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


 
                  THE DEPARTMENT OF VETERANS AFFAIRS
                          HEALTH CARE BUDGET
=============================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                           VETERANS' AFFAIRS

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS


                              first session

                                 -------

                              June 30, 2005

                                 -------

                            Serial No. 109-16



                    U.S. GOVERNMENT PRINTING OFFICE
22-695                      WASHINGTON : 2005
_____________________________________________________________________________
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                   The Department of Veterans Affairs 
                            Health Care Budget


                         Thursday, June 30, 2005

                                          U.S. House of Representatives,     
                                          Committee on Veterans' Affairs,
                                                         Washington, D.C.

    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, Bilirakis, Stearns, Moran, Mr. Brown of 
South Carolina, Miller, Boozman, Bradley, Brown-Waite, Turner, Evans, Filner, 
Ms. Brown of Florida, Snyder, Michaud, Herseth, Strickland, Hooley, Reyes, 
Berkley, and Udall.

OPENING STATEMENT OF CHAIRMAN BUYER

    The Chairman. The full Committee hearing of the House Veterans' Affairs 
Committee Oversight Hearing on VA Budget Modeling and Methodologies, June 30, 
2005, will come to order.
 We're here this morning to identify fiscal year 2005 funding requirements for 
the VA health system and to develop the picture for 2006, 2007, 2007, and 
beyond.
    In a continuation of last week's robust discussion with Dr. Perlin, we 
will further examine the process used by VA to forecast health care demand 
among America's veterans, so that we can ensure both today's veterans and 
the veterans of the future have a sound health care system.
    I want to thank Secretary Jim Nicholson for his leadership over the last 
week, as we have worked through this challenge.  We recognize that you have 
inherited a pretty tough problem.  It's clear to me that Secretary Nicholson 
and the Bush administration in your response to this are very serious about 
caring for America's veterans.
    And, to Under Secretary Perlin, who is in the trenches of the VA's health 
administration, I offer and extend my gratitude to you for stepping up to the 
plate, and your candor, not only in public, but also in private.
    As Chairman, getting the VA budget right is about the most important thing 
that I can do.  It's the most important this Committee can do.  Without a good 
budget, how can we provide the good health care for our nation's veterans? So 
we're going to get it right.
    This entire Committee is committed to working closely with you and your 
staff as we move forward in developing an accurate budget for the department, 
not just here in 2005, in your final quarter, but also in 2006 with whatever 
may be required for a budget amendment on 2006 that can be developed with you 
through the August, maybe even into the September time frame, as we finalize 
the 2006 budget.
    Earlier, I had made some comments, not only at a press conference but also 
in particular at a hearing last week, that in this town, everybody seems to 
have a number with regard to the VA budget.
    So the American Legion has a number.  The Independent Budget has a number. 
VA comes up with a number. OMB comes up with a number.  Lane Evans has a 
number.  We've got a number.  Everybody seems to have a number.
    Mr. Evans. Except ours is right.
    The Chairman. What we learned is that you have individuals whom you 
consult, actuaries on contract.  We learned that the model that you use is a 
model that is also similarly used by the private sector, but we stress the 
model.  And we use bad data.  And perhaps the assumptions were not right.  
And they weren't right.  Improper variances give a bad result.
    So over the last four or five years, we were pretty fortunate to get it 
pretty close.  This year, we're pretty far off.
    Recognizing that the 2005 budget was crafted using data in 2002, we 
weren't even in the war in Iraq in 2002.  So while we're looking at today, 
Mr. Secretary, we recognize that we want to work directly with you, and we're 
going to extend our oversight to make sure we get this model correct in 2006 
and 2007, and the budgets beyond.
    And if you're not able to do the risk adjustments, are not able to do 
these changes, we're going to have to do it.  We just want to make sure that 
we get the dollars accurate.
    I know that Chairman Walsh and Chet Edwards, the Ranking Member on 
appropriations, feel the same way.
    I did have to say to Chet last night, Chet Edwards, my good friend, I 
asked him what the power ball was, and he said -- you know, he gave me a 
funny look -- "Why?"
    And I said, "Tell me what the power ball number is."
    And he said, "I don't understand."
    And I said, "Well, if you can be more accurate in guessing what the VA 
budget number would be than the VA, then you should know what the power ball 
number is."
    So I extended him some congratulations.
    It's also kind of interesting that when I look at your model, and the 
sophistication of your model, and I look at what the Independent Budget did, 
and when I look at what the American Legion did in an unsophisticated 
process, they were more accurate.  They were more accurate than you.  And 
that's the reality of where we are.
    I appreciate your coming here today.  We're most interested in hearing 
about these work-around solutions, and we're also most interested in hearing 
what you have to say today and any requests you may have of us to take action.
    The Chairman. I yield now to Mr. Evans.

Opening Statement of Mr. Evans

    Mr. Evans. Thank you, Mr. Chairman.
    I also look forward to working with you to develop why we got into this 
situation, what your plans are for addressing this shortfall this year and 
next.
    I also want to hear from the VA as to what it plans to do to prevent this 
from ever happening again.
    I disagree with comments made by the Secretary earlier this week.  This is 
certainly a problem, and definitely a crisis.
    I'm angry, and I know many of my colleagues are angry.  This is an issue 
of credibility -- the credibility of what you tell us here in Congress and 
the credibility of the budgetary process involving the VA.
    You blame your budgetary model, but year after year you underestimate in 
your February budget submissions the number of veterans who will seek care.  
I don't understand why you are expressing surprise when you've underestimated 
this again.
    VA assures us that this is a $1 billion shortfall that is not affecting 
adequate care to our veterans.  That's not correct.
    The Democratic staff have compiled a snapshot of how this shortfall has 
been affecting patient care, and I ask that it be entered into the record, 
Mr. Chairman.
    The Chairman. Without objection.
    [The information appears on p. 98]

    Mr. Evans. We are still awaiting answers from your February budgetary 
hearing, and I'm still waiting for the answers to a simple survey we sent out 
months ago to gauge the fiscal health of the networks.  The answers to these 
questions in the survey have been held by the VA, and they won't release them.
    Yet, Secretary Nicholson, you told us in February that the VA's 
information was our information.  Is doesn't seem like that's been the case.
    We found out about this shortfall at last week's hearing.  It appears you 
knew about it in April.  You claim that you have been "forthcoming," but this 
has clearly not been the case.
    You are doing no one any favors, least of all the VA, by not leveling with 
us.  We need honesty and accuracy from the VA so that we can get our job done 
and help you, as well, in your job.
    I think we've got a lot of work here to do, Mr. Chairman.  I appreciate 
your holding this hearing, and look forward to working with you.
    [The statement of Hon. Lane Evans appears on p. 62]

    The Chairman. Thank you, Mr. Evans.
    Would anyone else like to make an opening statement?
    Mr. Filner?

Opening Statement of Mr. Filner

    Mr. Filner. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here.
    Mr. Chairman, I found your opening comments bordering on the irresponsible.
    You said we have to get the budget right.  We've been trying to do that 
for months, in fact for years.  You laughed at us.  You laughed at the 
Independent Budget.  Now you're comparing the Independent Budget with power 
ball figures.
    If you look at the record, the Independent Budget has been right for years 
and years and years.  It's a professional analytic job.  Those of us who have 
used it have turned out to be right, and you ought to admit it, rather than 
just saying all of a sudden that we ought to get it right.
    We've been telling you this for months and months. We've tried on the 
floor of the House to raise the budget.  We have been ruled out of order. 
We've tried in Committees to do it.  We tried it yesterday in the House to 
do it, and we've been ruled out of order each time.
    You talked about the Secretary's leadership.  I cannot believe you used 
that word.  We not only were not kept informed of the shortfall here.  The 
Secretary has said, and I assume he's going to say again today, "There's no 
crisis here, there's no diminution in quality."
    We have lists and lists and lists of shortfalls at every single medical 
center in this nation.  We have testimony of veterans who have to wait for 
months and months in line.
    In San Diego where I am, there's nearly 1,000 veterans waiting for their 
appointment.  There's 231 vacancies. And you're telling the Secretary that's 
leadership?
    This Secretary ought to resign because of the way he dealt with us in this 
situation, and how he's handling this crisis.  He is not a leader.  He is 
failing the veterans, he's failing this nation, and I think he ought to inform 
us today of his resignation.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Stearns?
    Mr. Stearns. Yes, Mr. Chairman, thank you.  Just allow me to say a few 
words.
    I appreciate the Secretary coming up here, and this is the first 
opportunity I've had to talk to him, and I appreciate his honesty and his 
staff, forthright in trying to give us the information we need.
    You know, I guess some of the questions we now have, with the Senate 
passing approval of $1.5 billion yesterday in emergency funding, is that all 
you need, and can you project in the future what else you'll need?
    So I guess getting a firm handle on a number, and how much is contributing 
to this, the Reservists and the Guardsmen, perhaps even discussing with us 
what the actuarial model that you're using, does it just continue to miss the 
mark, or does it have to be modified?
    You know, I think many of us follow these hearings, and I know that Dr. 
Perlin on April 12th, who was the under secretary for health, he wrote to the 
Senate VA Committee:
    "We do feel confident that the VHA has sufficient resources for the 
remainder of 2005."
    So those are his quotes in April 2005, April 12th.
    And so then we suddenly hear about this.  It makes us a little concerned.
    So I know that you welcome like we do the opportunity to explain.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.  Mr. Michaud.

