.
    Mr. Chairman, I would be remiss if I did not note that last year VA's National Cemetery Administration earned the highest rating ever achieved by a public or private organization in the 2004 American Customer Satisfaction Index. It was a rating of 95 on a scale of 100.
    In closing, Mr. Chairman, despite the many competing demands for Federal funding, the President continues to make veterans' benefits and services a top priority of his Administration.
    Mr. Chairman, our veterans deserve no less.
    We are now prepared to take your questions.  Thank you.
    The Chairman.  Thank you, Mr. Secretary.  I have several questions.  One will focus on seamless transition. I'd like to know what the Department is doing to ensure that Operation Iraqi Freedom and Operation Enduring Freedom servicemembers are identified and provided with the benefits they deserve.
    I recognize what you just mentioned with regard to the one exam and determinations upon discharge.  We are hopeful that will lead to greater accuracy and timeliness in these determinations.
    I would like for you to answer that in greater detail.
    I would also like for you to touch on CARES and even outside of CARES, with regard to competitive sourcing.  I'd like your input on that.
    I would also like you to talk about the third party collections.
    I know we have a pilot project out there.  Unisys received the bid on that contract.  It is in Ohio.  I've been concerned about the growth of that contract and whether we need to have another competitive pilot.  I would like your comments with regard to that.
    It is how we perfect the health system, whereby we do everything properly, from the first sign when the patient walks in, getting the necessary information, having the right codings, the doctors doing their jobs.  We have to follow through the system.  That is quite an investment.
    The other comment I would like you to make is with regard to - we are going to give you some running room -- with regard to IT.  I'm hopeful that you will come up with a proposal for the Committee with regard to how you can restructure IT so that your chief information officer has line and budget authority.
    We have been very concerned over the years on how much money we have been authorizing and appropriating here in Congress with regard to IT, and you have three stovepipe systems.  We believe that if you are able to empower with budget authority your CIO, we can save money in the end.
    My last comment will be that I appreciate your highlighting the inequity that we presently have.  When I offered TRICARE for Life and that passed, we instituted these co-pays and deductibles, and now when you have a situation whereby a VA hospital may be a TRICARE provider, you are absolutely correct, you could have somebody, having only serviced for one tour of duty, go in just before that military retiree and he doesn't have to pay the deductible, when in fact the military retiree does.
    We have an inequity in the system that we are going to need to address.
    I yield to you, Mr. Secretary.
    Secretary Nicholson.  Thank you, Mr. Chairman.
    Let me start with the seamless transition.  That is a very high priority in our agency, because we have to get it right.  These people returning from Iraq and Afghanistan deserve no less.  We have a senior individual in the agency who is our seamless transition guru, if you will.  All of us are collaborating on that.
    I think great progress has been made.  We have stationed VA representatives in some cases with returning units.  We have put people on aircraft carriers to help orient and process people on their way home from deployment.
    We have people at all the major medical facilities. We have people in Gruenstadt, Germany.
    The goal is to impart good information and take the hassle out of the process for this person on active duty about to become a veteran, about to become an alumni of active service and become one of us, a veteran.
    I feel pretty good about the progress that is being made.  I've conferred with Secretary Rumsfeld.  We are working closely with the DOD on that.  That, I think, is moving as it needs to.  It is a priority.
    The CARES process is very commendable.  It addressed a need there is out there to bring the Department of Veterans Affairs into the 21st Century.  As you all know, most of the hospitals in stock were built to serve World War II returnees.  The average age was over 50 years.  The average age of a hospital in a civilian component today is about ten years.  That is an issue.  Another is some of our hospitals are not ideally located, given the demographic shifts of our country.
    CARES addressed that and the general inefficiencies that are ensured from this aged hospital and facility stock.  We are now underway.
    Our job is implementation.  I think that is going well.  There are still about 18 sites I think that are still under review.  There is a process that has commenced with getting a lot of community input that will result in what the disposition of those remaining 18 sites is.
    With tangible things happening, there is a new hospital planned in Las Vegas.  There is a new hospital planned in Orlando.  I mentioned in my opening statement a transaction that is occurring in Chicago, getting rid of redundant aged stock and resulting in a new tower there.
    This has to happen.  It's not without controversy, and in some cases pain.
    The Chairman.  Mr. Secretary, I recognize my light is on.  My question is, is CARES competitive sourcing part of your plan?  Then we will go to Mr. Evans.
    Secretary Nicholson.  Yes, it is, Mr. Chairman.  I would defer to my general counsel, Tim McClain, who has a deeper knowledge than I do.
    The Chairman.  Thank you.
    Mr. McClain.  Mr. Chairman, thank you for the question.  As you are aware, competitive sourcing is part of the President's management agenda, and VA is doing competitive sourcing in all non-medical areas, medical facility areas.
    Currently, there is a law in Title 38 in Section 8110 that prevents VA from expending any funds to do any type of competitive sourcing for studies in medical centers or medical facilities.
    Obviously, that is our greatest area of purchasing. We have supported a legislative proposal simply that would allow us to expend appropriated funds doing studies in the medical facilities.
    The Chairman.  You are going to send a proposal to us?
    Mr. McClain.  Yes, sir.
    The Chairman.  Thank you.  Mr. Evans?
    Mr. Evans.  Thank you, Mr. Chairman.  The Government Accountability Office has just released a rather damning report about the VA's failure to firmly implement any of the recommendations of the Advisory Committee on Post-Traumatic Stress Disorder.  It seems many of the recommendations are not scheduled to be implemented until after 2007.
    With this information, how can Congress have any assurance that the VA will be able to meet the needs of folks returning from Iraq and Afghanistan?
    Secretary Nicholson.  I am going to ask Dr. Perlin to respond, sir.
    Dr. Perlin.  Good morning, Congressman Evans.  The PTSD Advisory Committee is an advisory committee to the Office of the Under Secretary on how we can best serve veterans. This GAO report identifies a review of progress in meeting recommendations made by that Committee.
    It is not actually a report on the quality of PTSD care offered to America's veterans.  In fact, they do make mention in the report that the quality of care is world class.
    VA takes exception, because in fact, we would never be so presumptuous as to believe we can't improve care, but the care that is being provided is really exceptional, and we have the capacity to meet the needs of veterans returning from Operations Iraqi Freedom and Enduring Freedom.
    With the support of Congress Public Law 108-170, $5 million is directed specifically to increase support for PTSD, another $5 million for substance abuse disorders, and another $5 million specifically for outreach to Operation Iraqi Freedom veterans.
    This 2006 budget proposes an additional $100 million for mental health care.
    We are not alone in taking exception to this report.  I would like permission to enter for the record responses from the two chairs of the PTSD Advisory Committee who disagree with the findings.
    The actual mechanisms may lead to some interpretation, and we will be working with the Advisory Committee, as we have, in developing a robust mental health strategic plan that meets the remaining outstanding issues.
    We care for more than 200,000 patients now with PTSD.  That number increases by 20,000 annually.  We have the resources and the skills.  We will make improvements.  We are adding additional resources.  We want veterans to know and we want the employees who give passionate, dedicated, and effective care to know that this care is state-of-the-art.
    The Chairman.  Dr. Perlin, hearing no objection, your request shall be entered into the record.
    Dr. Perlin.  Thank you.
    [The material to be provided was not available at time of printing.]
	
    The Chairman.  Mr. Evans?
    Mr. Evans.  I would like to ask about the enrollment fee and how that would work.
    Secretary Nicholson.  Yes, sir.  That is a good question.  The way that it would work in the categories to whom it would apply, which are the lower categories, it would be for an annual enrollment fee for their healthcare, and it would be paid in the beginning of that 12 month period, and then it would be good for that period and then renewed.
    Mr. Evans.  How would indigent veterans pay for that?
    Secretary Nicholson.  It wouldn't apply to indigent veterans, sir.  It would apply only to the Category 7s and 8s who would be above the means testing in their locality.  I believe administratively, it would work as it does in TRICARE for military retirees who are in the TRICARE system.
    They will probably be sent a bill and they pay the bill, like they would if they had a monthly insurance premium or something.  It would be an annual enrollment bill.
    Mr. Evans.  I would like to submit my additional questions for the record.
    The Chairman.  Yes, Mr. Evans.  All members may submit questions for the record to the Secretary.
    [The material to be provided appears on p. 219]
	
    The Chairman.  Mr. Bilirakis, you are now recognized.  Thank you, Mr. Evans.
    Mr. Bilirakis.  Thank you, Mr. Chairman.
Yes, that's working.  Don't charge me with the time, Mr. Chairman.
    The Chairman.  I'll restart the clock.
    Mr. Bilirakis.  I want to welcome you, Mr. Secretary, and to thank you for taking on this task.  It's a Herculean one, there's no question about that.  I imagine your years at the Vatican were probably soft compared to this.
    I want to welcome all of your staff, and of course, all of the panelists that come up after this panel.
    I want to make a statement, but first, I would just say, Mr. Secretary, that we are concerned about a lot of areas, but the seamless transition issue is very significant.
    I've assumed the Chairmanship for the O&I Subcommittee.  I met with Mr. Strickland and other members of that O&I Subcommittee, and we are planning to travel around to see how things are really working out.
    I'm not asking a question regarding it, but I would say to you that is certainly in this day and age, with Iraq and Afghanistan particularly, it's a very important area.
    Additionally, we passed the partial concurrent receipt repeal legislation.  There was a Veterans' Disability Benefits Commission that is established by that law.
    I understand that the Commission is moving very, very slowly.  We need to hear on that.  I would appreciate your letting us know, giving us an update on what is taking place there.  I realize that also involves DOD as well as the Veterans' Administration.  That is really one of my babies.  I am very curious and very interested in knowing how that is going.
    The statement that I want to make, Mr. Secretary, pertains to Cooperation on veterans' issues.  I don't know what the intent was in creating this Committee.  
    Your role, of course, as Secretary, yes, you work for the President, whoever the President might be.  I would like to think that your role is primarily a role for the veterans.  I like to think that our Committee is primarily a role for the veterans.
    We never get enough money to be able to satisfy all the veterans' needs.  It has never happened, regardless of who was President, or regardless of who is in charge of Congress.
    I used to sit over there for years and years when the other party was in charge and their Chairman used to complain about all the veterans moving into Florida every month, and how the amount of veterans' spending increased.  It was just a proportion of the spending increases that took place over the years.  Virtually, in every area, we saw great spending increases, 120 percent, 130 percent increases over a period of time with veterans' spending lagging behind, and only increasing like 40 to 50 percent.
    We are not going to solve even a portion of these problems if we don't work together.  What I am saying is we can sit up here and we can throw out the rhetoric and complain and things of that nature.
    We have to get together and we have to realize yes, politics involve compromise.  We have to realize that is the case.  You know my credentials as far as veterans are concerned.
    Either we are going to get something done that is good for the veterans or we are just going to have an awful lot of rhetoric and not really accomplish what is best for the veterans.
    I'm not admonishing anybody.  I've talked to the Chairman, and I've agreed to be Vice-Chairman.  I said, Mr. Chairman, I'm agreeing to be Vice-Chairman because I want to be a check and balance, and he said that's why I'm asking you to serve as Vice-Chairman.
    I guess my time is up.  I wanted to make that statement, Mr. Chairman.  I just hope, we have the TV camera here and we are going to say certain things and it is going to play broad back home, but it's the bottom line as to what we do for the veterans, and that's what counts.
    Thank you, Mr. Chairman.
    [The statement of Hon. Michael Bilirakis appears on p. 63]
	
    The Chairman.  Thank you, Mr. Bilirakis.  Mr. Michael Michaud of Maine, you are now recognized.
    Mr. Michaud.  Thank you very much, Mr. Chairman.
    Mr. Secretary, first of all, congratulations.
    Secretary Nicholson.  Thank you.
    Mr. Michaud.  As the President described, in May of 2003, there was a growing mismatch between the demands of VA and the resources we had made.  Mr. Secretary, there is a debate going on in Congress about how best we can continue to provide for high quality care of veterans who are currently serving our country.  This debate is occurring while we are now at war and as the numbers continue to grow.  We have some disagreement as to whom has earned the right to receive the care for veterans.
    I believe caring for our veterans as Members of Congress, is part of our ongoing national security mission and therefore it should be our high priority.  This budget must, as Abraham Lincoln stated, allow the VA to fulfill the mission of care for him who shall have borne the battle, and for his widow and his orphan.  Veterans should not lack care.  We should not abandon our long-term obligation.  There are many demands on the VA; but that demand represents real veterans' real needs across America.
    We have an obligation to care for those who put their lives on the line.  This budget does not meet that obligation, in my opinion.
    I'm also very concerned about the long-term care provisions, and their effect on local veterans' resources  - the eligibility requirements for the state veterans' homes so that the vast majority of our veterans who are not in homes should suddenly be ruled ineligible.  I'm not sure that's good policy.
    Mr. Secretary, I'm willing to work with you on particular problems.  My question is that I understand a number of veterans' integrated service networks may be experiencing budget shortfalls.  First of all, have any of these veterans' integrated service networks been afforded supplements for fiscal year 2005?  Is there any indication that any of these networks are dealing with shortfalls by delaying service?
    And finally, the fiscal '06 budget appears to assume that VA will carry over a half a billion dollars in fiscal year '05 money.  Are any of the veterans' integrated service networks able to carry that money over, or will that be a shortfall in fiscal year '06?
    Secretary Nicholson.  Thank you, sir.  You raise some very important points.
    First, let me address the fact that - this is somewhat in response, also, to Congressman Bilirakis' point of my role.  I'm an advocate for veterans.  When I was asked to do this job and considered it, that was one of the most appealing things to me.  Because as I said, in my life, having the opportunity to serve in the Armed Services changed my life permanently to the good, and I think that has happened to millions and millions of Americans.
    Americans answer to call.  In a perfect world, everybody that has put on that uniform and taken that oath, I think it would be great if we could provide them with a full panoply of goods and services.
    We are not in that world.  We are in a more constrained world.  We have to make decisions and priorities and decide who it is that needs us the most.  I think that is those veterans who have been disabled as a result of their service, either physically or mentally, or contracted a chronic condition as a result of that.  Those who served us and are down on their luck and down and out, and those that maybe subsequently contracted some acute condition and have a special need.
    We take care of those people.  Those are our priority.  There are a lot of those.  It's expensive.
    That is the reason that we ask that we be able to continue to take care of them, and as a result, for those that are doing well and are healthy, not able to do as much as we probably would like.
    Let me respond to your specific question about divisions.  In my two weeks, I have not been made aware of any division that has requested additional money for any purchases or is undergoing under deferral of purchases or maintenance. I will defer to the Acting Under Secretary for help and see if he would like to add anything to that.
    Dr. Perlin?
    Dr. Perlin.  Congressman, no VISN has submitted a request for additional funds.  As you know, we have to operate to spread the resources through the year.  At the end of the year, much equipment is purchased.  I think you will see a pick up in purchasing of equipment at that time.
    The Chairman.  I thank the gentleman for his contribution.
    Mr. Michaud.  Mr. Chairman, I'd like to provide additional questions for the Secretary, for the record.
    The Chairman.  Yes, indeed.  If we have time, depending on the members, we could do a rapid fire second round, depending on the Secretary's time.
    I now yield to Mr. Henry Brown of South Carolina. Mr. Secretary, if you need an interpreter, we can bring back Mr. Hollings.  Mr. Brown is the Subcommittee Chairman on Health.
    Mr. Brown.  Thank you, Mr. Chairman. Thank you, Mr. Secretary.  Congratulations on the appointment.  I certainly look forward to working with you, as we look outside the box and meet the health care needs for our veterans.
    My question is about health care resources, caring for the benefit of veterans.  There is a great potential for VA and DOD and other medical entities to come together to share expensive equipment, especially services in facilities. This is seen between the Charleston Medical Center and the Medical University of South Carolina.
    What progress can we expect to see in the next couple of years to facilitate direct sharing of goods and services and eliminate some of the barriers that have limited progress in such collaborations?
    Secretary Nicholson.  I would start off by saying that is a very positive goal.  In the context of sharing facilities, we are involved in the planning and siting of a new VA hospital in Denver, which is my home town.  It is contemplated that DOD will have six to eight percent of the space in that new facility.
    As to the sharing of goods and services, I am going to defer to Dr. Perlin and ask him to answer that.
    Dr. Perlin.  Congressman Brown, we have enjoyed a close working relationship with both the Department of Defense as well as with the Medical University of South Carolina.  I think we were able to help each other, as on the 75 year lease with the Medical University to transfer Dodghty Street, which I understand increased access and allowed them to commence with phase one of their hospital.  It has also increased revenues by $1 million a day.
    That sets the stage for additional discussions about the sharing of high tech equipment, and subspecialty services. The Department of Defense was very enthusiastic about the design phase for the community-based outpatient clinic at the Naval Weapons Station.
    These are projects that we are very interested in because they improve the care of veterans and the care in the community.
    Mr. Brown.  Thank you very much.  One of the things we were concerned with is the facilities we have in the veterans' hospitals are getting old.  The Medical University is going through extensive rebuilding of facilities that are outdated.
    For the benefit of all taxpayers, this would be an ideal opportunity to bring together some of those resources and establish a model similar to Colorado.
    Veterans in my district, and I guess we have over 70,000, with travel between the different health facilities, some up to 150 miles away.
    I think we have to find alternative ways, whether vouchers might be a solution or other revenue sharing sources.
    Thank you very much.
    The Chairman.  I thank the gentleman for his contribution.  Ms. Stephanie Herseth of South Dakota is now recognized.
    Ms. Herseth.  Thank you, Mr. Chairman and Mr. Evans, for your leadership on the Committee.  Thank you, Mr. Secretary.  Congratulations on your appointment.  We appreciate your service to the country previously and now in your tenure with the VA, in serving the veterans, and the service of your colleagues as well.
    As you know, we have had an organizational change with the Subcommittee on Benefits, and I will be working closely with Mr. Boozman from Arkansas, who chairs that Subcommittee. I would like to pose a couple of questions as it relates to economic opportunities specifically in the area of education, employment and vocational rehabilitation.  Then I will submit other questions as it relates in particular to the care that our outpatient clinics provide to rural veterans, which is common in South Dakota and many other districts and states represented here today on the Committee.
    First, in the area of veterans' education benefits, the President's budget request would eliminate 14 full time staff positions with the VA's education service.
    As you know, education claims are expected to increase due to more veterans seeking to take advantage of the Montgomery G.I. Bill, as well as the new Chapter 1607, Guard and Reserve education program enacted last year as part of the National Defense Authorization Act of 2005.
    I would like to know just how this request to eliminate these full time positions would be justified.
    As I'm sure you are aware, the number of veterans applying for vocational rehabilitation and employment services increased dramatically over the last decade, roughly a 75 percent increase.
    Demand for this service will surely continue due to the many injuries suffered by our troops serving in Iraq and Afghanistan.
    Recognizing the great importance of providing quality employment services to our transitioning disabled Servicemembers, former Secretary Principi established a task force to review the vocational rehabilitation employment program, VR&E, from top to bottom.
    This VR&E task force issued a comprehensive report in May of last year.  The report contained 102 recommendations to improve the VR&E program and reform it to be responsive to 20th Century needs of Service-connected disabled veterans.
    The task force recommended an additional 228 full time staff positions for the VR&E program, including 27 in headquarters, 112 in regional offices, 56 in regional offices for contracting and purchasing, and eight quality assurance staff.
    The President's budget request doesn't provide any resources consistent with the VA's own VR&E task force report. Rather, the President's budget simply reflects a redistribution of management and support personnel.
    I would like it if you would also share your thoughts on meeting the report's recommendations in light of this shortfall of necessary resources.
    [The statement of Hon. Stephanie Herseth appears on p. 65]
	