Opening Statement of Mr. Michaud

    Mr. Michaud. Thank you, Mr. Chairman.
    Mr. Secretary, I'm very disturbed by VA's recent disclosure of a huge 
budget shortfall.  VA hospitals across the nation are using drastic 
cost-cutting measures to cover the shortfall.
    I do not agree with you that the VA can continue to provide timely highly 
qualified health care for veterans with this budget.
    I do not agree with you that siphoning off funds from medical equipment 
and vital maintenance is simply, as you put it, and I quote, "deferring 
non-critical capital expense for a few months."
    For example, the VA hospital in Vermont had to shut its three operating 
rooms this Monday because the heating/ventilation/air conditioning system was 
broken and has not been repaired because maintenance dollars were transferred 
to cover the budget shortfall.
    The failure to repair needed equipment is hurting patient care and 
safety.  The cost-cutting measures are not just putting off maintenance and 
buying medical equipment.  VA managers across the nation are deliberately 
delaying the hiring of key clinical staff by at least three months just to 
cover the shortfall.
    Mr. Secretary, veterans are being left behind now under your watch, 
because the VA is putting them on a waiting list and eliminating services to 
cover huge budgetary holes.
    These drastic actions are not, as you said, simply part of good 
government.  Your approach to the shortfall is hurting veterans, and it's 
wrong.  A better approach, and the only approach, is to assure funding for 
veterans' health care.
    I do not buy the argument putting the blame on poor modeling.  You've 
known, and this Committee has known, and we've stated over and over again, 
the cost of this war has an added cost -- taking care of our veterans.
    I do not know, it appears you have not been listening about the cost of 
the war as it relates to the veterans.
    This is not a Democratic issue or a Republican issue.  This is an issue 
about taking care of our veterans.
    I've been reading articles recently.  Members of the other party, Senator 
Larry Craig, and I quote:
    "It was frustrating to me and an embarrassment."
    Jim Walsh talks about the Congress needs to provide additional resources 
now because we're at war.
    The Chair of the House Appropriations Committee, Jerry Lewis says, and I 
quote -- about the administration withholding the information, and I quote:
    "It borders on stupidity."
    It might not be a crisis to you.  If this administration thinks Social 
Security is in crisis because it lacks the funding beyond 2052, the Veterans 
Administration lacks funding today, and it might not be a crisis to you, but 
it is for those veterans who need the services today.  If it's not a crisis 
to some of them, it definitely is hurting some of them.
    I implore you, Mr. Secretary, and I look forward to your testimony, to 
correct this problem that we currently are facing, and it is a problem.
    And I know, Mr. Secretary, you served as Republican National Committee 
Chairman.  This is not a partisan position. It's okay when you were party 
chair, but this is not a partisan position.
    Caring for our veterans who put their lives on the line is extremely 
important, and this Committee and members of both sides of the aisle have 
come together in the past to help our veterans.
    Your predecessor worked with both sides of the aisle on this issue, 
putting veterans first, ahead of politics, and I hope that you will do the 
same.  Your record has not shown that, and during the questions, I will ask 
you specific questions, and I'll expect they're worded in such a manner that 
you can give a yes or no answer.
    You have, in my opinion, disappointed a lot of members of both sides of 
the aisle.  You have a lot of explaining, and I, and I know members of both 
sides, would respect you more if you will be up front with us, honest with 
us, and do not try to push the blame on modeling.  The buck stops, initially, 
with you, and ultimately, with the President of the United States.
    So I look forward to your testimony, Mr. Secretary.
    The Chairman. Thank you, Mr. Michaud.
    Mr. Moran, you're now recognized for an opening statement.

Opening Statement of Mr. Moran

    Mr. Moran. Mr. Chairman, thank you very much.  I appreciate your holding 
the hearing today.
    Mr. Secretary, thank you for your willingness to appear before our 
Committee today, and I hope we can have a worthwhile discussion.
    Last week in this room it was revealed that the department is failing in 
funding our veterans' health care in fiscal year 2005, and since then we've 
learned that the budget situation for the coming fiscal year is even more 
difficult, which I think likely will impair the ability of the VA to meet the 
needs of veterans in coming years.
    America's veterans, as you know and I know you believe this, deserve the 
very best, and I strongly believe that the VA health care system must be 
available for all veterans and to provide them with nothing less than 
excellent service.
    Clearly, inadequate resources threaten to harm the quality of the service 
the VA provides and hinders our ability to meet our commitments to those who 
honorably served.
    It is imperative that we act to rectify this problem.  I think this means 
that initially we need to gain accurate numbers, exactly how much funding is 
needed to meet the current demands, and then we must provide the necessary 
appropriations to meet those demands.
    I call upon my colleagues in the administration to fully fund veterans' 
health care.  Making up for the shortfall by allaying spending or borrowing 
money only serves to postpone the problem while reducing the quality of 
service.
    Immediate action is needed to ensure that the VA fulfills its mission 
that all veterans receive health care that they have earned, and as public 
servants, we have the responsibility to set aside partisanship to keep this 
promise.
    As more and more of our troops return home from combat, we must make 
certain that we do what needs to be done to fix this problem in the coming 
years so that the situation does not reoccur, and I'm concerned that current 
forecasting models used to determine demand and develop budgets has proven 
inadequate.
    This process needs to be examined to ensure that Congress and the 
Department have accurate information from which we can make sound budget 
decisions.
    Mr. Secretary, I welcome your testimony on this topic, and I look 
forward to working with you and your colleagues in the department to see 
that we meet the needs of our nation's veterans.
    Thank you, sir.
    Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman for his opening statement.
    Mr. Strickland, you're recognized for an opening statement.

Opening Statement of Mr. Strickland

    Mr. Strickland. Thank you, Mr. Chairman.
    Mr. Secretary, I come from southern Ohio, and down there we have a saying 
about the chickens finally coming home to roost, and I think that's what we're 
experiencing here as we consider the shortfall of the VA budget.
    The fact is that people are beating up on you, and I guess I can kind of 
understand that, but the ultimate person responsible for what we face here is 
the President of the United States.
    He's the Commander in Chief.  He makes decisions about war and peace, 
sending our soldiers into battle.
    And the fact is that none of us are really surprised at what's happened 
here.
    We sent our soldiers to war without body armor. Poor planning.  Lack of 
planning.
    It took months and months and months for our soldiers to have access to 
armored humvees, and I think probably even today there are soldiers in Iraq 
and Afghanistan that are not properly equipped.  Just absolutely egregious 
mistakes in planning.
    I'm not surprised about this.  Our former Secretary sat right where you're 
sitting, sir, and told us that he had asked the President for $1 billion more 
than the President was willing to include in his budget for VA health care.  
He's no longer with us.
    Our former Chairman of this Committee, Chris Smith, served on this 
Committee for 24 years, almost a quarter of a century, was stripped of his 
chair's position and purged from this Committee because he spoke out 
regarding the inappropriate or inadequate funding for VA health care.  We 
all know that.  Everyone of us sitting here knows that.
    So why should we be surprised?  We're not surprised.
    Management efficiencies were built into the budget. No one said how these 
management efficiencies were going to actually save money, but they were built 
into the budget as a way to provide fewer resources.
    And now the President apparently is going to continue to ask us -- it's 
not going to happen -- to increase the cost of prescription drugs for our 
veterans, and to impose an annual user fee on our veterans, and to create 
categories of veterans that are excluded from VA health care, even some 
who may be combat decorated veterans.
    Now we've got a shortfall this year.  I think it's going to be take care 
of.  Thank God for what the Senate did yesterday.  I hope the House takes 
action today.
    But what about next year?  Well, we're being told that next year the 
budget shortfall may be $1.6 billion, but that's assuming that the President 
is going to get the onerous increases that he wants to place on the backs of 
veterans in terms of user fees, and it's not going to happen.
    This Congress -- my Republican friends are not going to support that.  You 
might as well just get that out of the budget request.  It's not going to 
happen.
    This Congress is not going to, during a time of war, increase the cost of 
medicines or -- it's just not going to happen.  And so we're really talking 
about next year probably over $2.5 billion in shortfall.
    What we're asking is just some honest information. That's all we're asking 
for.
    And I would just close my remarks, Mr. Secretary, by saying this.
    We hear a lot of talk in this town about morality. We really do.  We talk 
about morality in terms of stem cell research and morality in terms of 
abortion and morality in terms of gay marriage.
    I wish we would talk about morality in terms of keeping our promises to 
the men and women who have fought our wars, served our country, sacrificed 
their bodies, and too many times families have actually lost loved ones. 
That's a moral issue.
    It's a moral issue if we choose to give tax breaks to the richest people 
in this country, many like me, who have never served.  We give tax breaks to 
them, and we shortchange our veterans.  I think that's a moral issue.
    I wish the President would accept responsibility as the commander in chief 
to not only look after our soldiers when they're on active duty, but to also 
assume responsibility for those once they've come home.
    Thank you, Mr. Secretary.
    The Chairman. Mr. Brown, you're recognized for an opening statement.

Opening Statement of Mr. Brown of South Carolina

    Mr. Brown of South Carolina. Thank you, Mr. Chairman, and thank you, 
Mr. Secretary, for joining us here today to further explore the budget 
shortfall for the remainder of fiscal year 2005 and additional actuarial 
and budgetary challenges for future years.
    I think it is fair to say that last week's testimony provided by Dr. 
Perlin, the under secretary of health at VA, came as a bit of a surprise to 
us on this Committee.
    Certainly the extent to which the department has already programmed 2006 
rollover funds and capital assets funds should be of concern to all of us here.
    I hope that, through your appearance here, Mr. Secretary, that you can 
provide us with a more concentrated look at the VA's current year's funding 
requirements in hard dollars and provide us some reassurance that a more 
permanent and reliable dialogue can be established between this Committee and 
the administration so that we might avert a similar situation in the future.
    As I mentioned during last week's hearing, the numbers that we discuss 
here are important, because there are real consequences in all of our 
districts.  The consequences of underestimating the funding requirements in 
my mind is something unacceptable.
    Again, I thank you, Mr. Chairman, for digging deep on this issue, and 
having the courage to address this in a head-on way.
    Mr. Secretary, I look forward to your testimony.
    The Chairman. Thank you, Mr. Brown.
    Ms. Hooley, you're recognized for an opening statement.

Opening Statement of Ms. Hooley

    Ms. Hooley.  Thank you, Mr. Chair, and thank you, Mr. Secretary for being 
here.
    As we go into the future, there are some things I hope you would do.
    Number one is look at, with whatever model you use, would you look at not 
only the cost of living, but the fact that more veterans are coming into the 
system, health care costs are rising much faster than the cost of living, and 
the services we deliver to veterans are a little bit different and more 
expensive than what we have in a regular hospital, and that's why we have VA 
hospitals.
    I have one last request, that you listen to what's going on at the 
hospitals, which will help you in trying to figure out whether you have a 
shortfall now or not.
    And let me just go over some things that have happened in the Portland VA 
Hospital.  That's the one I know about.
    First of all, Portland has delayed all non-emergency surgery by at least 
six months.
    Recent visitors to the short care stay unit were surprised to see a 
handwritten sign declaring that, "due to budget issues, we can no longer 
supply meals to patients," and asking patients to bring meals from home.
    The hospital has reduced staffing and is now short 150 hospital staff, 
including nurses, physicians, and social workers.  As a result of budget 
cutting for staff, the VA has cut the number of hospital beds available for 
care of veterans.
    For the fiscal year 2005, the facility needed 13 million for medical and 
clinical equipment, but received 2 million.
    I believe that any soldier who puts his or her life on the line shouldn't 
have to worry about getting health care when they return from battle.
    How are we supposed to provide adequate health care to these new veterans 
that are coming in every day, when we can't meet the needs of our current 
veterans?
    I think our returning soldiers deserve better.  I think our current 
veterans deserve better.  And I'm looking forward to you working to correct 
the VA budget.
    Thank you, Mr. Chair.
    [The statement of Hon. Darlene Hooley appears on p. 64]

    The Chairman. Thank you, Ms. Hooley.
    Mr. Miller, you're recognized for an opening statement.

Opening Statement of Mr. Miller

    Mr. Miller. I have an opening statement I'd like to enter into the record.
    The Chairman. Your statement shall be entered into the record with no 
objection.
    [The statement of Hon. Jeff Miller appears on p. 68]

    The Chairman. Mr. Reyes, you're recognize for an opening statement.

Opening Statement of Mr. Reyes

    Mr. Reyes. Thank you, Mr. Chairman.  I also have a full statement.  If I 
could enter it into the record -- 
    The Chairman. Without objection, you're written statement will be entered 
in the record.
    Mr. Reyes. Thank you.
    I just wanted to mention, welcome, Mr. Secretary.
    In fact, I consider the Secretary a friend, because back in the first 
initial campaign, he represented President Bush very well in debates, and I 
did so, debated him, representing then Vice President Gore, so I consider 
him a friend.
    I respect him as a fellow veteran, because I know that he cares very much 
about the country, and now being Secretary, I know he cares about veterans.
    I do hope, Mr. Secretary, that you will do everything that you can to 
communicate to those that make decisions along with you about the budget for 
the Veterans Administration.
    I know, having heard Secretary Principi here tell us that he had in fact 
asked for $1.2 billion more than he had been authorized by OMB, and last week 
we heard testimony from Dr. Perlin about the severe cutbacks in this year's 
budget, it seems to me like we shouldn't be surprised about that, when he 
doesn't get the amount of money.
    As our Chairman says, you know, yes, everybody's got a number.  You know, 
there's an Independent Budget that's got a number.  The VA has a number.  He's 
got a number.  Our Ranking Member has got a number.
    But I think after this fiasco, all veterans around the country have the 
administration's number.
    It's unconscionable, in my mind, that we find the money for billions of 
dollars to go and build neighborhoods and do all the things that we're doing 
in places like Iraq and Afghanistan, and we can't find the money to fund our 
health care for our veterans.
    It's unconscionable that we can go to the deficit and build a budget that 
increases the deficit so it will be within the realm here in Congress of this 
artificial budget, but we're unwilling to do that for the veterans.
    So it's not just the Secretary who is at fault here and who is to blame.  
It's all of us, for allowing this to happen.
    When the Chairman wants to know if anybody can predict the power ball, 
like my good friend and colleague Chet Edwards, I can't predict the power 
ball, but I can tell you this.  Decisions like this, our inability to have 
guts enough to fund veterans' programs like they ought to be puts the 
veterans behind the eight ball.
    So the hell with the power ball.  It's the eight ball that we ought be 
fighting against, because that's where we're putting our veterans.
    Finally, I would like to say that the system doesn't suffer in this 
process.  It's our veterans that are suffering, our veterans that can't get 
the health care, our veterans that are getting letters that they're showing 
me.
    And I was just in the district over the weekend, and had had a previously 
scheduled meeting with veterans, and they showed me the letters, and they 
said, ``It's getting worse, it's not getting better.''
    And as we're seeing, one of them had been wounded in Iraq nine months ago, 
and had been discharged because of those wounds.
    Those are the people we ought to be caring about. Those are the people we 
ought to be putting first in this line instead of having to make up for it 
in a very embarrassing way like we are now.
    So with that, Mr. Secretary, I don't know if you ever wondered what it's 
like to be the meat at a barbecue, but I think you're about to see that.
    So welcome.  Thank you, Mr. Chairman.
    [The statement of Hon. Silvestre Reyes appears on p. 81]

    The Chairman. I thank the gentleman for his opening statement.
    Mr. Boozman, you're recognized for an opening statement.

Opening Statement of Mr. Boozman

    Mr. Boozman. Thank you, Mr. Chairman.
    I want to thank you and Mr. Evans for holding this hearing, and certainly 
it comes at a very critical time.
    We had a hearing last week, or earlier this week, sometime not too long 
ago, about modeling, and I know that it really is very difficult to do that.
    I was in Germany not too long ago, and saw a young man that had lost both 
his legs below his waist, and literally, he was coming out of anesthesia.  He 
had had that happen to him the night before.
    And he asked me about two things.  He wanted to tell a story, but 
apologized because he had slurred speech, from coming out of the anesthesia.
    But he wanted to know about his wife and family, and was reassured that 
he would be in the United States the next day.
    And then the other thing he wanted to know was, would he be able to walk 
again.
    And I could look him in the eye and reassure that, yeah, we've got the 
technology, we've spent the money, we're doing the things that it takes to 
literally provide him with the finest care that we could do that.
    My uncle died last week.  I was at his funeral.  He was a World War II 
guy, and had been ill for the last six months, and probably spent more in 
health care dollars in the last six months than he had in his entire life.
    So I understand, we've got all this stuff going on, and yet we got to 
do a better job than what we're doing.
    This Committee, everybody here, and I think you can hear it from all of 
us, things might get such that, you can get asked some tough questions, but 
everybody on this Committee truly is committed to the veterans.  In this 
Committee, we're the ones that push things forward on both sides.
    We have a great system now, and like I say, we're committed to continuing 
that.
    To be honest, I think the only thing that we're missing in this equation 
is somebody from OMB to explain, but maybe they're not willing to do that. 
But like I say, at some point, I'd really like to hear from them, on what's 
happened on their part.
    So again, thank you all very much for having the hearing, and thank you 
all for coming.
    The Chairman. Ms. Berkley, you're recognized for an opening statement.
    Thank you, Mr. Boozman.