    Secretary Nicholson.  Congresswoman Herseth, those are important questions and an important area.  I have spent some time, among many other things, that we have been doing the last two weeks, looking at education.  I agree with you about its importance.  I feel myself a product of what it can mean to you in our country.
    Because they are so important, I am going to ask Admiral  Cooper to answer that with more learned experience and detail than I have at this point on that.  If you would, Admiral.
    Mr. Cooper.  Yes, sir.  In the education question that you asked, you will note that in 2005, we in fact had 888 people, which is the highest number we have had in education in recent years.
    We took a very close look at this.  We are trying to keep a balance.  We had 888, which was an increase over previous years.  Yes, we will drop back maybe 14 in 2006.  I have to look at that.
    We do not know - 
    Ms. Herseth.  I just want to interject.  I appreciate that flexibility and the fact that you keep an eye and notice that close to retirement, that we have that transition of people who can provide training for those other claims that may be coming after.
    Mr. Cooper.  Yes, ma'am.  I am watching that extremely carefully.  As I say, we have that number of people. As far as the 1607, we do not know what now what the effect is.  I don't think we will see much effect in 2005.  Again, that is something I have to watch and make adjustments.  The 1607 program just became effective last October.
    We are about to sign an MOU with DOD to make sure we carry that out properly, and we are working on how to make the payments in that particular program.
    We are watching that very carefully.  I have very good leadership in education.  I think I will have enough warning if I need to do other things, but I think right now we are proceeding properly.
    The second question you had on vocational rehabilitation, we set up this Task Force because we were very concerned about not only the leadership but the execution of our vocational rehabilitation program, primarily because I think it had lost focus and was not focusing on employment.  It was focusing more on training.
    We have replaced the leadership pretty much across the board.  We have also focused, as the study stated, on employment.  As a result, we are setting up five different tracks for a veteran to gain employment, ranging from somebody coming back and getting re-employed by the previous employer through a full college education to independent living.
    We have set that up at four test sites.  We are continuing to run the tests for three or four more months and then we will expand that across the board to all of our regional offices.
    That is the main part of the recommendations.  There were 102.  Of the 102, there are probably 20 or so we will not implement.  However, 34 have been implemented today, and I expect in excess of 50 percent to be implemented by the end of this year.
    The Chairman.  I thank the gentlelady for her questions.  To my colleagues, I have received word that we are going to have votes around 11:30.  If you look at the time, if we try to restrict ourselves within the five minutes, we might be able to do this, Mr. Secretary, without your having to wait while we go vote and come back.  We will see how this plays itself out.
    Mr. Jeb Bradley of New Hampshire, you are now recognized.
    Mr. Bradley.  Thank you very much, Mr. Chairman.  I appreciate your leadership and that of Mr. Evans and Mr. Secretary, welcome to this Committee.  It is a pleasure to meet you.
    I would like to turn to the overall health care item in the budget, which is in the President's budget about $30.7 billion.  Depending on how you calculate it, I think you have estimated it is about a 2.5 percent increase.
    My question to you, sir, is that generally medical inflation is running at a much higher rate.  It could be as high as three times that, number one.
    Number two, you have had staffers that have testified before Congress in the past that in order to maintain the services that veterans have come to expect, it would generally take about a 13 to 14 percent increase.
    Given those numbers and the budget perspective that we see before us in this presentation, how are you going to be able to maintain those commitments?
    Secretary Nicholson.  That's a good question, Congressman Bradley, and one we have discussed and I discussed with my team here.
    There are some major efficiencies that have been enacted in our delivery system such that it brings us down to be quite a bit below in inflation what it is in general, in the civilian component.
    We can do this with this number, given our demands.
    I am going to ask Dr. Perlin if he would like to add anything to that.  He's the guy that has crunched these numbers the most.
    Dr. Perlin.  Thank you, Congressman, for the question.  Your question really asks if we have the resources to do the job.  In consideration of this budget with the policy proposals that it contains, we have the resources to do this job.
    As the Secretary identified, we have greater efficiencies.  We have efficiencies in the scale of purchases we can make.  Our pharmacy program has been held to be the most efficient in the country, as represented in the Wall Street Journal and USA Today.  It's ability to allow us to leverage our scale and the Federal supply schedules allows us to meet the needs with the budget.
    Mr. Bradley.  Thank you very much for that answer.
    My second question is that it is estimated that there will be as many as 430,000 veterans who require long term care services from the VA over the next decade, but this budget calls for a reduction in 500 beds.
    Once again, how do you square that with being able to complete the mission?  Thank you.
    Secretary Nicholson.  If you look back, Congressman, you will see that number has really drastically gone down.  The number of people in beds and extended care to the model of taking care of these people now and allowing them to stay in their own habitat, their own environment, closer to their families, their spouses, if you will, their own homes.
    That has been done and I think has been done effectively through the use of telemedicine, through the use of outpatient based clinical care, going out to them with both health care providers and social workers.  The combination of that has brought a large reduction.
    That trend is continuing.  It's working.  Of course, there are those for whom that doesn't work.  They do need to be in a bed.
    Dr. Perlin, would you like to add anything?
    Dr. Perlin.  Thank you.  Ten years ago, we would have said the population is aging, we need more hospital beds. But medicine has moved from the hospital to the clinic.  A decade ahead of us, care moves more from the clinic to the home.
    Our goal is to provide care in the least restrictive environment and the most humane way possible.
    The technology that the Secretary alluded to, such as the use of telemedicine, allows patients to successfully age in place and have their needs met.
    This budget actually allows us to substantially increase by 79 percent the number of patients cared for in non-institutional settings.
    We have increased the resources by nearly $60 million for non-institutional care, and we have seen a growth in our care coordination, which specifically is the application of those technologies to allow those veterans, veterans with chronic illness and older veterans to successfully age in place, maintaining social, community and even spousal relationships.
    Mr. Btradley.  Thank you.  Mr. Chairman, I yield back the balance of my time.
    The Chairman.  Good try.  Mr. Strickland of Ohio is now recognized.
    Mr. Strickland.  Thank you, Mr. Chairman.  Mr. Secretary, welcome.
    Mr. Secretary, in the early 1940s in World War II, this country subjected many of our veterans to mustard gas, nerve agents, and they didn't know what had been done to them. They were sworn to secrecy.  They weren't followed up with afterwards.  Many of them now, if they are alive, are in their 80s.
    Earlier this month, I received a letter requesting an update from VA about their contacting these World War II veterans to give them medical exams, provide them with assistance if they needed it.
    In the early 1990s, the VA promised they would make every effort to contact these individuals and to see that they got the help they needed.  The only thing the VA did to my understanding is to put some ads in a magazine, they put out no letters, made no phone calls, and no effort of active outreach.
    As the new Secretary, I'm asking you, sir, will you do everything possible to reach out to find these individuals and to provide them with assistance that I believe this country should provide to them?
    Secretary Nicholson.  That's a question that is first impression for me, Mr. Strickland.  I will assure you that I will take it on board and will look at it and get back to you.
    I don't fully know the extent of that.  I will get back with you after looking into it.
    Mr. Strickland.  I appreciate that, sir.  Thank you so much.  I did send you a letter earlier this month.  Do you have a comment, sir?
    Mr. Cooper.  Yes, Mr. Strickland.  If I could address that for a second.  We in fact are working actively with DOD right now.  We have received 4,000 names.  We are in the process of checking our records, and in the next two to three weeks, we will get letters out to everyone for whom we have current addresses.
    We are then simultaneously contacting IRS and Social Security to get whatever other addresses we can, and for those we cannot get, we will go to a civilian group to try to find addresses.
    We are in fact in the process of implementing this plan.  We are giving veterans a number to call.  We are also referring them to VA hospitals for medical care and so on.
    Mr. Strickland.  I thank you for your response and I thank you, Mr. Secretary, for your response as well.
    Mr. Secretary, there has been discussion here of management efficiencies as a way of saving money and perhaps calling for a lesser appropriation for health care.  You have indicated, I think, you are anticipating management efficiencies of two percent approximately, or $1.8 billion. It seems like a lot of money.
    If these are not achieved, and if the co-payments and the user fee are rejected by the Congress, as I hope they will be, it seems to me that the VA is going to fall far short of what is needed to provide for VA health care.
    In fiscal year 2004, the VA estimated management savings of $950 million to partially offset the cost of VA health care.  That estimate was accepted at face value, was based on implementation of vigorous competitive sourcing, increasing employment productivity, shifting from patient to outpatient care, reducing travel, maintenance and repair services and supplies.
    That was for 2004.  We are now in 2005.  Is the VA able to document for us that those management efficiencies that were anticipated for that year were achieved?  Should we not do that before we go ahead and anticipate further management efficiencies for the next fiscal year?
    Secretary Nicholson.  Congressman, I'm going to respond based on what my understanding is.  In the last two budget cycles, we have met our expectations on efficiencies and savings, which gives us the confidence that we can meet those we are projecting for 2006.
    Mr. Strickland.  Excuse me for interrupting, sir. Time is very short.  Can you or can Dr. Perlin provide us with documentation as to where and how those efficiencies were met and can we also be provided with those instances where the efficiencies were maybe not met, for example, the VA lost $250 million, according to a GAO report on the Core FLS project.
    Did you count the failures as well as the successes when you calculated whether or not the management efficiencies that were anticipated actually were achieved?
    Secretary Nicholson.  I'll give you a very quick answer and tell you our information at the VA is your information.  We will look into that and come back to you with our answer.  I don't think we can answer that on a line item basis here today.
    We have had significant savings.  We have had hiccups.  You mentioned one of them.  I feel pretty good about where we are headed and the efficiencies we are going to achieve through standardization and competitive purchasing, particularly in the pharmaceutical area, and some other efficiencies we are looking at, including in our IT area.
    As to the details, we will have to get back to you.
    The Chairman.  Mr. Strickland, thank you for your contribution.  Please be responsive to Mr. Strickland's questions, I think it is very appropriate. He is asking for how you came up with your budget.  It is really an appropriate question. Please be responsive to the member.
    Secretary Nicholson.  Yes.
    The Chairman.  Mr. Turner of Ohio, you are now recognized.
    Mr. Turner.  Thank you, Mr. Chairman.  Thank you, Mr. Secretary.  Most of our perspectives on a national budget can be defined in part by our local experience.  I want to talk to you for a moment about a local issue and ask the question as to the national policy, and I am going to return to the issue of nursing home beds.
    Previously when you were answering, I understand the concepts of your shift in defining the need for long term care.  I understand that with the changes that are occurring in the way services are provided, the importance of age in place and the benefits financially, but also the benefits it has to the patients themselves.
    I tend to for as long as possible not shift an individual into institutional care, looking to non-institutional care.
    I'm also familiar with the policies that permit the VA for both access buildings, to lease them out with partner organizations, and also the provisions that allow the VA to look to the nursing home area, to look at community assets and resources as opposed to expanding veterans' VA center resources.
    I'm a little concerned because last year in my community we have a nursing home facility that had been renovated, and is a quality facility by everyone's standards.  It was providing quality services.  An unexpected announcement was sent to all the residents that it was going to be closed and they were going to be returned home or sent out to a community facility as part of the policy of looking to community assets.
    Obviously, my understanding was that the community use of resources was to prevent expansion but not to be used for closing a facility.
    Mr. Secretary, your predecessor in October came to our community and reversed that decision and allowed the nursing facility to remain open and the patients could stay there.
    In looking to the large population that you have that is coming and still looking at the alternatives of care that you are going to provide so that you don't have the same stream percentage that would end up in institutional care, it still seems to me that it is an important role for the VA to play in having nursing home facilities.
    The reports I received were not only just quality of care but also the comradery, the spirit that occurs within a veterans' nursing facility that contributes to the overall success of long term care for the patients.
    In looking at the policy and the issue of eliminating your average daily census issues and reductions in beds, I want to make certain that you are not looking to a policy of actually the VA center receiving in its nursing care facilities to get out of the business and to quit providing that service.
    Secretary Nicholson.  It is an important question, Congressman.  Thank you.  I can assure you that the VA is not looking at getting out of that business.  There are those that really need it and are counting on it and need to be there.
    There are categorical priorities of those who need it the most, and that is who we need to prioritize so we can serve.
    I am going to ask Dr. Perlin if he would like to detail that a little further as to those people who need that care and that we will be there for them.
    Dr. Perlin.  Mr. Congressman, as the Secretary has said, we are not looking to get out of the nursing home business. However, our care will be delivered first and foremost to those most highly service-connected veterans in Priority Groups one through three, and to those veterans who really have difficulty in having their needs met elsewhere, such as those with special needs like ventilator dependence.  We will be there for those veterans as well.
    Those veterans who are coming out of the hospital and need acute rehabilitation to get back to normal living, we will be there for those veterans.
    Those veterans who require hospice care, we will be there for those veterans.  Those veterans whose families need respite from caring for those veterans 24 hours a day, we will be there for those veterans as well.
    The commitments, as I've detailed, will be there for those veterans whose needs can't be met appropriately in the community environment with new technologies.
    Mr. Turner.  Since I have just a moment, since you gave that list, again, my question concerns your actually being the direct provider of the nursing home services versus just looking at scattering the services out in the community.
    Will you have a nursing home facility that is of high quality and providing quality services?
    Dr. Perlin.  Yes, we will continue to have the nursing homes at our VA facilities, absolutely.
    The Chairman.  The gentleman's time has expired. Ms. Berkley to inquire.
    Ms. Berkley.  Thank you very much, Mr. Chairman, and thank you, Mr. Evans, for your leadership.  Welcome, Secretary Nicholson.  I am looking forward to working with you.  I had a wonderful relationship with your predecessor. He was responsive and accessible.
    Please take this as an invitation to visit us in Nevada.  On behalf of myself and the veterans that I represent, I want to thank you for including in the 2006 budget funding for a full service VA medical center that we desperately need.  The medical center will have a long term care facility, a hospital, and an outpatient clinic, none of which we have now.  I am very excited about that.
    However, in the 2006 budget, there is $199 million that has been requested, and that is $27 million short of the projections on what it will cost in order to build this facility.  I understand the $27 million will be requested in the 2007 budget, and construction will be completed in 2009.  Can you confirm this?  And when do you expect us to break ground?  And when do you expect these facilities to be completed?
    Secretary Nicholson.  Thank you, Congresswoman. What I can't tell you - and if someone else at the table can, I would like them to do so - is when we anticipate breaking ground.
    Dr. Perlin.  I will have to get back to you with the exact information.
    Ms. Berkley.  I have been a buffer to protect my constituents.  I think it is important to get this information.
    Let me just say very, very quickly, because I know the time is short, what my veterans are saying.  I have heard an awful lot from my veterans about the President's State of the Union address.
    There is particular concern about the $250 user fee and the co-pay.  Most of my veterans are seniors on fixed incomes, and this is a lot of money.  I have never heard from a veteran from anywhere - Vietnam, Korea - that hasn't said the same thing about when they enlisted, what they were promised from the person that enlisted them.
    There is no contradiction here that they were promised health care benefits for life.  Again, I've never heard anyone say that is not what was said.  They had an expectation of this.  I just wanted to put that in your mind, that this is not going over particularly well.
    The President's budget provides $762 million less than needed to maintain current services for veterans' health care.  This turns into a loss of almost 3,000 nurses nationwide.  I have a huge and critical nursing shortage in southern Nevada.  The VA has done an extremely good job in recruiting and retaining our nurses, but if there is a cut, we are going to lose them and they are going to go back to the numbers that we used to have, and instead of having a vacancy rate of 2.5 percent, which is quite good, that is going to go up dramatically.
    The budget also has a cut of $350 million for veterans' nursing homes.  I can't remember who brought that up in their line of questioning.  I have no nursing facilities for veterans, as you know.  They are going to be built, and hopefully, they are going to be done by 2009.
    I do have a state home, but even the executive director of the Nevada Office of Veterans' Services said the President's budget limits nursing home grants to those severely injured in the line of duty.
    I don't have any other facilities to send my veterans to.  We have a critical nursing home shortage in southern Nevada.  We can't move our veterans anyplace else.  I have tremendous concerns about that.
    I hope that you will take a good look at the proposed budget and help the President see that some of these cuts are inconsequential in the scheme of things, and I know you are dealing with a huge budget and have extraordinary needs and limited resources.  These cuts are going to do a tremendous disservice to our veterans and do damage.
    On mental health issues, a large number of my veterans, particularly from the Vietnam era, need to be provided mental health counseling, and particularly those coming back from Iraq.  I've seen it happen with my Vietnam era veterans that have suffered tremendously because of the lack of mental health care.  It would be inexcusable not to provide these services and adequate funding needed to do that.
    Thank you very much.
    Secretary Nicholson.  Thank you.
    The Chairman.  Ms. Berkley, we gave you great latitude, because Mr. Bilirakis and I have talked several times before about the concerns that you have in Nevada; this influx of population is something that no one else is experiencing around the country at the level that you are.  We want to be very responsive.
    Mr. Filner, you are now recognized.
    Mr. Filner.  Thank you, Mr. Chairman.  Welcome, Mr. Secretary.  Before I start, I want to make sure we have a recording of Dr. Perlin's advocacy of bulk purchases and how great that was for our nation.  You should tell the President that so we could get a Medicare bill that says the exact same thing, which we are prohibited to do by law right now.  I hope you will go to the President immediately!
    Mr. Secretary, welcome.  You said you were an advocate for veterans.  In answer to the same question later on, you said basically we are ï¿½going with the VA we have rather than the one we want,ï¿½ paraphrasing the Secretary of Defense.
    I see those two statements to be in contradiction with each other.  I don't think an advocate would give us a budget that basically says that it is the veterans who are going to have to pay for the deficit that is created by the same administration that is proposing the budget.
    It is the veterans who are going to have to deal with that.  Mr. Bradley brought up the point, and I am going to drive it home clearly.  It is the VA that said a year or so ago that it may take a 12 to 14 percent annual increase just to keep up with the services that you have, and even more, I think, is needed with not only the people coming back but what we have learned about Hepatitis C, PTSD, et cetera.
    Our needs continue to increase, and yet you come here with a budget - if you don't get your legislative proposals for the enrollment fee and the co-payments ï¿½ that proposes less than one-half of 1 percent increase in the health budget for the veterans of this nation.
    That is not advocacy!  We have an administration that says support our troops, support our troops, and when they come home, they are going to find a VA that is not adequate to the needs they have.
    The President presents to us a Social Security proposal that is estimated to be trillions of dollars, gives tax cuts with a couple of trillion to the wealthy, and yet when it comes to the veterans, says ï¿½I'm sorry, we have to save here,ï¿½ I say that if the choice is giving more money to people who have it rather than what was promised to veterans, I am going to choose the veterans every time.
    You also said ï¿½your information is our information.ï¿½  What did you ask OMB for in your budget request?
    Secretary Nicholson.  Congressman, I was not involved in - 
    Mr. Filner.  Come on, Mr. Secretary.  Tell me what the previous Secretary asked for.
    Secretary Nicholson.  I don't know.
    Mr. Filner.  You don't know what your own department asked from OMB for our veterans?  You say you are an advocate.  How do you not know that?
    Secretary Nicholson.  This budget was a year-long - 
    Mr. Filner.  Don't play games, Mr. Secretary.  You can just ask somebody.  Ask any one of these people.
    Secretary Nicholson.  Mr. Cooper, do you know what was asked for from OMB?
    Mr. Cooper.  If I could, Congressman - 
    Mr. Filner.  Admiral Cooper, do you know?
    The Chairman.  Mr. Filner, I think it would be productive for us not to quibble with the Secretary.
    Mr. Filner.  I asked a question after he said your information is our information.  He doesn't know what the request from his own department was to the Budget Office. That is inexcusable.
    Secretary Nicholson.  When I was answering Mr. Strickland's question, things that are developed, policies, and accounting records and things for the public domain are certainly yours and would be made available to you on your request.
    Mr. Filner.  Are you familiar, in your two weeks as Secretary, with the Independent Budget?
    Secretary Nicholson.  Yes, sir.
    Mr. Filner.  I would read it carefully.  Most of us take this as a Bible.  It is put together by people who understand the system.  They are not asking for the moon. They are not asking just for the asking.  It is a professional and very conservative look at the VA, what it takes to save the veterans.
    They have asked, if you take out your legislative proposals, for $3.4 billion more than your budget.  $3.4 billion.  That is the highest figure since I've been on the Committee of the difference between an administration budget and an Independent Budget.
    If you don't get your legislative proposals -- the enrollment fee, which I think is disgraceful.  You have to pay, after you have been a veteran, to use our system?  Come on. If you are not going to get that, I don't understand how you are going to meet the needs of our veterans with that $3.4 billion deficit, just from a very conservative look at what the VA has to do.  I don't know how you are going to do it.  I think you better advocate for more money.  I certainly would advocate to get you more money.  If you do, I hope you will use it wisely.
    Certainly, this Congressman and most of the people on this side are not going to vote for a budget that is not worthy of our veterans.
    The Chairman.  I thank the gentleman for his contribution.  I look to Mr. Boozman of Arkansas, the Subcommittee Chairman on Economic Opportunity.
    Mr. Boozman.  Thank you.  I don't have a question.  I just have a comment.  Again, I welcome you here and look forward to working with you and your staff as we have in the past.
    As Chairman of the Economic Opportunity Subcommittee, again, on the seamless transition, it is very important.  We are going to make sure that the VA, VETS, National Guard, DOD, all work together as these guys come home and again assure that we truly do have a seamless transition.
    Again, thank you for being here and I look forward to working with you.
    Secretary Nicholson.  Thank you, sir.
    The Chairman.  Ms. Corrine Brown of Florida.
    Ms. Brown.  Thank you, Mr. Chairman and Mr. Secretary.
    The first President of the United States, George Washington, said the rate at which our young people are likely to serve in any war, no matter how justifiable. should be directly proportionate as to how they perceive the veterans of earlier wars are treated and appreciated by their country.
    As far as I am concerned, this budget should be dead on arrival.  The President and the administration proposed to the Congress and we decide priorities.  You can say something about a country, about priorities, by the budget, what we hold as important.
    We practice reverse Robin Hood, robbing from the poor and working people to give tax breaks.  These veterans have paid their dues.
    I live in Florida.  Most of my case work are veterans.  They can't get into the system.  They have long waiting lists.  There is some problem.  One-third of the veterans are in the streets, one-third of the homeless people on the streets are veterans because they are not getting the proper health care or they have fallen through the system.
    How do we propose - most of us in Congress think nothing of a co-payment of $10 to $15, but our veterans cannot afford it.  We are trying to fund a department to increase fees.  That is unacceptable.
    I have been on conferences with the House and the Senate.  When we get in the closed door, we can't afford it. That is unacceptable.  How are these veterans going to afford these additional fees is what I want to know.
    Secretary Nicholson.  Thank you, Congresswoman, particularly for the obvious concern you have for veterans. Let me respond in a couple of ways.
    One is to point out to you that this Administration brought about with the help of the Congress almost a 50 percent increase in health care benefits and pension and compensation benefits since it has been here.
    This year does represent a pause, if you will, in that incline that you have seen.
    Ms. Brown.  Mr. Secretary, did you know that the increase had gone up to 130 percent, the increase in needs?
    Secretary Nicholson.  We are serving a million more veterans than we were in fiscal 2001.
    Ms. Brown.  The veterans, the ones I'm talking about are the ones that are older, they don't have the income. They have a lot of needs.  They are very frustrated.  When I talk to them, they are almost in tears because they feel in their prime time, they gave their best to this country.
    The question is what are we going to give back to them.  Maybe I'm the only one in this body that has these kinds of veterans.  They move to Florida.  They have high expectations.  We are not meeting their needs.  It's a constant fight.
    We want to close some of the sites.  It is just one thing after another.  The veterans are not getting what they need from the system.  We have the money.  It's just the matter of priorities.  They are not priorities with this Administration.  I hope to God it will be a priority with this Congress.
    Every year, we have this fight.  Let me tell you, Secretary Jesse Brown.  I dearly loved that man.  He fought the administration for veterans.  He didn't care who the President was.  He was an advocate for the veterans.  That's why I'm on this Committee and have been on this Committee for 13 years.  I care about them.  I'm going to fight for them.
    As far as I'm concerned, this budget is dead on arrival.  I yield back the balance of my time.
    [The statement of Hon. Corrine Brown appears on p. 67]
	