Opening Statement of Ms. Berkley

    Ms. Berkley. Thank you, Mr. Chairman, and thank you Mr. Secretary for 
being here.
    I have a very great relationship with my veterans. I've grown to love them 
and I think they really have been terrific to me.
    My World War II vets kind of look at me as a daughter; and my Vietnam 
vets, those that came after, many of them, because people returned to Las 
Vegas because it was such a booming town, I went to high school and college 
with them.
    So I have more than a constituent-Congresswoman relationship with many 
of my vets.  They are truly friends, lifelong friends.  They're going to be 
friends of mine long after I finish my service to our country.
    I can barely look at these people now, because I know that we're not doing 
right by them.  You know the needs that I have in Southern Nevada.
    I've got 80-year-old veterans standing in 110 degrees temperature, waiting 
for a shuttle to pick them up to take them to one of 10 temporary VA 
facilities so they can get their health care.
    Standing out in 110 degrees for anybody for more than a few minutes is a 
very difficult thing to do, and yet my veterans, who need these health care 
services so much, do it, and they're not complaining too much, because they 
have been assured and they've been told by me and your predecessor that we 
are in line to get a full VA medical center that includes a long-term care 
facility, which we are in desperate need of, a VA hospital which we are in 
desperate need of, and an outpatient clinic, because, as you know, our 
outpatient clinic, after being in service for five years, was declared 
structurally unsound and the building was condemned.
    We have worked very hard, and the CARES Study, as you know, bore out the 
fact that we needed these facilities desperately for the 200,000 veterans that 
live in Nevada, 50,000 of whom get their health care needs met, rightly so, by 
the VA.
    I've got 500 veterans from Iraqi Freedom who have already accessed our 
health care system in Nevada, such as it is.
    I need to get assurances from you during your testimony that we are not 
going to fix this shortfall with a temporary fix and take that money out of 
our capital building fund.  We need those facilities, and this emergency 
needs to be taken care of and we need to get our VA funding on sure footing, 
and we can't steal from Peter to pay Paul.
    The other thing I am very concerned with, and I appreciate Ms. Hooley 
talking about her facilities in Portland and the challenges there, because all 
of us are dealing with our veterans on a local level.
    If we're going to provide these services by cutting services to our 
veterans, then that doesn't work for me, either.
    If we cut federal funding to state homes, I'm going to have 100 veterans 
out in the street that have no other place to go, because all we have right 
now in southern Nevada is a state home for veterans, and there's a waiting 
list.
    I can't have my veterans paying double for their prescription medication.  
They can barely afford the amount of money we charge them, because many of 
them have multiple needs, multiple ailments, and if they're paying for six 
or seven prescriptions a month, to double that would be the difference 
between getting their medication and getting their food, and I don't want 
to be melodramatic, but that's the reality on the ground.
    And providing or instituting a user fee for our veterans to me is 
unconscionable, given their service and the promises that we have made.
    So we need to do this, and do this well, and I would invite you and the 
President to come to my district and talk to my veterans, not in a staged 
event where everyone needs a ticket to get in and you have to be a great 
advocate of the Administration or a great fan of the President so they give 
out the tickets in advance, but to be able to sit and talk to my rank and 
file veterans that use these facilities, that need these facilities, that 
are looking to their government for the help that we promised them.
    If you spoke with them for five minutes, you would know what their needs 
are, what their concerns are, what their challenges are, and then maybe we can 
adequately fund this VA budget.
    I'm anxious to hear your responses to me.
    And what I find most insulting is that if the VA knew about these numbers 
in April, to have kept it from all of us for this long of a time, to me 
doesn't make any sense.
 We're all in this together, I think many of the members on both sides of the 
aisle feel that we've been had, and for the amount of work and time we put 
into this Committee and into our jobs, to have deceptive numbers or wrong 
numbers, and having the VA know this and having us go forward with these 
wrong numbers, to me makes absolutely no sense in the world.
    So I'm anxious to hear your remarks, and I thank you very much for being 
here.
    [The statement of Hon. Shelley Berkley appears on p. 69]

    The Chairman. Thank you, Ms. Berkley.
    Ms. Brown-Waite, you're recognized for an opening statement.



Opening Statement of Ms. Brown-Waite

    Ms. Brown-Waite. Thank you very much, Mr. Chairman, and I want to thank you 
for holding this hearing so that we can get some facts, so that we can remedy 
the situation.  That's what this hearing is all about, making sure that we get 
accurate numbers.
    Last Thursday the VA testified that they have used $600 million for health 
care that was intended for infrastructure and maintenance.
    We can't be in the business of borrowing money so that the buildings 
dilapidate, so that we don't have proper maintenance.
    I have the highest number of veterans of any member of Congress.  I have 
over 107,000 veterans.  I, like other members in VISN 8, also have the highest 
number of returning servicemen and women coming back from Iraq and 
Afghanistan.  We want to make sure that the quality of care is there.
    You know, had we had this information, we could have addressed the problem 
over a month ago when we passed the military quality of life and veterans' 
affairs appropriations bill -- if we had that information.
    Two years ago, I served on the Budget Committee and was able to work with 
the Chairman to plus up the amount for veterans, specifically with the 
agreement that it would go to veterans health care.
    I don't think there's a member of this Committee who doesn't want to do 
well by veterans, but if we are given faulty information or if we are 
misled, then we can't do our job.
    I don't want one veteran, whether they served in World War II -- I even 
have some World War I veterans in my district.  Over 50 percent of the 
107,000 veterans that I have use the veterans health care system.
    I don't want one veteran deserving health care, whether it's World War 
I all the way up to Operation Iraqi Freedom, I don't want them to be denied 
that because we were misled.
    It wasn't intentional.  I'm sure of that Mr. Secretary.  You know, when 
you use a model and you just come into a new job, which you did, sometimes 
you rely on the same old same old.
    We can't do that.  We cannot have that ever, ever happen again.
    You know, there are certainly other programs that we can perhaps pare down 
to make sure that the man and women who serve our country are well cared for.  
That's our job, but we can't do it if the information that we have is in some 
way, shape, or form not accurate.
    We want to help you, Mr. Secretary.  We want to help you to make sure that 
the VA health care system in our country is one that everybody can be proud 
of.  It takes dollars to do that, and it takes a commitment, and I know that 
the members of this Committee have that commitment.
    And I assure you that I look forward to working with you to make sure that 
our veterans' health care is the very, very best in the world, and I 
appreciate your being here today and look forward to your testimony.
    I do have a formal opening statement which I'll submit.
    Thank you.
    The Chairman. You're written statement will be entered into the record.
    [The statement of Hon. Ginny Brown-Waite appears on p. 71]

    The Chairman. Mr. Udall, you're recognized for an opening statement.

Opening Statement of Mr. Udall

    Mr. Udall. And I would also ask that my full opening statement be put in 
the record.
    The Chairman. Your written statement will be entered into the record 
without objection. 
    Mr. Udall. Thank you, Mr. Chairman, for holding this crucial hearing 
today, and thank you, Mr. Secretary, for joining us.
    I'm holding here in my hand a stack of letters sent to the President, the 
Speaker, the House Appropriations Committee over the past year.
    These letters have been signed by many members of this Committee.
    On October 11, 2004, a letter to the President requesting he reevaluate 
his fiscal year 2005 budget request in light of the large number of veterans 
returning from Iraq and Afghanistan who were in need of health care.
    February 17, 2005, letters to the President and the Appropriations 
Committee requesting that they add an additional $1.3 billion to the fiscal 
year 2005 supplemental appropriations bill, to provide health care and 
readjustment assistance for Afghanistan and Iraq veterans.
    March 7, 2005, a letter to Speaker Hastert about the woefully insufficient 
funding for the VA under the President's fiscal year 2006 budget proposal, and 
asking that the House increase the amount by 3 billion for veterans' health 
care.
    April 27, 2005, a letter to Secretary Nicholson about how the budget cuts 
for veterans' health care have hurt New Mexico.  The Accommodations Hotel 
Lodging Program in Albuquerque, New Mexico has been forced to limit access to 
veteran patients further than 150 miles, which has adversely affected 
thousands of veterans.
    The average wait for dental appointments at the dental facility in 
Albuquerque is two years.
    All of these letters were ignored.
    If what I have read in the papers is accurate, it is about time the 
Secretary and the administration fully acknowledge what is going on here.
    I hope today the House will pass an emergency supplemental appropriations 
bill for veterans health care.  We are here today to figure out what events 
and mistakes leading up to today made this necessary, and what the VA, and 
this Committee, are going to do to prevent a recurrence in the future.
    I'm particularly concerned that the Committee was not informed of the 
VA's agreement that there was a shortfall earlier.
    I want answers about the timeline here, and about when exactly the VA 
began reprogramming the money for this purpose, without the knowledge of 
Congress, and if the main problem here is that the VA underestimated how 
many soldiers returning from Iraq it would need to care for, what does this 
say about our planning for that war?
    I very much look forward to hearing Secretary Nicholson's answers to these 
questions today.  There are 183,000 veterans in my state who deserve nothing 
less.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much for your statement.
    Mr. Turner, you're recognized for an opening statement.

Opening Statement of Mr. Turner

    Mr. Turner. Thank you, Mr. Chairman.  I appreciate you holding this 
hearing on our ability to get additional information.
    And, Mr. Secretary, I appreciate your being here, and your service.  You 
certainly have an excellent reputation that I know as we proceed in this is 
going to serve you well as we try to resolve it and come to solutions and 
conclusions.
    I got on this Committee because in my community my large veterans' 
facility was exhibiting pressures for reductions of service that did not 
make sense.  As we heard that the Department of Veterans' Affairs had 
the funding necessary, we still were hearing of reductions in services.
    So I sought a seat on this Committee because I wanted to find out why this 
was occurring and what needed to happen.
    I think the comments earlier that suggest that budgetary processes may be 
compared to guessing are unfortunate, because we all know that in the issue of 
budgetary processes, we're talking about issues of professionalism.
    I appreciate Mr. Strickland's comments that this is not a partisan issue, 
and I certainly think that, to the extent that this is made partisan, we're 
not serving our veterans, because again, this is not a partisan issue, it is 
a professional issue.
    A professional issue is, how do you prepare budgets and how do you seek 
funds from Congress that provide the Department of Veterans' Affairs what you 
need?
    When we say it's not partisan, I think we can say that there is not one 
members of this Committee and there is not one member of Congress that would 
not vote to give the Department of Veterans' Affairs what they need.
    So the question becomes, then, how do we arrive at what does the 
Department of Veterans' Affairs need, and the process for us providing that 
to you.
    And I know that today you're going to be speaking as to how you're 
working on that process to fix it to make certain that we can do our job 
and live up to our commitments of making certain you have what you need to 
be able to serve our veterans.
    Thank you.
    The Chairman. Thank you, Mr. Turner.
    Ms. Herseth.

Opening Statement for Ms. Herseth

    Ms. Herseth. Mr. Chairman, I apologize for not making this request earlier, 
but I'd like to submit a written copy of my opening statement for the record.
    The Chairman. Without objection, it will be entered.
    Ms. Herseth. Thank you.
    [The statement of Hon. Stephanie Herseth appears on p. 72]

    The Chairman. Ms. Brown, you're recognized for an opening statement.

Opening Statement of Ms. Brown of Florida

    Ms. Brown of Florida. Thank you, Mr. Chairman, and thank you for holding 
the meeting today.
    I, for once, can say that I want to be associated with the remarks of all 
of the members' comments about the veterans' department and the Secretary.
    And to be truthful, if we were in court, they would have to view me as a 
hostile witness, because I feel pissed off.
    My favorite secretary was Jesse Brown, and his motto was "Putting veterans 
first."
    Now, this town is an ugly rumor town, and one of the rumors going around 
is that the priorities of the Veterans' Affairs is to make sure your picture 
is up.  I know that's a lie.  I know it's not true.  But that's what the 
rumor has been going on, and that's why we haven't been focusing on the 
health care of veterans.
    But let me just say that every member on this Committee knows that we're 
close to $3 billion short for the needs of the veterans, and I don't 
understand how anyone could feel like, "Oh, $1 billion is enough."
    We have known for a long time that the numbers we were getting, the 
comments we were getting from the community were just all lies.
    We need to have OMB to come in here, because I know the former secretary, 
when they turned in the numbers, it was different, and when it got to OMB, 
they approved whatever they wanted to, and that's what was sent up to the 
Hill.
    So the real people that need to be in here is OMB. We need to get them on 
the carpet.
    But, Mr. Chairman, after this meeting, I am hoping you and the Ranking 
Member will put forth a motion that this Committee will come out here today, 
and the news will be that we authorize additional $1.5 billion for Veterans' 
Affairs for maintenance and for health care.  That should be the headlines 
in the news, not whatever the Secretary has to say.
    So I want to go on record that I am not happy, I'm not pleased, my 
veterans are not, and the sad thing is, they support you and the Republicans. 
They voted for you, and they don't understand why you don't support them the 
same.
    The first President of the United States said that no matter how great the 
war, and I question that this is a great war, that the men and women will 
determine whether they're going to join the military as to how we treat the 
veterans, and they're getting shabby treatment from this Bush administration 
and your administration, sir.
    I yield back the balance of my time.
    [The statement of Hon. Corrine Brown appears on p. 74 ]

    The Chairman. I thank the gentlelady.
    Mr. Bilirakis is recognized for an opening statement.

Opening Statement of Mr. Bilirakis

    Mr. Bilirakis. Thank you, Mr. Chairman, and thank you for this hearing.
    I, as others have said, agree with most of what all of our members, the 
comments that they have made.
    I agree with Ms. Hooley, particularly, even though she's left.
    I agree with Mr. Reyes in terms of the veterans' suffering as a result of 
what has taken place here.  I do sort of disagree with him, though, when he 
says that the system doesn't suffer.  I think the system does suffer.
    You know, we serve on this Committee, I like to think, for the most part, 
because we really believe in our hearts for veterans and care about veterans, 
but we have to depend on our staffs, we have to depend on figures that we get 
from OMB, from the VA administration, et cetera, et cetera, and then we have 
to make our decisions, because we can't pull them out of the sky.
    And when we have, as was already indicated, the former secretary telling 
us, sitting right there and telling us that he needed an additional $1 
billion, and that was ignored by OMB, it was ignored by our leadership up 
here, it was ignored by the White House, et cetera, et cetera, I mean, 
that's the system, and it's hurting because we don't have the credibility, 
and the believability that we need in order to do our job.
    We were reminded earlier that the Secretary has served as the Chairman of 
the Republican National Committee.
    I think it's also very important that we be reminded that he served in 
Vietnam with tremendous distinction, very decorated, received the Combat 
Infantryman's Badge, which is, frankly, in the eyes of many, even more 
significant than the Medal of Honor.
    So that is the man that we have as Secretary of Veterans' Affairs, not 
just that he served as the Chairman of the Republican National Committee.
    I'm the oldest member in many respects of this Committee, but certainly 
one of the longest serving.  I can tell you that from day one.
    We've had the same kind of problems.  I don't care who was the 
administration, I don't care who was in charge of OMB.
    Frankly, every secretary we've had -- Mr. Brown, so many others -- it came 
from the heart, but they had to answer to other people, OMB particularly, and 
the White House, and the leaderships on both sides of the aisle, and that sort 
of thing.
    I used to sit over there and constantly remind our members at virtually 
every hearing, certainly in every markup, that the percentage increases for 
every other program that we deal with up here, were something like 125 
percent.  For veterans, it was something in the 50 percent category, because 
we are way behind the curve.
    Veterans are basically considered almost at the tail end.  That's been the 
way, all along.
    We had to handle the Clinton budget, and Mr. Brown, I specifically asked 
him one day, who does he really work for? He's a good man.  I knew him 
personally.  But I specifically asked him.  Why?  Because we weren't happy 
with the President's budget.  
    But he worked for the administration, and he had to kowtow, so to speak. 
He probably made an awful lot of noise behind closed doors.
    It's a very difficult thing, and I'll tell you, it's really a mindset.  I 
think it's a mindset that we have, I don't think this Committee has it, but 
virtually everybody else has it.  We know that the cost of war does not end 
with the end of the war.
    So our leadership, in the majority, I mean, the battles that I've had with 
those people over the years, but I would say that I also had as many battles 
when Sonny Montgomery, who was the most beloved man who ever served, probably, 
in the House of Representatives.  He received all of the awards, sat right 
there, and I used to battle him on concurrent receipt.  I used to battle with 
him regarding not enough funding for health care for veterans, et cetera, et 
cetera.
    So it's a mindset, my friends.  And we sit here, and, you know, the 
partisanship that takes place and the demagoguery that takes place doesn't 
help matters any.
 You might be right when it comes to the unified budget, or the need for more 
money, but when it's done in such a way that it's demagoguery and that it's 
politics.  There are people on this Committee who refused to sign my discharge 
petition on concurrent receipt there in the House. But when it came to a 
Democratic discharge petition, oh, my God, these Republicans were horrible 
that they refused to sign it.  That's politics.  Okay?  That's politics.
    If we put that aside and decide to sit around the table and work together, 
and given the clout that we have, and hopefully with the Secretary supporting 
us and we supporting him with OMB and with the administration, I think we can 
do a much better job.
    Will it ever be perfect?  Of course not.  This is not a perfect science, 
obviously.
    Ms. Brown of Florida. Would the speaker yield?
    Mr. Bilirakis. Well, my time is up.  I just basically would finish.  Maybe 
the Chairman -- 
    Ms. Brown of Florida. I feel very strongly that I need to respond to what 
you said about Secretary Jesse Brown.
    Mr. Bilirakis. I didn't say anything bad about Secretary Jesse Brown.
    Ms. Brown of Florida. I just want to be clear that we are all on the 
record that I understood very clearly that he had problems with the Clinton 
Administration -- 
    Mr. Bilirakis. Yes.
    Ms. Brown of Florida. -- and he would come here, and he would stand up to 
them.  That's the point I'm making.
    Mr. Bilirakis. Amen.  Amen to that.
    Ms. Brown of Florida. Regardless of who the administration was, he was a 
man that would stand up to the administration.
    Mr. Bilirakis. And I would suggest that Secretary Principi had problems 
with them, I would suggest that this Secretary, he hasn't had that much of an 
opportunity to do so yet, because he's relatively new, is going to have 
problems.
    I just hope that we have learned a lesson from what's taking place, 
because for the first time, we have had an acknowledgement on the part of 
all of these people -- I don't know, maybe even OMB, for crying out loud -- 
certainly from the White House, from  the administration, from our leadership 
and whatnot, that there is a true shortage in terms of this $1 billion or 
maybe more, for the first time.
    So hopefully, we've all learned a lesson, and we'll work together.
    Thanks.
    Ms. Berkley. Mr. Chairman, may I request that my prepared remarks be 
submitted for the record?
    The Chairman. Yes, Ms. Berkley, your written statement without objection 
shall be entered into the record. So ordered.
    [The written statement of Hon. Shelley Berkley appears on p. 69]

    The Chairman. Also, I have a request from Mr. Tom Osborne of Nebraska, 
not a member of the Committee, that a statement be submitted as part of the 
record of this hearing.
    I ask for unanimous consent.  Without objection, it shall be ordered and 
his statement shall be entered into the record.
    [The statement of Hon. Tom Osborne appears on p. 83]

    The Chairman. Ms. Hooley.
    Ms. Hooley. I would also ask that my statement be entered into the record.
    The Chairman. All members may submit a written statement and it will be 
entered into the record.
    Hearing no objection, we'll give you three days to enter that statement 
into the record.
    [The written statement of Hon. Darlene Hooley appears on p. 64]

    The Chairman. Mr. Secretary, I want to thank you for coming.
    At about 9:45, I was on the phone and had a painful discussion, no 
differently than other members that are in this room, no differently than what 
you have had to do, and it was to speak to a father whose son was on the 
helicopter that was shot down in Afghanistan.
    Those of us that experience that conversation with a loved one, it's not 
easy.  They are looking for reassurances. He just wants to know what happened, 
"When can I get my son back?"
    He wants to fulfill his son's last request, and it's, "Dad, if I don't 
come home, bury me in Arlington."
    So members here can rightfully be upset.
    No differently than you in taking the helm of this position that you have. 
I sincerely believe that, interwoven into the fabric of our common bond of all 
of us as Americans is our love, our respect, our admiration, and our care for 
the men and women who wear the uniform and the loved ones they leave behind.
    You're a West Point grad, grew up on a farm, seven children, combat 
veteran, retired colonel, knighted by the Pope for raising human dignity in 
the world.
    The statement that people don't care how much you know until they know how 
much you care, I know your heart. Now we want to hear your statement about how 
how you're going to use your intellect to solve the problem.
    Mr. Secretary, you're recognized.