    The Chairman.  I thank the gentlewoman.  I will yield one minute for a rapid fire for anybody who may have follow- up.  Mr. Michaud, you are now recognized for one minute.
    Mr. Michaud.  Thank you, Mr. Chairman.  Togus Hospital in Maine actually has reported a shortfall.  They have been told that the delivery of the MRI machine has been postponed, which actually could save a lot of money.  I'm sure if that happened at the Togus Hospital in Maine, it is happening elsewhere.
    I would just ask that VA please look at that.  I know that is a big problem.
    Secretary Nicholson.  Thank you.  We will look into that.
    Ms. Brown.  Mr. Chairman?
    The Chairman.  Ms. Brown.
    Ms. Brown.  I just want to make sure that the questions that I have - 
    The Chairman.  Hold it just a second.  Mr. Michaud, do you yield back?
    Mr. Michaud.  I yield back.
    The Chairman.  Will the gentlewoman yield for a moment?
    Ms. Brown.  Yes.
    The Chairman.  Mr. Bilirakis?
    Mr. Bilirakis.  The Veterans Administration has now and has always had input into the formation of the President's budget, yes or no?
    Secretary Nicholson.  I can tell you it has in this budget, yes, sir.
    Mr. Bilirakis.  Thank you, Mr. Chairman.
    Ms. Brown.  I move that my questions will be made a part of the record.  I want to know that my questions are going to be answered.
    The Chairman.  We will ask the Secretary, just as we did with Mr. Strickland, that for any questions submitted by any member of this Committee, the answers shall be responsive.  If they are not, you may resubmit.
    Secretary Nicholson.  Indeed.  Let me say I welcome the oversight responsibilities that you have for this agency. It is a very big agency, there are 235,000 people throughout the country.  From what I've seen so far, they are fantastic.
    Whenever someone is performing an oversight or an audit, I would welcome to hear about that.  We want to do the best job we can.
    Ms. Brown.  Thank you.
    The Chairman.  Mr. Filner?
    Mr. Filner.  Thank you, Mr. Chairman.
    Mr. Secretary, you are in a difficult position as you are representing the administration as Secretary in presenting the administration's budget.  You also understand that we have looked at your predecessors as advocates for veterans.
    I guess I just wish that in your testimony, you were more honest; you are not going to make the efficiencies, and you know it.  You are not going to get the legislative proposals, and you know it.  You going to have less money than you know you need.
    Just state that.  What would you like to do?  You are the professionals.  Get across what you need to do the job for the people who have given us this nation.  You know these things in this budget are not going to happen.  It's a charade.
    Let's get to realities.
    Secretary Nicholson.  Could I respond, Mr. Chairman?
    Mr. Filner.  I would like to submit my questions, too, since everybody else is.
    Secretary Nicholson.  I would like, if I could, just to respond in one way to your point, which I appreciate. In the interest of just making sure that people understand what we are talking about in this realm of the enrollment fee and a co-payment, we have prepared a little chart that I would like to submit for the record, if I could, Mr. Chairman.
    The Chairman.  It will be entered without objection.
    [The provided material appears on p.  406]    
	
    Secretary Nicholson.  We will distribute it to the members.  It is showing the medical care regime for a person who served 20 years in the Service.  The example they have used would be a sergeant E-7 with 20 years of service that is receiving TRICARE under the DOD program, which I think you will find is almost universally acclaimed by the people that are using it.
    Those are the people that when they took the oath and the recruiter told them if you serve a career in this, you will be given health care for life.  Those are the people to whom that was told, I think, and to whom it is indeed owed. They now have, because of you, this TRICARE system, which everybody I've talked to really likes it.
    If you look at this, you will see this is somebody who served 20 years who is paying an enrollment fee for services and certain co-pays for services.
    The proposal that we have in this budget, Mr. Filner and members, is for those people that in a means test of the local income levels are able to pay this.  It is not for the poor veteran.
    Mr. Filner.  Do you know what that number is?
    Secretary Nicholson.  It varies.
    Mr. Filner.  It is around $25,000.
    Secretary Nicholson.  I think in San Francisco, it is about
$71,000.
    Mr. Filner.  People earning as little as $25,000 could be in this category.  I would not call them all that able to contribute to the medical care they were promised.
    The Chairman.  I appreciate the gentleman's slow fire.
    Mr. Filner.  Mr. Chairman, could I also introduce into the record the budget of 2006, the Independent Budget and the differences?  I would like to introduce that into the record, also.
    The Chairman.  Without objection.
    [The provided material appears on p.  407 and p. 408]
	