STATEMENT OF THE HONORABLE R. JAMES NICHOLSON,
    SECRETARY, DEPARTMENT OF VETERANS' AFFAIRS; 
    ACCOMPANIED BY JONATHAN B. PERLIN, M.D., PH.D.,
    MSHA, FACP, UNDER SECRETARY FOR HEALTH, DEPART-
    MENT OF VETERANS' AFFAIRS, AND TIM McCLAIN, GENER-
    AL COUNSEL, DEPARTMENT OF VETERANS' AFFAIRS

STATEMENT R. JAMES NICHOLSON

    Secretary Nicholson. Thank you, Mr. Chairman, and good morning, members of 
the Committee.
    I appreciate the opportunity to be here and to discuss budget forecasting 
and the finances of the Veterans Health Administration.
    Accompanying me this morning is our under secretary for health, Dr. John 
Perlin, and our general counsel and chief management officer, Mr. Tim McClain.
    Mr. Chairman, we appreciate the support of both the Congress and the 
administration to identify the resources necessary to restore capital funds 
and enhance VA's ability to deliver care to our veterans in 2005.
    By way of summarizing this week's hearings, I think it's important to 
review how VA's health care resource needs are projected.
    Before eligibility reform, VHA budgets were based on historical 
expenditures, adjusted for inflation, and then increased based on proposed new 
initiatives.
    As the VHA became an integrated health system, VA adopted the tools of the 
private sector and moved to using actuarial modeling to dynamically formulate 
a health care budget.
    Actuarial modeling allows VA to project resource needs based on veteran 
population trends, based on changing health care technologies and utilization 
patterns, and the costs of goods and services.
    Actuarial modeling is a well-tested private sector tool that the VA 
applies to our 21st century health care system.
    Over the past six years, we have integrated the VHA enrollee health care 
demand model projections into our health care financial and management 
processes.
    In March 2005, March of this year, the demand and resource trend line 
moved upward.  My letter of April 5, 2005 to the Chairman of the Senate 
Subcommittee on Military Construction and Veterans' Affairs said:
    "Whenever trends indicate the need for refocusing priorities, VA's leaders 
ensure prudent use of reserve funding for these purposes.  This is just simply 
part of good management."
    End of quote.
    On April 19th, VA staff met with the Ranking Member and members of the 
minority and majority staff of the House Appropriations Subcommittee to 
discuss the veterans equitable resource allocation, or VERA, model.  During 
this meeting, there were protracted discussions of the health system's 
financial status for 2005, including the reallocation of capital funds for 
direct patient care.
    During that same week, I met with the director of OMB to update him on the 
current status and to alert him to potential issues for fiscal year 2006, as 
well.
    The model on which the 2005 budget was formulated relied on data from the 
year 2002, before the beginning of Operation Iraqi Freedom, and as we all 
know, the world has changed and much has occurred since then.
    During fiscal year 2005, our 2005 budget assumed that 23,553 VA patients 
would be veterans of our global war on terror.  That number is now estimated 
to be 103,000. Fortunately, many of those are just seeking routine health care 
services and dentistry.
    However, it's important to point I think also that the majority of the new 
VA health care users in 2005 are older veterans from previous eras, and we are 
caring well for all of them under this budget, as well.
    In May, we performed an actuarial model update for fiscal year 2006, with 
more current and accurate data from 2004 further indicating to us the 
significant increase in patient demand that we could expect for fiscal year 
2006.
    In the first week of June, the VA staff met with VA and DOD branch staff 
at OMB for a mid-year management review and to discuss the implications of the 
fiscal year 2005 management decisions on the 2006 budget.
    Similarly, VA staff met on June 3rd with majority staff members of the 
House and Senate Veterans' Affairs Committees to discuss the implications of 
the reallocation and use of funds projected for carryover into the base for 
fiscal year 2006.
    On June 23rd, the under secretary for health offered testimony to this 
Committee on the actuarial model and its limitations, and identified a 2005 
workload growth rate of 5.2 percent compared with a forecasted growth rate of 
2.3 percent. That is a delta, or difference, of 126 percent.
    We have been forthcoming with information regarding both the status of our 
budget and the responsible management decisions that we have made as 2005 has 
unfolded.  However, I think the difficulties of projecting health care 
utilization in the out years are now self evident to everyone.
    While the VHA enrollee health care demand model is a valuable budgeting 
and planning tool for projecting VA's resource requirements, projecting 
health care trends and utilization for a huge health care system such as 
the VA, it is inherently complex.
    It is significantly more challenging in the context of the federal 
budgeting timeline, the phasing that's needed, which requires projections 
not for the next year or even the next open season, as in the private sector, 
but for two-and-a-half or three-and-a-half years hence.
    As I explained in testimony on Tuesday before the House Appropriations 
Committee and the Senate Veterans' Affairs Committee, we do have a plan to 
manage within existing resources without putting at risk our ability to 
provide high quality care for our nation's veterans, which is our mission 
and our goal.
    However, based on my consultations over the past few days, it is clear 
that many Members of Congress and veterans groups continue to have concerns.
    Because it is important to this administration that our veterans have full 
confidence that the VA will have the resources it needs to meet our 
obligations, we now believe that it is appropriate to request additional 
resources for fiscal year 2005.
    Thus, later this afternoon, the administration will be submitting an 
fiscal year 2005 supplemental request in the amount of $975 million for VA 
medical care to address the higher than estimated number of patients seeking 
health care services.
    The administration is also currently reviewing how this supplemental 
request impacts fiscal year 2006 needs and will be proposing an fiscal year 
2006 budget amendment in the very near future.
    With both of these actions, the administration will ensure that veterans 
continue to receive the highest quality care at VA facilities.
    Mr. Chairman, again, we appreciate this opportunity for continuing 
dialogue to assure resources for direct patient care in 2005, and to address 
the additional resources necessary to restore capital and reserve funds in 
support of timely, high-quality care for veterans.
    We also appreciate the opportunity to discuss our budget modeling and 
projections with you.
    Thank you, Mr. Chairman.
    [The statement of Hon. R. James Nicholson appears on p. 84]