    Ms. Brown.  Mr. Chairman, one other point, please.
    The Chairman.  Yes, ma'am.
    Ms. Brown.  The Secretary just mentioned this schedule with TRICARE, which I think is a very good program, for people who have served 20 years or more.
    We need to keep in mind that some people go into the Service that don't even live 20 years, particularly in time of war.
    The question is we should not pit one veteran against another.  What we need to do, in this country, we don't have proper health care.  That's a problem.  Those people who have contributed to this country and when they need help and assistance, the question is whether or not they are going to be a priority and whether or not we are going to be there for them.  That's the question.  I don't know the answer.
    Thank you.
    The Chairman.  I thank Ms. Brown for her contribution.
    Mr. Secretary, I want to thank you for coming.  I want to thank you for bringing your staff on the formulation of the President's budget.  I also thank you for telling your story and where you came from, a town of 99.
    I grew up in a town of approximately 200.  I took my oath as a cadet at the Citadel, but I remember my commissioning oath at Fort Bragg, given to me by Lieutenant Colonel O'Johnson.
    Why do members of the military remember their oath?  They remember it vividly because they said they will give their life to defend the Constitution.  It is an oath which they embrace and it is implanted in their minds.  We are then inculcated with what are called values.  We refer to them as military values.  I read them with regard to all the branches of our Services.
    It is the bond which we all share.  It is the dimension by which we see the world.  It is our common understanding and it is our bond.
    With regard to the prioritizations of care, Congress, when we did the eligibility reform, set out the priorities of care.  As we set forth those priorities in categories one through six, it is the responsibility, I believe, of the nation to care for the disabled, the injured, the veterans with special needs and the indigents.  Those are the priorities the nation held for a very, very long time.
    When we did the eligibility reform, we had hoped and made assumptions that as we would open it up to the non-Service-connected disabled veterans and non-compensatory veterans, that we would bring efficiencies and economies of scale.
    We received testimony from many that it would be budget neutral and in fact, it would be an enhancer, a revenue stream.
    The reality is that it is not what happened.  We are now at war and we have some challenges.  We have over 10,000 wounded.  We have a VA that has perhaps a generation skip with regard to handling some of these catastrophic injuries the actual duty force is about to hand off to you, Mr. Secretary.
    The generation skip means the VA knew how to handle a lot of these catastrophic injuries from World War II, Korea, and Vietnam.  They cared for the aged population, and now we have something pretty strong coming our way.  We will also have as many as 100,000 veterans with post-traumatic stress disorder.
    When we refer to caring for the veteran, it is not only the physical disabilities but also the mental.
    We also in the generosity of this Congress said to those soldiers, sailors and Marines, who are in these operations in Afghanistan and Iraq, that when you come back home, we are going to care for you for two years.  We have also opened up more enrollment into VA health care.
    Beginning to understand the impact of that is something we have to do.
    How Congress did that I believe is the fulfillment of our values, the reason we set out these priorities of care.
    I appreciate your highlighting with regard to the TRICARE system.  Again, with that system, there was no push back from anyone with regard to the co-pays and deductibles.  As a matter of fact, I think Mr. Bilirakis is correct.  Maybe if we had been better listeners to Dave Gorman of the Disabled American Veterans who raised the concerns echoed by OMB and CBO, perhaps if we had created that system with those deductibles like that, maybe we wouldn't be where we are today.
    When you create a system and then you try to add something to it later, you get an echo.  You get a reaction. That is what we have right now.  We have to work through this. This will be very challenging for the members of this Committee.
    I also want you to know that with regard to the disabled and the injured and special needs veterans, we will work with you with regard to how we focus on our core constituency of the VA.  We will make sure there is a centric in our focus.  We want to make sure that just because their life has changed, that we ensure they have the opportunity to live, and that means beyond governmental assistance.
    Just because you send them a check and they find their life in a bottle, that is not a quality of life.
    We reorganized on this Committee to work with the administration on these focuses at this time of war.  We took the Benefits Committee and we cut it into two subcommittees, and working with the minority to in fact carry forward on that obligation.
    I will let you know that we are reorganizing our appropriations process here in Congress.  When I went before the Steering Committee with regard to this Chairmanship, I gave a recommendation to the Steering Committee that they reorganize the appropriations process, that they take the military personnel and MILCON and marry that with the VA.
    The reason I asked that the personnel of the military be with the VA in the appropriations process is the TRICARE program that you just mentioned.
    As we can talk about these efforts with regard to seamless transition, sharing initiatives between DOD and VA, and having one decision maker, one Subcommittee in appropriations, to work with us in these endeavors, I am most hopeful that never again will we have these scenarios whereby the Army buys one digital x-ray machine, the VA buys one, it is right across the street, and yet the two systems are incompatible and can't talk to each other.
    Hopefully we are going to end that kind of stuff and we are going to work together, and that is the reason we did that appropriations process.
    I wanted to highlight the changes we had made here in Congress.  Mr. Secretary, we thank you.  We thank your staff.  We look forward to working with you during these very difficult times.
    The Committee will also be submitting questions for the record.  Again, please be responsive to any written questions.  Thank you, Mr. Secretary.
    Secretary Nicholson.  We will be glad to.  Thank you, Mr. Chairman.
    The Chairman.  Our second panel consists of representatives of the Independent Budget.  We have Mr. Richard Jones from AMVETS.  Joseph A. Violante of the Disabled American Veterans.  Richard B. Fuller of Paralyzed Veterans of America.  Mr. Dennis M. Cullinan of Veterans of Foreign Wars.
    These gentlemen are the national legislative directors for their respective organizations.  Gentlemen, if you would please proceed to the witness table.
    For my colleagues, the 11:30 vote got pushed back to 12:00.  We will just wait to hear the bells.
    Gentlemen, we are prepared to take your testimony. We will proceed in any order which you gentlemen prefer.
    Mr. Jones.  Mr. Chairman and Ranking Member, Mr. Evans, members of the Committee, my name is Rick Jones, AMVETS Legislative Director and Chairman of The Independent Budget steering - 
    The Chairman.  Would the gentleman suspend?  Will the members please come to order.  You may proceed.
    Mr. Jones.  Thank you, sir.  My name is Rick Jones, Chairman of The Independent Budget Steering Committee.
    With your consent, sir, we would like to proceed having PVA give the health portion, Disabled American Veterans presenting the benefits area, the Veterans of Foreign Wars presenting the CARES construction portion, and have AMVETS follow up with the burial option.
    The Chairman.  With no objection, your written testimony will be submitted for the record.

STATEMENTS OF RICHARD B. FULLER, NATIONAL LEG-
    ISLATIVE DIRECTOR, PARALYZED VETERANS OF 
    AMERICA; JOSEPH A. VIOLANTE, NATIONAL LEGIS-
    LATIVE DIRECTOR, DISABLED AMERICAN VETERANS;
    DENNIS M. CULLINAN, NATIONAL LEGISLATIVE DIR-
    ECTOR, VETERANS OF FOREIGN WARS; AND RICHARD
    JONES, NATIONAL LEGISLATIVE DIRECTOR, AMVETS

STATEMENT OF RICHARD B. FULLER

    Mr. Fuller.  Thank you, Mr. Chairman.  I'm Richard Fuller, national legislative director for Paralyzed Veterans of America.
    In the 19 years since The Independent Budget was published, PVA has always coordinated the medical care section.  I will confine my remarks to that issue.
    The Administration's 2006 budget request provides very little if any new appropriated dollars for the VA health care system.  It relies on overly optimistic third party collections, as usual, accounting gimmicks, and totally unrealistic management efficiencies to derive its budget figures.
    The Independent Budget gives a clear assessment of the coming needs and rising costs of health care, projects VA will need a $3.4 billion increase in 2006. At 12 percent, this increase is actually below the 13 or 14 percent the previous Under Secretary for Health testified before this Committee that he would need.
    In the interest of time, I would just like to make three points.  For the past two years, the members of this Committee and its counterpart in the other body, likewise, the appropriation committees, have realized that a $250 user fee and a $15 prescription co-pay are unduly onerous to veteran patients, and they were rejected.
    We urge the Committee to reject these proposals once more.  Two million veterans would be affected by these increases.
    Mr. Chairman, I would just like to briefly raise one point about a misconception that has been repeated several times during this hearing, that these increases in fees would only apply to category 7s and 8s.  They also apply to catastrophically disabled veterans in category 4, who are in category 4 because of their special needs.  This would increase the burden on these veterans who are in great need of specialized health care, paraplegics and quadriplegics seeking care for specialized services at VA.
    Secondly, the effect of the proposed drastic reductions in funding would be catastrophic.  Finally it is true we have seen increases in past years, but we have a fluctuation now of funding up and down, up and down, which makes it very difficult for VA to manage itself.
    For that reason, we continue to ask the Congress to provide a guaranteed funding plan for the VA health care system.
    [The statement of Richard B. Fuller appears on p. 85]
	
    The Chairman.  Thank you, Mr. Fuller.
    Mr. Violante?

STATEMENT OF JOSEPH A. VIOLANTE

    Mr. Violante.  Mr. Chairman and members of the Committee, good afternoon.  I'm Joe Violante with Disabled American Veterans.
    As with our primary responsibility in the Independent Budget, I will address mainly the recommendations for the benefits programs.
    This year, the President's budget recommends only one legislative change for veterans' benefits, that is a cost of living adjustment for compensation.  We support that recommendation.  We include a number of other recommendations in the Independent Budget.  I won't attempt to cover those at this time.
    I hope the Committee will refer to the IB for specifics and for reasons for these recommendations.
    For our benefits program, we mostly need some fine tuning to make them better serve their purposes.  Persistent problems with the delivery of benefits diminishes their effectiveness.
    The optimum efficiency obtainable in the administration of programs cannot overcome inadequate resources.  Year after year, the President's budget requests inadequate resources, but supposedly contain the right solution to fix the problem nonetheless.
    Year after year, the problem remains unfixed.  The solutions are flawed because they are built around inadequate resources.  No one disputes that the VA can obtain and should continue to pursue new efficiencies, but highly optimistic and vaguely conceived new efficiencies cannot justify cutting the workforce and investing too little in tools to do the job when VA is already in the hole.
    Past reductions in the workforce are the foundation of the problems.  If the VA continues to curtail its resource requests to extraneously impose budget targets rather than requesting resources called for by a realistic assessment of its production capacity in relation to its workload, its service to veterans simply cannot improve to acceptable levels.
    In the Independent Budget, we endeavor to provide a more honest assessment of VA resource needs.  I will again refer you to my written statement and the IB to cover the specifics.
    I simply say here that we recommend more employees for the Veterans' Benefits Administration than in the President's budget.  We recommend funding for information technology initiatives, to which the President's budget appears to include no funding.
    The President's budget claims that its priority goal is to improve the timeliness and accuracy of claims processing.  The inadequacy of the resources it requests contradicts that claim, however.
    In preparing your views and estimates for the Budget Committee, we therefore urge this Committee to consider our recommendations in light of these inescapable facts.
    That concludes my statement, Mr. Chairman.  I'll be happy to answer any questions a member of this Committee may have.
    [The statement of Joseph A. Violante appears on p. 91]
	
    The Chairman.  Thank you.
    Mr. Cullinan?

STATEMENT OF DENNIS M. CULLINAN

    Mr. Cullinan.  Thank you, Mr. Chairman and members of the Committee.  I am Dennis Cullinan.  I'm the legislative director for the Veterans of Foreign Wars of the U.S., and on behalf of the 2.4 million men and women of the VFW and our auxiliaries, I express our deep appreciation for being included in today's important VA budget hearing.
    The VFW is responsible for the construction portion of the IB, so I will limit today's testimony to two main areas, CARES and long term care.
    In light of the administration's totally inadequate budget request for VA, we are very concerned that Congress may not adequately fund all CARES' proposed changes and projects. This will greatly worsen the obstacles now impeding veterans' timely access to quality health care.
    It is our opinion that VA should not proceed with the final implementation of CARES until sufficient funding is appropriated in a separate account for construction of new facilities and renovations of existing hospitals.
    Supporting this view is the fact that the Administration's budget would devote the total funding for major or minor construction of $699.8 million to CARES, leaving nothing for non-CARES' projects.
    Mr. Chairman, it defies credibility and good reason that the VA will or should suspend all non-CARES' related construction projects to include essential non-recurring maintenance, seismic corrections and other safety issues and so forth.  It is for this reason that CARES be funded separately to provide sufficient funding and to avoid the temptation to engage in this kind of budgetary slight of hand.
    We recommend that Congress appropriate, not including funding specific to CARES, $562 million to major construction for fiscal year 2006.  We also recommend that Congress appropriate $716 million to the minor construction account.
    With respect to long term care, we are equally dismayed.  The budget proposal slashes $350 million from veterans' nursing homes by serving 20,000 fewer residents and completely eliminating $104 million in state grants.
    This would have devastating consequences for veterans in need of long term care and the system that is to serve them into the future.
    In total, the Administration plans to save $606 million by restricting eligibility to nursing home care.
    VA and the nation has an obligation to provide for a full continuum of health care to those who served this country.  Long term care is an essential part of this.  This budget advocates that responsibility.
    We look to you, Mr. Chairman and the other members of this Committee to come to the aid of this nation's veterans in need and reject this proposal.
    Thank you, Mr. Chairman.  That concludes my testimony.
    [The statement of Dennis M. Cullinan appears on p. 99]
    The Chairman.  Thank you.
    Mr. Jones?

STATEMENT OF RICHARD JONES

    Mr. Jones.  The members of the Independent Budget recommend Congress provide $204 million in fiscal year 2006 for the operational requirements of the National Cemetery Administration and the National Shrine initiative, and a backlog of repairs.
    In total, our funding recommendation for NCA represents a $40 million increase over the Administration's request for next year, an increase almost entirely aimed at improving the NCA shrine initiative.
    As you know, pursuant to past legislation, VA awarded a contract to Logistic Management Institute to conduct an assessment of veterans' burial needs.  One of those reports entitled National Shrine Commitment, dealt with capital improvements needed at existing veterans' cemeteries.
    It identified 928 restoration or repair projects estimated to cost $280 million.  The Independent Budget veterans' service organizations recommend funding be accelerated to correct current issues.  We all know delayed maintenance results in an exponential increase in the costs of repairs.
    We also recommend in the document certain burial benefits be increased and enhanced, rather than be eroded as they have in value over the years.
    In the series of benefits recommended, I would like to highlight one matter.  With the heightened interest in increasing the Service member's death gratuity from $12,000 to $100,000 or more, the Independent Budget service organizations ask you to recognize that deaths also result from the wounds incurred in service long after the last shot is fired.
    We therefore recommend a modest increase in the Service connected benefits to $4,100 from the current level of $2,000.  That is one-third of the current rate for those killed in service, in combat.  It is much less in the sights of what you are currently focusing on.
    This request, of course, would restore the allowance to its original proportion of benefits and burial expense and tell all veterans that their sacrifice is given in appreciation as it so well deserves.
    We thank you, sir, for allowing each of us three minutes to present our portions of the Independent Budget.
    [The statement of Richard Jones appears on p. 104]

    The Chairman.  Thank you very much.  I want to thank the gentlemen for coming to Charleston.  I think it was a very productive day.  Any time we can get out of this town and sit down and have some frank discussions, I think it's a good thing.
    The first thing I would ask of each of you, tell me where you were when you took your oath, either of enlisting or commissioning.
    Mr. Fuller.  Mr. Chairman, I was at Fort Hollin outside of Baltimore.  I don't think it exists anymore, and I hope it doesn't.
    The Chairman.  Mr. Violante?
    Mr. Violante.  I was attending University of Dayton and decided it was time to drop out of school and enlist, so I enlisted in Ohio and took my oath in Cincinnati, Ohio.
    Mr. Cullinan.  Mr. Chairman, I was in the Federal Building in Buffalo, New York on August 23rd, and it was warm for a change.
    Mr. Jones.  Fort Dix, New Jersey, 1970, a few days before Thanksgiving.
    The Chairman.  Thank you, gentlemen.
    One of the things that I learned is you can take a lot of experts and you can take a lot of economists, and they build their modeling to determine the financing.  In the end, it still is very difficult, because we are dealing with a ghost population.  People that ebb and flow and utilize many different systems.
    It's challenging to come up with a good number.  The VA uses a private sector actuarial firm to help develop their estimates of the funds needed to provide care to all veterans.
    I'd like to know who develops the estimates that are used in the Independent Budget and what are the assumptions that are used to ensure that these projections accurately reflect the health care needs of the enrollees.
    Mr. Fuller.  Mr. Chairman, we use the same formula that VA uses in preparing its budget for its submission to OMB.  You basically break down personnel costs, regular inflationary increases and medical inflation increases, plus projections of increases in demand that will be placed on the system.
    I think you heard a lot about the shrinkage in the number of nursing home beds in the system today.  Likewise, the same is true as far as mental health beds are concerned. We add initiatives into The Independent Budget in order to ramp those programs back up, as the Congress has mandated by statute.
    Our budget is accumulated every single year based upon what we factor the needs are.  In past years, we have had communications with VA officials who called our numbers basically on track.
    The Chairman.  Gentlemen, I think it would be helpful to me, I appreciate your oral testimony, if you would place in writing the science behind how you come up with your budget estimates. It would be very helpful.  People like to use numbers and they throw them around.  If I know the methodology, how you came up with those numbers, I think it would be very important.  Some people place a lot of credibility with them, and I need to know.
    Mr. Fuller.  We will be happy to provide that, Mr. Chairman.
    The Chairman.  Thank you very much.  Mr. Filner?
    Mr. Filner.  Thank you for being here.  Mr. Chairman, I take it we are having a meeting tomorrow to submit our views and estimates to the Budget Committee?  Is that correct?
    The Chairman.  Yes, we are, 10:00 a.m.  We are to hold a business meeting tomorrow.  That is what we are going to do, we are going to sit down and talk about it; the challenge we all have is that this Committee's views and estimates are to be reported to the Budget Committee on the 23rd.
    Mr. Filner.  We are not voting on that tomorrow?
    The Chairman.  We are holding the business meeting at 10:00 tomorrow morning, Mr. Filner.
    Mr. Filner.  Okay.  The Independent Budget is one that many of us, certainly on this side, take very seriously.
    As I said earlier, the President submitted a Social Security proposal with a couple of trillion dollars worth of borrowing.
    If they can propose borrowing for Social Security, if there is borrowing to fund a tax cut, borrowing to fund a war, and yet the veterans have to stay within this fixed budget.  We have the money.  It has been spent everywhere else.  We are putting our VA budget under different rules, Mr. Chairman, and I think that is wrong.
    I heard mentioned ï¿½core veterans.ï¿½  Is there any definition of that?  Is there a definition?  Does anybody know?
    Mr. Jones.  Title 38, there are no words in the code that say this is a core group to be served.  The Veterans Administration was opened to all veterans according to the appropriations available and gave the Secretary some authority to make decisions regarding the resources he had at the time.
    Mr. Filner.  I agree with that.  I think we can serve all veterans with high quality health care.
    Thank you, Mr. Chairman.
    The Chairman.  I thank the gentleman for his contribution.  Mr. Bilirakis?
    Mr. Bilirakis.  I find myself agreeing at least in part with Mr. Filner in that I do also believe - 
    [Laughter.]
    Mr. Bilirakis.  Come on, we haven't disagreed that much, for crying out loud.  You just handle it differently than I do.
    I believe our veterans deserve complete coverage.  I really do.  That may be one of the reasons why I am vice-chair of the Veterans Committee.
    We could probably approach something like that if we would all work together, but we don't.  You pit us one against the other with your Independent Budget.
    I remember in the days when the other party was in charge.  I don't remember an Independent Budget.  I don't remember going through an Independent Budget business or anything of that nature.  I don't remember that.
    We were dealing with the President's budget, whoever the President happened to be, and trying to work with that, and in the eyes of some people, it was good, and in the eyes of other people, it is not so good.  I was generally in the category of people thinking it was not so good.
    Bob, you remember that.  We have worked well together over the years.
    As far as the President's budget is concerned, it is a negotiating point.  It's a draft.  I suspect your Independent Budget is intended to be a negotiating point or a draft.
    I would hope that you would expect us to come up with something so that we are not pitted against each other. That's ridiculous for us to be pitted against one another. I'm not saying you intend that.  That's really what takes place as a result of your budget versus the President's budget and what not.
    Mr. Filner.  With that attitude, I appreciate what you are saying.  We have talked many times about this.  I think we have to have a working meeting and let's do it.
    The Chairman.  The Committee will stand in recess for a vote.
    [Recess.]
    The Chairman.  The Committee will come to order.  I will go to Mr. Bradley for any questions he may have.
    Mr. Bradley.  Thank you very much, Mr. Chairman.
    In the Independent Budget, in the medical care system, and I wasn't expecting to ask the full question, let me see if I can find the citation, page 79.
    You talk about seeing a significant increase in the long term care needs over the next decade, in particular, the number of veterans 85 years and older are expected to increase by over 400,000.
    Could you just talk about that a little bit, where you see things going with the proposals in the budget?
    Mr. Fuller.  As we did back in the mid-1980s when all of a sudden VA and this Committee saw this huge influx of World War II veterans and started to make plans for caring for the aging veteran.
    We were never very successful in doing that, basically because of annual inadequate budgets to try to make changes and so forth.  The reports done by the VA called for a huge increase in nursing home beds and services.
    We are projecting now, putting myself in the next generation of aging veterans, a huge influx not only from the Korean War veterans' side but also from the Vietnam veterans' side.
    I doubt if VA has any long term plans on how to meet this particular demand.  I think we heard today their concept in meeting the demand is to actually shrink eligibility for who are eligible.  As the Secretary said, it is about $400 million in ï¿½savingsï¿½ achieved to enhance the services for those veterans who remain behind.
    Historically, when we have seen this happen in changes in eligibility, you only have to wait for the next budget cycle, and our dear friends at OMB say well, you are not treating this many veterans so you don't need that money and they take it away from you.
    I think speaking from an organization that represents people with very serious disabilities, a nursing home's the last place in the world you would want to see an individual placed. Alternative institutional care is something that we have followed very, very closely.  As the Secretary said, it's the most humane way to do it.
    What we need to be careful about, however, is that we don't say that is the panacea for the entire problem.  We have paraplegics and quadriplegics who cannot be taken care of effectively at home.  The VA nursing homes have been the safety net in this process.  It's very difficult to place people like this in the private sector, in a contract nursing home.  They just won't accept them there.
    What we are trying to show here is that we need to move forward in improving long term care programs because there is going to be anticipated external demand.
    Mr. Bradley.  Do I still have more time?  I can't see the light.
    The Chairman.  Yes.
    Mr. Bradley.  The second question, you talked about the enrollment fee and the co-pays for priority 7s and 8s.  I have to admit, I worked my way through a lot of this material and read it, but I didn't see any description of the category 4, paraplegics that you talked about.  Perhaps you could talk about that a little bit more on the numbers again.
    Mr. Fuller.  Care was taken in order to give a higher priority to those with catastrophic disabilities, who needed specialized services that they would only find in VA. The statute allowed them to be enrolled as a category 4, which gave them some protection from the Secretary's authority to dis-enroll people.  He could actually dis-enroll people in category one through eight if he wanted to under the statute.
    But, it gave them higher level of protection and also ensured they maintained access.  Subsequent to that, because of the way the statute was drafted, the VA and General Counsel's Office in VA made the determination that while they were enrolled as category 4s, those who had higher incomes and would quality as being either category 7 or 8 would still have to pay all the co-pays, all the fees, the outpatient fees, the inpatient fees, the prescription fees and everything else.
    These are very high end users of the system.  A quadriplegic or paraplegic has multiple prescriptions, catheters, bowel equipment, pads, skin care, all kinds of things.  We have presented this information to this Committee in the past. That comes to a big bill, a huge monthly bill, which could be hundreds of dollars.
    We are seeing in some same cases, it might become so burdensome that the individual leaves the VA system and its specialized care and spinal cord injury centers and tries to find a cheaper way to get his health care and he gets himself into real medical trouble.
    That was something that we thought we would bring up to the Committee.  Everybody keeps saying it's only 7s and 8s and this others groups, people including service connected, the indigent and those with special needs are in a somehow higher category.  I just thought it was important to bring that up.
    Mr. Bradley.  That affects about 2 million?
    Mr. Fuller.  The imposition of the increased co-pays and the $250 enrollment fee affects 2 million enrollees in category 7 and 8.  Two million people would be affected.
    The Chairman.  Mr. Fuller, I am glad you gave that explanation.  I believe it really defines the compassion of a nation when they permitted those category 4s and specialty needs.  You are absolutely right.  That is very, very expensive, and it's a cost for which the VA said we are going to absorb.  Would you concur?
    Mr. Fuller.  I would certainly agree.  I think the VA has shown they can provide certain types of specialized services. If you look at care for amputees, care for people with spinal cord injuries, care for blinded veterans and so forth, I think it is only natural that VA would lead the nation in these and spinal cord injury care as well.
    The Chairman.  My point is when we absorb that cost, that really also helps define the compassion of the nation.  I don't hear that very often.  I think it does.
    I really get going whenever I see inequities.  I like fairness.  This conversation that is happening here in Washington with regard to the death gratuity, I'm just curious for your personal opinions.
    These proposals that are headed this way, the death gratuity will end up in the Armed Services Committee, which Mr. Evans sits on, and this Committee would have any Servicemembers' Group Life Insurance piece of that.
    You are right.  We have a burial piece for which The Independent Budget recommended an increase from the $2,000 to $4,000.  There is a death gratuity to help remediate expenses, some for burial, for those who do not choose national cemeteries, and we have the SGLI piece.
    Now there has been this eagerness to put our arms around the veteran and the family and further define compassion.  What about $100,000 if someone dies in the combat theater?
    What I ask of you is that in the military, it is all about a team; it is the team concept.  When we do that, we recognize that it can be anywhere from five to seven to one ratio of support personnel to put one combatant in the theater.  The theater combat operations has even changed. You could have someone loading a bomb on a B-2 bomber in Missouri and the bomb drops and kills him, but he's not in theater, or he went to the theater and came back.
    It's always changing.  We have always been fair.  I understand the Marine Corps has come out now and opposed it because they wanted everyone to be treated the same.  They don't want to say well, since you were in combat, therefore you should be treated differently than someone who wasn't, yet that guy in combat wouldn't be successful had he not been trained right, and the logisticians had not done their job.
    We recognize in the military, for the Army, you wear your combat patch.  That is a sort of in your face.  I was there, you weren't.  You have ribbons that you earned.  Then there is this feeling by those who didn't go to the war that somehow they are placed at a disadvantage.
    I'm just curious about your thoughts with regard to some of the proposals that are bouncing around, and include your thoughts on SGLI, please.
    Mr. Cullinan.  Mr. Chairman, representing the Veterans of Foreign Wars, we certainly understand the impulse to provide a greater benefit to the survivors of those who were killed in combat.
    We have to agree with what I believe you are saying, it should be fair.  It should be equal across the board.  You could have an individual who was killed while loading a bomb or performing some other task essential to successfully carrying out a combat operation.
    It should be equal.  It should be across the board. I understand the impulse though.
    The Chairman.  Do the other gentlemen concur with the testimony of VFW?
    Mr. Jones.  Philosophically, it is correct to provide that benefit to all military individuals, their families, those folks who were killed in service to country. It is the value that they give to that service that we should recognize.  There is no way we could possibly repay the family for its loss, but a loss in training, a loss in combat is a loss to a family of an individual who served this country and helped defend its cherished freedoms.
    The Chairman.  Thank you.  With regard to this question on category 4, I don't know what the Committee is going to do yet with regard to our budget views and estimates. If in fact we say we are going to cure this inequity between the active duty and those who may have only served one tour, and create an enrollment fee along with a deductible.
    If we were to exclude the category 4, would there be any objections from anyone?
    Mr. Cullinan.  Mr. Chairman, we absolutely do not object to that provision, protecting those severely disabled veterans.  I'd like to say something else about that.
    The vast majority of those who have served this nation in uniform did not make it a career, I think 90 percent or something like that.  Among those, you have those who saw Omaha Beach, Korea, Vietnam. Today we have Iraq, Afghanistan.
    On the other side, we have those individuals who chose to devote a portion of their lives to military service, a military career.  Among those, there are those who have not seen combat.
    While both accomplishments are valuable and important, we have a problem distinguishing between the worthiness of their respective services.
    What I am saying is we object to the enrollment fee and the co-pays.
    The Chairman.  Am I to then assume that you do not see an inequity between charging the deductible and enrollment fee with TRICARE for military retirees, versus someone who only served one tour of duty?
    Mr. Cullinan.  They have certainly earned the Tri-Care for life package.  On the other hand, the category 8 veterans in the main are not wealthy individuals.  Category 7, although their incomes may come above the national poverty threshold, they are not rich people.  They need the help and the care that  VA provides.  They have come to rely on it.
    In that sense, no, we do not perceive - it's a question of need.
    The Chairman.  You do not perceive that as an inequity?
    Mr. Cullinan.  No.
    Mr. Jones.  Sir, it seems to me we are continuing to speak of these priority veterans from an economic framework, those with income above $24,000.  I think it is important for us to understand that these are the soldiers, sailors, airmen and Marines who walk the patrol somewhere in Iraqi or elsewhere across the globe.  They are the heroic men and valiant women who answer our nation's call, and with God's grace, they return from service whole and able to continue their lives without disabling injury or illness.
    As we speak, these warriors may be replacing a buddy who yesterday gave the ultimate sacrifice.  Today, these patriots are ready to take their place voluntarily in defense of freedom and our way of life.
    The members of AMVETS, in regard to your question, believe that these men and women whose future income may exceed an income threshold which currently serves to deny them future health care eligibility should be able to seek care at VA if they have the need following their military service.
    It is the least our nation can do to those on whom America depends to defend her liberty.  That is AMVETS' position on that question, sir.
    The Chairman.  Mr. Jones, it also is in the statute as needs and means.  Isn't that correct?
    Mr. Jones.  Needs and means.  Absolutely.
    The Chairman.  We are very challenged by the growing number on 7s and 8s versus the priorities that we face.  We recognize that and talked about that in Charleston; right?
    Mr. Jones.  Yes, sir.  I would say as far as AMVETS goes, we would be happy to give our place, an 8 or 7, would be pleased to give their places as long as it is part of the deficit package that has been combed for lesser priorities.
    Let me give you one example of the problem we face right now.  Last year in the Omnibus Budget Reconciliation Act, was placed a four year $1 billion program to provide health care to illegal aliens.  At the same time, we are talking about pushing 1.1 million 7s and 8s out of the system with a higher co-pay and with a doubling of prescription marks.  It is an user tax on veterans who defended the country, and yet we are providing $250 million a year over the next four years to provide health care for illegal aliens.
    That is the problem with the priorities here, sir. The box that we are in is an OMB box.  The box needs to be more broad.  There needs to be some wisdom in the budget process to comb these things out.
    The Chairman.  The box that we are in is the box which we constructed.  Mr. Evans?
    Mr. Evans.  I want to thank the panel and the Independent Budget proposal you have presented.  Thank you.
    The Chairman.  Thank you, Mr. Evans.  I want to thank you for the time that you put into the budget submission.  We look forward to working with you.  There are many areas on which we agree and find common interests.  We look forward to continued work.
    Mr. Fuller.  Mr. Chairman, if I could just make just one quick final comment.  We will give you as requested the format of how we develop our budget.  I think it would be helpful for the Committee and for everyone if you requested VA to give you their process as well.
    The Chairman.  I already have, Mr. Fuller.
    The second panel has now concluded.  We would ask the third panel to come forward.  We would like to thank our final panel today.
    We have Major General William M. Matz, Jr., U.S. Army retired, president of the National Association for Uniformed Services.  Peter S. Gaytan, director, National Veterans Affairs and Rehabilitation Commission, American Legion.  Colonel Robert F. Norton, U.S. Army retired, deputy director, Government Relations, Military Officers Association of America.
    General Matz, please begin.