    The Chairman. Thank you, Mr. Secretary.
    I want to thank you for your supplemental request.
    The 975 million, if you would please give me a breakout?
    If you would also then tell me, as we go into the last quarter, what 
monies of that do you think will be carried over into 2006?  I'm asking you 
to project.
    If you could do that for me, right now.
    Secretary Nicholson. Yes, sir.
    I'll give you these categorically, the way that we are slotting them, and 
then be happy to submit this -- 
    The Chairman. All right.
    Secretary Nicholson. -- in written detail.
    For the increase in OEF workload and expense, in forecasting that impact 
upon the rest of this fiscal year, in the 103,000 veterans, including the 
Guard and Reserve soldiers that we're treating and will be, we're projecting 
$273 million.
    For increases in CHAMPVA, which is the health care benefit for 
dependents of the 100 percent service connected veterans, we're projecting 
$39 million.
    For VA long-term care, which is the nursing home -- and the daily average 
consensus is what we used to measure that -- we're projecting $226 million.
    For fee-basis care, to reduce the waiting lists -- this is where in a 
facility, if the waiting list is getting unacceptably long, we are authorized 
to contract out and have people go out on the local economy to see doctors and 
medical facilities -- for that, for the rest of this year, we're projecting 
$58 million.
    Increase in energy costs.  Again when this budget was put together using 
2002 baseline data, and looked at again with actuals of 2003, we did not 
anticipate the amount of increase in fuel and utility costs that would be 
experienced by the country and of course by the VA, and so that amount is $95 
million.
    And we are experiencing a greater than expected workload in our Priorities 
1 through 6 veterans, the service connected disability veterans, and thus 
asking for $200 million for that category.
    And for an increased utilization of services for veterans overall, 
including the need for the purchase of more emergency medical equipment and 
supplies, $84 million, Mr. Chairman.
    And that is $975 million.
    The Chairman. All right.  Mr. Secretary, you have made an official 
supplemental request to the United States Congress in the amount of $975 
million.  I'd like for Mr. Brown, if you would come forward and take the 
chair.  I don't have much time.  As Chairman of this full Committee, I have 
some work to do.
    Mr. Brown of South Carolina. [presiding] Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, and I'll entertain questions from the membership.
    Mr. Evans, do you have a question?
    Mr. Evans. Mr. Secretary your predecessor, Secretary Principi, told us how 
much money he had requested for a budget and what had actually been provided 
to him.
    What was the difference between what the VA requested and what you 
obtained from OMB for the fiscal year 2006 budget?
    Secretary Nicholson. Does your question relate to the numbers that I just 
stated?
    Mr. Evans. The difference.
    Mr. Brown of South Carolina. I think he's talking about the 2006, Mr. 
Secretary.
    Let counsel restate the question.
    Mr. Tucker. Secretary Nicholson, the question is, your predecessor, 
Secretary Principi, forthrightly told this Committee how much more he had 
requested for his budget than what he had actually been provided.
    What was the difference between what the VA requested and what you 
obtained from OMB for your fiscal year 2006 budget request?
    Secretary Nicholson. I don't know exactly that number, Mr. Evans, because 
when I got into this process in February, that number was established and I 
was not part of the discussions leading up to that, and I've not known that 
number.
    Mr. Evans. How many clinics have you closed or not staffed or delayed the 
opening of in this process?
    Secretary Nicholson. I'm going to ask Dr. Perlin to answer that question. 
I think the answer is that we have not closed any clinics except I think we 
may have consolidated two clinics in one area.
    But I'm going to ask Dr. Perlin to answer that.
    Dr. Perlin. Sir, I'd have to get back to you on the record for any clinic 
shifts, but I think the important point is that we've gone from 200 to 874 
community based outpatient clinics, and we have been continuing to open 
clinics.
    Mr. Evans. How are you going to address the situation faced by veterans in 
VISN 16 where, as of the end of April, no appointments will be scheduled for 
non-service connected veterans, and how could you say that this is not 
directly related to the $1 billion shortfall you currently face?
    Secretary Nicholson. I'll ask Dr. Perlin to respond, sir.
    Dr. Perlin. Sir, I believe your question was about VISN 16 and the clinic, 
or hospital?
    Mr. Tucker. If I could, yes, it's the medical centers in VISN 16.
    There is a letter that was entered into the record by the American Legion 
in last week's hearing detailing that all medical centers in that VISN are not 
accepting new appointments for non-service connected veterans, dated April 
29th this year.
    Dr. Perlin. I'd heard of a particular hospital in VISN 16 that had 
inappropriately authored a letter that delayed new patients to the clinic or 
to the facility.
    Mr. Tucker. Dr. Perlin, that letter says it applies to all VISN 16, not 
just the Alexandria Medical Center.
    Dr. Perlin. I will have to look into this.  I'm not aware of a letter that 
has been sent to patients along those lines.
    Mr. Evans. Thank you, Mr. Chairman.
    Mr. Brown of South Carolina. Mr. Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman.
    Mr. Secretary, when did we hold the hearing when they had the actuary 
here?  It was last week, I believe, the 23rd.
    Now the data that was used for 2005 projections was 2002 data.  I mean, 
come on.  Is that the best that we can do?
    And the actuary sitting at the end there, when I kind of raised this 
question to her, I understood her to say that, "Well, we used the most current 
data." 
    Does that mean that 2002 is the most current data? I mean, since 2002, as 
you have already said, we hadn't invaded Iraq yet, we didn't have those 
situations present.
    We have supplementals up here.  Many people don't like supplementals.  But 
basically it's, so to speak, a correction on shortfalls in appropriations that 
took place previously, and so, you know, it's an admitted -- admitted on our 
part.
    Doesn't the VA take into consideration these types of changes and change 
their data and that sort of thing?
    Secretary Nicholson. I think that's a very important question, and 
frankly, I think that that, you know, may lead to what could be one of the 
most hopeful and helpful parts of having a hearing like this, would be for the 
VA to be able to come up with a better, more accurate system to project its 
needs, its business.
    It's even, in some ways, more difficult than that, because the model, the 
model that is used does not take into account long-term care, it doesn't take 
into account dentistry, and it doesn't take into account prosthetics.
    Mr. Bilirakis. Does it take into account older veterans who are -- with 
related service connected conditions? You mentioned older veterans.
    Secretary Nicholson. Yes.
    Mr. Bilirakis. It does take that into account?
    Secretary Nicholson. It is a pretty sophisticated model.
    It has 55 variables of services that it encompasses, and as our testimony 
has been, and as you all know that have been on this Committee for a while, it 
has worked quite well and been pretty accurate up until recent times.
    But as we also know, when 2002 is the predicate for 2005, you know, the 
global war on terrorism had begun, but it had not begun even in Iraq.
    So, I mean -- 
    Mr. Bilirakis. Well, all right -- 
    Secretary Nicholson. -- the difficulty, because we're now working, right 
now we're working on 2007.
    Mr. Bilirakis. And for 2007 we're dealing with 2004 data?
    Secretary Nicholson. 2004 data.  Yes, sir.
    Mr. Bilirakis. Come on.  You're a West Point graduate.  Is that right?  I 
mean, can't we do better than that?  We have computers today.
    I don't know what's going to -- and we're also -- this is related to using 
DOD data.  As I understand it, the data is not very user friendly because it's 
very dated.  It's not aggregated by unit or particularly by geographical 
location.
    So how in the world can we forecast when these young men and women come 
back here from Iraq and Afghanistan, if we're using very dated data, as far 
as the VA -- as far as DOD and the VA are concerned.
    You know, we talk about models and we talk about numbers and power balls 
and things of that nature.  I know it's a big system.  I know this is big 
government and it's a big system and it's a big health system and things of 
that nature.
    But we have computers, for crying out loud.  We can do better than that.  
Can't we do better than that?
    I mean, are you satisfied that you're going to be using three-year-old 
data for 2007 and three-year-old data for 2008?  Are you going to look into 
making changes?
    Secretary Nicholson. I'm not at all satisfied. I'm uneasy about having 
that at work on our submittal for the 2007 budget that will eventually come 
to you, and then, you know, sitting there in 2007 and seeing what the world, 
you know, is going to be like and what the demand is going to be like and what 
the return element for coming from -- 
    Mr. Bilirakis. Can't we plug in more current data? That's the whole 
question.  I mean -- 
    Secretary Nicholson. One of the things I think I'm learning from this, Mr. 
Bilirakis, is that, I mean, we do monitor actuals on a monthly basis.  We 
have a monthly performance review.
    What the VA needs to do I believe is to come here to you on a far more 
frequent and scheduled basis, so that you know what we know when we know it.
    I mean, we, through the first six months of this fiscal year that we're 
in, 2005, we were on that plan that was projected based on that 2002 data, 
we were on it and we were operating pretty close.
    Then it began to deviate up, and that's when -- but overall, if you take a 
look at this, this is a $30 billion business projected, its needs based on the 
data of three years ago, and it came within 3 percent with a war having broken 
out in between times.
    So in many contexts, that would not be -- that would be pretty good.
    We took that data and made a decision with the reserves that we had on 
hand, and to reallocate resources to get through the end of the fiscal year, 
and we divulged that in many different ways, as my testimony has been.
    Now, you can disagree with that judgment, and obviously you do, most of 
you do, and we accept that, and that's why you're now seeing this request for 
a supplemental in lieu of that.
    Mr. Bilirakis. My time is up.
    Do you disagree with that judgment?
    Secretary Nicholson. No, sir.
    Mr. Bilirakis. You don't disagree with it?
    Secretary Nicholson. I'm in total concurrence.
    Mr. Bilirakis. Well, I -- all right.
    Thank you, Mr. Chairman.
    Mr. Brown of South Carolina. Thank you, Mr. Bilirakis.
    I now recognize the gentleman from California, Mr. Bilirakis -- Mr. 
Filner.
    Mr. Brown of South Carolina. Hey, I'm on the wrong side of the aisle, you 
know, just -- but excuse me, Mr. Filner.
    Mr. Filner. Thank you, Mr. Chairman.
    I was somewhat struck by some of my colleagues on the other side.
    Ms. Brown-Waite, you said "if we had this information," or "we weren't 
misled."  We had this information. We all had this information.
    Mr. Turner said there's not one member who would vote against giving the 
veterans what they needed.
    I had a motion on the floor to put in the budget exactly what is missing, 
and you voted against it.  In fact, every member on your side voted against 
it.
    So let's have some reality here.
    You had a budget that the President gave you.  It was inadequate, but you 
went with it, and now you've been found out.
    Mr. Secretary, in some respects, this is a phony hearing.  We're looking 
at modeling, and these words -- trend lines, projections, 55 variables -- 
it's like you're wrong because, you know, the model ate your homework. It 
reminds me of students of mine, who used to come to school, "Sorry, I didn't 
do it.  It's not my fault."
    And talking about all this modeling, "it's the model's fault," allows you 
and this President and this Congress to avoid responsibility and 
accountability for what you've done.
    We're talking about people here.  We're talking about veterans who have 
served this nation.  And you're talking about trend lines and projections, and 
you're "uneasy."
    You should be outraged.  You should be out in every hospital in this 
country to say, "I'm sorry, we made a mistake, and we're not serving you 
right, and we're going to correct it."
    But you come here and say, "I'm uneasy."  "Oh, the model is wrong.  It 
didn't have the fact that we went to war in Iraq."  Hello?  Everybody knows we 