STATEMENTS OF WILLIAM M. MATZ, JR., PRESIDENT,
    THE NATIONAL ASSOCIATION FOR UNIFORMED 
    SERVICES; PETER S. GAYTAN, DIRECTOR, NATIONAL 
    VETERANS AFFAIRS AND REHABILITATION COMMIS-
    SION, THE AMERICAN LEGION; AND ROBERT F. 
    NORTON, DEPUTY DIRECTOR, GOVERNMENT RELA-
    TIONS, MILITARY OFFICERS ASSOCIATION OF 
    AMERICA

STATEMENT OF WILLIAM M. MATZ, JR.

    Mr. Matz.  Mr. Chairman, on behalf of the members of the National Association for Uniformed Services, I want to thank you for this opportunity to present our views on the proposed budget for the Department of Veterans' Affairs for fiscal year 2006.
    I would also like to begin by thanking you, sir, for inviting NAUS to participate in the veterans' summit that you organized at the Citadel last week. This meeting in my view established a great foundation for our future relationship with you, with your Committee subchairmen, and also your staff.  We also appreciated the willingness during that summit to listen.
    One of the issues brought up at that meeting, and I think everyone was in agreement with, is the urgent need for seamless transition.  There has been a lot of very good dialogue here today on that.
    This is the seamless transition for our active duty and our Reserve personnel as they depart DOD medical care and transition into the VA medical care.
    Recently, I had a personal meeting with the Commandant of the Marine Corps in his office as part of my catching up here just taking over as the president of this association.
    During that meeting, he emphasized to me the importance of taking care of the most catastrophically disabled during this transition to veterans' care.
    Accordingly, our first priority here with our association is to help you, sir, and your Committee to continue your efforts toward this seamless transition, not only for the catastrophically disabled, but also for all eligible veterans.
    We think we can achieve this by implementing the following, and I will simply give you two recommendations.
    First, we need to develop an electronic medical record.  This record will be the cornerstone of any seamless transition initiative.  In today's world of technology, it makes no sense from my perspective that a Service member still needs to hand carry a paper record for four, five, or 20 years, and then upon discharge, have the record sent to paper archives, then have to start a whole new record when he shows up at the VA.
    Secondly, we need a single stop separation physical examination.  A Service member takes a physical exam when he is discharged.  In some cases, just days later, they have to take another physical to qualify for benefits in the VA system.
    As part of this single stop examination, we are also recommending the need to expand VA's benefits delivery at discharge, the BDD process, which also was discussed earlier today. Expand that to all discharge locations in making a determination of VA benefits before separation.
    I think where we have this discharge process now, it is working pretty well.  My members tell me it is working well where it is.
    Clearly, this will allow more disabled veterans to receive their benefits in a timely manner.
    I think we must of course be realistic, that during the time of budget deficits and with the country at war, dollars for all government programs are tight.  We feel the funds for care and support of our veterans is money well spent.
    Some government officials have stated recently that providing earned benefits for those who have served is hurtful.  In reality, from my perspective as an infantryman for 32 years, taking care of veterans is helpful to the nation's cause.  Also, in my view, I think it will enhance the recruiting efforts of our Armed Forces.
    Retired military and veterans can be among the best recruiters if they can report their promises were kept after their service was over.  Also, from my perspective, it could have the opposite effect if veterans don't receive their promised benefits.
    We worked hard on our written testimony and it expands in detail where a plus-up of funds for the VA is needed.  I would enjoin all of you to please read that.
    In closing, we need to continue our efforts towards making the transition of our departing troops as seamless as possible, and we need to keep the promises to those who have served to ensure they will continue, from my perspective, to be among the very best recruiters when our country needs a strong Armed Forces.
    Thank you, sir, and the other members of this Committee for your past and your ongoing efforts.  We look forward to working with you as we work through this year.
    [The statement of William M. Matz, Jr. appears on p. 114]
	
    The Chairman.  Thank you for your testimony.
    Colonel Norton?

STATEMENT OF ROBERT F. NORTON

    Mr. Norton.  Thank you, Mr. Chairman and Ranking Member, Congressman Lane Evans, and distinguished members of the Committee, for the opportunity to appear before you today on behalf of the 370,000 members of the Military Officers Association of America.
    First, Mr. Chairman, I want to congratulate you on your appointment as Chairman.  We look forward to working with you and your new Subcommittee chairs.  I also want to say on behalf of our national president, Admiral Ryan, thank you very much for the opportunity to participate in last week's meeting at the Citadel.  It was a very useful opportunity for us, and we really greatly appreciate the time that you committed to that, to dialogue on veterans' issues.
    I will address three issues from my prepared statement, and ask that the full text be entered into the official transcript of today's hearing.
    First, MOAA strongly supports full funding for the VA health care and claims processing systems.  With tens of thousands of new veterans returning from combat zones every day and future veterans being deployed every day, now is not the time to cut back on VA health care, or to accept continued lengthening of the disability claims backlog.
    A nation that can provide an $82 billion supplemental to prosecute the war must be able to provide for the needs of those who have borne the battle and their families.
  MOAA recommends, as did the Presidential Task Force, that the Committee support full funding to meet the rising demands in VA health care.
    Second, MOAA believes much more needs to be done to help Service men and women and their families to make a smooth transition from the Armed Forces into the VA.
    The hand-off between DOD and VA is still plagued with inefficiencies that affect active duty troops, mobilized National Guard and Reserve soldiers and their families. Action on seamless transition has not lived up to the talk, Mr. Chairman.
    During this time of war, we really need a ï¿½Manhattan Projectï¿½ to complete action on electronic medical records, VA disability claims filing before discharge, an one stop separation physical, and electronic DD214, and tracking of military occupational exposures.
    For years now, rhetoric has far out paced action, and we have made very little progress towards these goals.  We need greater pressure on the Defense Department and the VA to get this fixed now so our veterans will get better access to care and services, and the government can finally realize the projected savings.
    Thirdly, MOAA recommends restructuring and improving the Montgomery G.I. Bill.  Our forces in the field, active duty Guard and Reserves, operate as a total force, but the G.I. Bill is built on an outmoded Cold War platform that sets a firewall between the active duty and the Guard and Reserve G.I. Bill.
    If active duty benefits are raised for the G.I. Bill, the Reserve program should be raised proportional to the active duty rate.  There are huge challenges ahead in recruiting for all components, active, Guard and Reserve.  It will be essential for this Committee and the Armed Forces Committee to improve and integrate both G.I. Bill programs.
    My prepared statement outlines initiatives that we believe are needed now to modernize the G.I. Bill for the 21st Century force.
    Thank you again, Mr. Chairman, for the opportunity to testify today.  I look forward to your questions.
    [The statement of Robert F. Norton appears at p. 120]
	
    The Chairman.  I thank the gentleman.
    Mr. Gaytan?

STATEMENT OF PETER S. GAYTAN

    Mr. Gaytan.  Thank you, Mr. Chairman.  Thank you for the opportunity to express the views of the 2.7 million members of The American Legion regarding the Department of Veterans' Affairs 2006 budget request.
    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.
    The American Legion is concerned about the impact of certain proposals included in the fiscal year 2006 budget request that seek to generate increased revenue for VA from the pockets of veterans instead of through allocation of Federal funds.
    The American Legion opposes the implementation of a $250 annual enrollment fee for non-Service connected priority group 7 veterans and all priority group 8 veterans.  This newly imposed fee would simply charge currently eligible veterans without providing any guarantees of improvement in access to care at the very system created to treat their unique needs.
    The American Legion would urge Congress to once again reject this proposal just as it did last year.
    While the American Legion applauds the initiatives to eliminate co-payments for hospice care, to exempt former POWs from co-payments, and for VA to pay co-pays for emergency care for enrolled veterans at private hospitals, we do not support increasing the pharmacy co-pay from $7 to $15 for priority 7 and 8 veterans.
    While the American Legion realizes the importance of adequately funding VA, we support other options that would create additional revenue streams for VA, such as Medicare reimbursement.
    The American Legion would rather the VA seek reimbursement for CMS for all enrolled Medicare eligible veterans being treated for non-Service connected medical conditions before trying to balance a budget on the backs of priority groups 7 and 8 veterans.
    The American Legion recommends $34.1 billion for VA medical care.  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.
    The American Legion opposes restricting eligibility for state veterans' homes per diem payments for long term care to veterans in priority groups 1 through 3 and catastrophically disabled priority group 4 veterans.
    The state veterans' homes have been a successful cost sharing program between VA, the states and the veterans. Veterans in state veterans' homes tend to be without family, indigent, requiring aide and assistance.  This proposal would spell financial disaster for those homes and would result in a new population of homeless elderly veterans on our streets, especially in those states with poor Medicaid nursing home reimbursement rates.
    The American Legion supports increasing the amount of authorized per diem payments to 50 percent of the costs of nursing home and domiciliary care provided to veterans in state veterans' homes, and full reimbursement for veterans with 70 percent or greater Service connected disabilities.
    The National Association of State Veterans' Homes and VA should develop mutual planning efforts, enhance medical sharing agreements, and enhance use construction contracts with qualified providers.
    Mr. Chairman, the American Legion is fully committed to working with this Committee to ensure that America's veterans receive the entitlements they have earned.
    Thank you again for the opportunity to be here today.
    [The statement of Peter S. Gaytan appears at p. 131]

    The Chairman.  Thank you.  I appreciate your testimony.
    As I opened with other panels, gentlemen, I would like to know where you were when you took your oath either in enlistment or commissioning.
    Mr. Matz.  I was commissioned through the ROTC program at Gettysburg College, and it was 4 June 1961 at Gettysburg College.
    The Chairman.  Thank you.  Colonel Norton?
    Mr. Norton.  Mr. Chairman, I entered the Army from Brooklyn, New York at Ft. Hamilton on October 19, 1966, and a little over a year later, I took my second oath as a commissioned officer on August 27, 1967 at Ft. Benning, Georgia.  At that time, the Benning School for Boys.
    The Chairman.  Right.
    [Laughter.]
    Mr. Gaytan.  I actually enlisted on July 17, 1991 in Richmond, Virginia in the Air Force.
    The Chairman.  Very good.  Thank you.
    You can do that on your time.  He would like to know when your discharges occurred.  I will let you cover that.
    Gentlemen, I would like your thoughts.  You were here, were you not, when I asked the second panel questions with regard to the death gratuity, its impact upon the total force and the team concept which we have in theater versus those out of theater.  I would appreciate your personal thoughts on the issue.
    Mr. Gaytan.  I can speak for the American Legion. We as well as the VFW understand the urgency to increase the death gratuity.  You brought up the fact that it may be an inequity and how it is awarded to individuals.
    Knowing that the American Legion is a veterans' services organization and we are run with organizational resolutions, since attention has been given to the increase in the gratuity benefit, the American Legion is considering that. Your point of view will be taken into consideration.
    What you brought up brings a new facet to our debate over support of the increase in the death gratuity and the fairness of that.  The American Legion is still developing an organizational opinion on exactly which direction that desire to improve the payment for a death gratuity should be directed.
    Mr. Norton.  Mr. Chairman, this issue really is about the families left behind.  As all of us have experienced in recent years after 9/11 with the loss of our brothers and sisters in combat, there were also losses from military training and other accidents.
    The families that are left behind, and as you know, most of the force today is married, have to adjust to this enormous burden of grief and get their lives back together.  To make artificial distinctions about deaths in combat zones as opposed to other aspects of military service is artificial, and this really does a great disservice to these families whose wives, sons, daughters, et cetera, have given the ultimate sacrifice to our country.
    Mr. Matz.  Clearly, sir, an increase in the death gratuity is needed, number one.
    Number two, I guess to second my colleagues here, death is death, whether it is on the battlefield or whether it is someone who is serving at Ft. Benning and something happens.  We as an association, and I honestly cannot say I've gone out and polled all my 180,000 members, but in anticipation of this question, I did do my best to try to get a feel from them and sort of see what the reaction would be if it did not go to everybody, so clearly our association is with these two folks here.
    We feel if it is going to be increased, it is about the families and it should be increased across the board.
    The Chairman.  Mr. Evans, you are now recognized for any questions you may have of this panel.
    Mr. Evans.  I just want to thank them again.  We appreciate you.  Thank you, Mr. Chairman, for holding the hearing again.
    The Chairman.  Thank you, Mr. Evans.  Mr. Bradley?
    Mr. Bradley.  Thank you again, Mr. Chairman.  It's been a great hearing.
    Not a lot of attention has been paid to prosthetics issues and research this morning and now this afternoon.  The Independent Budget, I believe, recommends a $67 million increase over the President's submitted budget.
    Given the 10,000 injuries that we are experiencing in Iraq and a lot of soldiers are coming home with injuries that they would not have survived in past conflicts, and that involves also the limb, would you care to comment on that issue, any of you?
    Mr. Gaytan.  I can comment for the American Legion, aside from the Independent Budget's recommendation.  If you look at the full testimony from the American Legion, our staff, and this may come in line with your question earlier, Mr. Chairman, about developing our recommendations for the budget, our staff analyzes the prior budgets, takes into account the inflationary increases in medical costs, and also the anticipated influx of veterans.
    With the war going on, as you mentioned, and the advances in battlefield medicine and battlefield care and the armor that is being worn by these individuals, in past wars, those lives may have been lost on the battlefield, where those individuals are coming back with life altering disabilities due to those improvements in protection.
    The American Legion recommended an increase for medical prosthetics research as well, equivalent hopefully to the impact of those veterans returning from Iraq and Afghanistan.
    Mr. Norton.  I would only add, sir, that I've been to Walter Reed and I've seen some of the amazing technologies that have been developed and are being developed for those who are wounded in the conflicts in which we are involved today.
    To me, there is really not enough that we can do for these great young heroes that come back wounded in mind or body.  As Pete indicated, there is an enormous opportunity to further refine and develop these technologies to restore as much function as possible.
    A robust prosthetics budget is very, very important to those who have really suffered horrifically in these conflicts.
    Mr. Matz.  I would concur wholly with that. Another point I would bring out, as you know, so many of these young men and women who are being hit with these IEDs, it's a dirty infantry war over there, they are losing their limbs but they are coming back here.  They are being rehabilitated and they want to stay in the Service.  They want to continue to serve for you and I.  The Service wants them.
    Whatever you can do to increase that budget for these prosthetic devices, I would encourage it.
    Mr. Bradley.  Thank you, Mr. Chairman.  I yield the balance.
    The Chairman.  Thank you. I would also, as I asked the last panel with regard to the Independent Budget, ask the American Legion the same question, since your testimony was an exact number.  You recommended $31.4 billion with regard to health care.  I would like for you to submit to the Committee, and as a matter of fact, as soon as possible, because we have until the 23rd to get our budget submission, I would like to know the methodology and your modeling with regard to your tables and how you made your predictions, assumptions, and estimates, to come up with this number of $31.4 billion, please.
    Mr. Gaytan.  Yes, sir.
    The Chairman.  With regard to the testimony of the Secretary and you have heard my remarks, with regard to what I refer to as an inequity between the active duty who are charged the higher co-pays, deductibles, enrollment fees, than someone who may have only served one tour of duty, do any of you gentlemen have an opinion?
    General Matz, do you think that is an inequity or do you think it is not?
    Mr. Matz.  First of all, and we have talked about this, the issue on the 7s and 8s.  I'm just getting into this. I believe that when we were bringing the 7s and 8s into the programs, they were really strongly encouraged to come into it.
    My feeling and our association's feeling is we made them a promise.  We should not go back now and charge them the $250 just to enroll in a program, and increase the pharmacy co-pay.
    Our position is we should not touch that.  However, what the Committee might want to consider is if you open it up again, if it's opened up again to other 7s or 8s, you might want to address it with those people.  However, those people who are currently in the program now, the 7s and 8s, should not have to pay this additional fee.
    Mr. Norton.  Mr. Chairman, I think you addressed part of this earlier.  You made a comment, I think you made reference to whether there should have been enrollment fees done back when when eligibility reform was enacted.
    As General Matz indicated, when open enrollment was implemented in 1998, which started the open enrollment era, that continued through two Administrations, four years running, and those folks came under a certain set of ï¿½rules and engagement,ï¿½ if you will.
    We feel it is unfair at this point to go back and change the rules on them.  They were folks who were invited into the VA to help the VA transform itself from a hospital based system then to a comprehensive outpatient based system today.
    We don't think it is fair to turn around and transfer the responsibility for funding the care that they came into the system onto their backs.
    I would also say, too, Mr. Chairman, if I might, that we are really not in the business of pitting one group of veterans, retired veterans, against other veterans.  We just simply don't care to go there.
    The Chairman.  Colonel Norton, we have a problem. We have a problem, gentlemen.  Whether you want to say it or whether we want to dance, we have a military retiree that is waiting in that waiting area but has to pay that enrollment fee and higher co-pays and deductibles versus someone whom may have only served one tour of duty.
    I just want you to know, we can talk about it, we can do the forensics of it, but I just throw out we have to cure something that we have in front of us.
    Mr. Norton.  A substantial number of these veterans, 7s and 8s, Mr. Chairman, as you know, are Medicare eligible.  They have paid into Medicare over a life time of work.  It seems to us that a more practical long term sustainable way to take care of them in terms of non-Service connected conditions, would be to allow them to use their Medicare benefit in the VA health care system.
    The Chairman.  I have been an advocate of co-pays and deductibles for a long time.  It is about modulating the utilization rate.  People can say whatever they want about why we use them.  I've heard that testimony here today.
    I just want you to know as I do my oversight over health systems, that is what we do.  You both belong to very strong organizations, along with some others, who helped me when I created TRICARE for Life.  I didn't have any pushback with regard to co-pays and deductibles.
    We conclude this third panel.  I ask unanimous consent for general leave for members to submit opening statements and questions for the record within five business days.
    This will complete our hearing.  We thank you for your testimony.
    [Whereupon, at 1:36 p.m., the committee was adjourned.]


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