went to war in Iraq.
    The model is not the problem.  You are the problem. The President is the 
problem.  And we're not serving our veterans.  That's what's going on.
    You say we didn't have the information.  We had the information.  I've 
used this Independent Budget as my Bible for many years, and it has been 
right on every single time.  
    I hope you look at it, because this budget has been right, and you ought 
to use it instead of your model, which you outlined just about two minutes 
ago, Mr. Secretary, how it didn't have long-term care, it didn't have this, 
didn't have that.  Why are you using it?  This is not real.
    You are talking about models.  We're talking about people who aren't 
getting served.  There's a thousand people  in my district on a waiting list. 
They can't get dental care for two years, and more.  We have lists and lists 
of the problems.
    The system is in crisis, and you ought to be emotional about it.  But you 
sit here and you talk about being "uneasy."
    I asked you when you first came to this Committee, what was the figure 
that your department submitted to the OMB.
    By the way, that's the real problem, as we heard before.  This 
administration, this OMB is trying to balance the budget on the backs of the 
veterans.  They don't care what your models are.  They're giving you a figure 
based on what they want to do with other departments.  They don't care about 
your model.  Why should we?
    We should be talking about the veterans, and this administration wants to 
balance the budget on the backs of the veterans.
    But I asked you what did your department submit versus what OMB gave you, 
and you said to me, and I just broke out laughing, "I don't know."  There were 
10 people by your side.  You could have asked any one of them.  They all knew.
    Four months later, you're back here.  You gave the same exact answer:  "I 
don't know."
    With this problem, wouldn't you want to know? Wouldn't you want to go back 
and ask?  You're sitting there and you're telling us you don't know.
    I have seen a lot of irresponsibility and refusal to accept 
responsibility, and a lack of accountability, and a lack of passion since 
I came to Congress, but you beat the cake.  I mean, you set the standard.
    I have never seen someone as laid back with a $3 billion problem, with our 
veterans not getting appointments, as you are today.
    Again, I think you should resign.  What do you think?  Do you think you 
ought to resign?
    Secretary Nicholson. No, sir.
    Mr. Filner. Tell me, why should you stay in office?  What are you doing 
about what's going on?  You read us a list of things, you're going to put $26 
million here and $32 million here.  I want you to go to the veterans and say, 
"I am going to change things to make sure you get the treatment you need."
    Have you been out of Washington to see one veteran since this came about?  
    Secretary Nicholson. Mr. Filner, I was in your state this weekend, meeting 
with homeless veterans -- 
    Mr. Filner. And did you tell them you were going to give them more 
support?
    Secretary Nicholson. -- homeless veterans' advocates.  I was at the L.A. 
-- 
    Mr. Filner. And what did you tell them?
    Secretary Nicholson. -- Hospital talking to veterans and talking to -- 
    Mr. Filner. What did you tell them?  Did you tell them the model was 
wrong?
    Secretary Nicholson. No, I -- 
    Mr. Filner. "I'm sorry, I can't serve you, the model is wrong?"
    Mr. Turner. Mr. Chairman, the Secretary should be permitted to answer the 
questions in regular order, Mr. Chairman.
    Mr. Brown of South Carolina. Mr. Filner's time has expired, but Mr. 
Secretary, if you would care to continue to respond with the visit you had in 
California, it would be certainly in order.
    Secretary Nicholson. I visit hospitals all over the country, and as I 
said, I was in California this past weekend visiting facilities there and 
meeting with homeless veterans, homeless advocates, because we have, as you 
know, a considerable homeless veterans problem in L.A., also, which concerns 
me a great deal.
    Mr. Filner. So did you raise the money for that? Did you increase the 
money in the budget for -- 
    Mr. Turner. Regular order, Mr. Chairman.
    Mr. Brown of South Carolina. Mr. Filner, I'm sorry, your time has expired.  
I'll just allow the gentleman a chance to your questions, and no further 
questions from you, please.
    Secretary Nicholson. Actually, yes.  What I'm trying to do is to put the 
pieces together between us, the VA, the public sector and the private sector, 
as we've done in Chicago for a 231-bed homeless veterans facility using VA 
loan guarantees, HUD Section 8 rental assistance allowances, and Catholic 
Charities in the Archdiocese of Chicago came in.
    We're trying to replicate that in other areas, including in California, 
where the need is probably the worst. And I met with elected officials in 
Santa Monica to discuss that, as well.
    But at the hospital, I took an extensive tour.  I talked to patients, as I 
do everywhere I go, and some of them, knowing that I'm in the building, make 
their way to me to tell me how grateful they are and what good care they 
believe that they are getting from the VA.
    Certainly there may be exceptions here and there, but I am proud and will 
stand behind the excellent delivery of health care services that the VA is 
providing to our veterans at the 157 hospitals and the over 850 clinics that 
we have throughout this country.
    Does that mean that we don't need more resources? Heck no.  We've just 
established that, and are working toward that with your help.
    But I'd like also if I could to ask you a question, Mr. Filner.  If you 
can tell me what the VA is going to need in 2007, based on what the actual 
situation is going to be in 2007, or if anybody else can, we sincerely will 
appreciate that input, because that is what we're doing right now, in 
addition to this work, is we're formulating the 2007 budget.
    Mr. Filner. You know, your own department has testified that the health 
care cost inflation is 13 or 14 percent per year.  You told us that.  So 
I'd start right there, 13-14 percent increase.
    We know how many more people are coming back from Iraq.  You step it up 
from there.
    And then I'd sit down with the guys who made the Independent Budget, 
because they're right every time, and get the number from them, and they'll 
provide you with the expertise that you need.
    Mr. Brown of South Carolina. Thank you, Mr. Filner.
    Mr. Secretary, when did you assume responsibility for this job?
    Secretary Nicholson. February 1st, Mr. Chairman.
    Mr. Brown of South Carolina. Of what year?
    Secretary Nicholson. Of 2005.
    Mr. Brown of South Carolina. So you really inherited this budget?
    Secretary Nicholson. Yes, sir.
    Mr. Brown of South Carolina. Okay, thank you.
    I recognize the gentleman from Florida, Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman.
    And let me just say in some of the questions posed by Mr. Filner about the 
Independent Budget he raised and had in his hand, I've had the opportunity to 
serve in the minority, and when Sonny Montgomery was Chairman, and I never 
recollect the Democrats or Chairman Sonny Montgomery using the Independent 
Budget as a guide.
    So this Committee really makes its decisions on the best information, and 
you're the one to help us provide that.
    Now, in your opening statement, you did admit that some VA services are 
not modeled, and you mentioned there readjustment counseling, dental 
services, the foreign medical program, CHAMPVA, and others.
    And I guess the question I have, do you propose to have those modeled 
based upon this?  Because yesterday, in the staff briefing, my staff told 
me that the average cost of a dental exam for a returning reservist is $3,100.
    Now, this seems high, and I guess maybe two questions are, dealing with 
the reservist and his dental bill of $3,100, what are the factors, and how 
can we plan better to handle that; and then a question is whether you're 
going to model on other areas that you mentioned in your opening statement.
    Secretary Nicholson. Again, those are very good questions, and we are -- 
we're dealing with that.
    The dentistry for the returnees is a new element, and I have confirmed 
that number, because that number seemed high to me, as well, on a per 
capita basis, but it's not of course just examinations.  It's for dental 
work, and many are in need because of deferred care and so forth, of a 
great amount of work on their dentistry, and we're providing that to them.
    So that is an accurate number, that $31,00 per dental patient.
    One of the things that we do in trying to project is to do what they 
used to do in total, as I testified, is to go back and see what the 
actuals were, to try to develop the trends and then apply an increased 
cost factor to that growth projection, and that's essentially what we do 
with those things that are not modeled.
    We are searching the market to see if there are any other modelers out 
there in these kinds of service areas that we provide, and we have not yet 
found any.
    Mr. Stearns. All right.  Maybe one other concern I have is why are 
quarterly reviews not conducted?
    Secretary Nicholson. Why are they not?
    I will ask Dr. Perlin to give you a detailed answer on that, but we 
internally, sir, we do monthly reviews, and what I've said earlier in 
reflecting on our experiences here is that I think that we, the VA, need 
to come here to at least leadership, or whoever leadership delegates, to 
have more frequent scheduled communication on exactly what is happening 
with our patient trend line and our costs to that you all know exactly what 
we know when we know it.
    Do you have anything to add to that, doctor?
    Mr. Stearns. Dr. Perlin.  Let me just add, as I understand it, a mid-year 
budget review has really showed you the difficulty here, and so the question 
is, you know, why don't you just move to quarterly reviews so that you detect 
this in a quarter, rather than a midyear, and that's really what I'm trying 
to get at.
    Dr. Perlin. Thank you, Mr. Stearns, for that question.
    In fact, we do track, as the Secretary indicated, absolutely monthly.  The 
mid-year review presented an opportunity to come to some summary 
interpretation and it was simply coincidental with the escalation of use of 
what would have been capital funds and the need to address the difference 
in utilization, the number of patients compared to what had been projected.
    So in fact, the timing was coincidental, but those data were apparent 
during the monthly review.  Mid-year simply summarized.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Bilirakis. Would the gentleman yield for a moment?
    Mr. Stearns. Glad to yield.
    Mr. Bilirakis. Dr. Perlin, do you review the the Independent Budget 
submitted by the veterans?
    Dr. Perlin. Yes, sir, I do -- 
    Mr. Bilirakis. You do?
    Dr. Perlin. -- review the Independent Budget.
    Mr. Bilirakis. Do you find fault with a lot of the projections and 
whatnot?
    Dr. Perlin. I think the Independent Budget -- and there was testimony last 
week on that -- uses a different approach.  It builds on a historical base. 
It makes -- 
    Mr. Bilirakis. Yes, and that's bad?
    Dr. Perlin. That's not necessarily bad.
    We don't believe it's as accurate, the ability to project different needs 
of service, and the needs or the services that would be required, given 
different policies, or what the actuarial approach applies.
    When we used to do historical based budgeting, it's my understanding, and 
this is before my time, that the error was 11.2 percent the last time that was 
applied.
    Mr. Bilirakis. Well, all right.  Thank you, Mr. Chairman.
    Mr. Brown of South Carolina. Thank you.
    Dr. Perlin, we certainly would welcome the quarterly review, if you would 
meet with the Committee, and come in and let's take a look at those figures.
    I now recognize the gentlelady from Florida, Ms. Brown.
    Ms. Brown of Florida. Thank you.
    First of all, let me just say I've been on this Committee since 1992, and 
the Republicans, Mr. Stearns, have been in charge of this Committee for over 
10 years, and so at some point, you're going to take some responsibility for 
what goes on in this Committee.
    Now, 81 percent of the American people said that the Congress is not in 
tune with what they think is important. Now, clearly they know that taking 
care of veterans is important.
    Now, you have just given us this list of your requests.  The Senate 
passed $1.5 billion.  I'm looking at this, trying to find out where's the 
main portion?  Now, if we adopted -- if you had requested 1.5, the Senate 
did 1.5, we wouldn't have a conference.  We could pass a bill before we 
left here tonight on the way to the President, and it's a win-win for 
everybody -- everybody meaning the veterans.
    Why is that we're going to have to go to conference when the Senate 
passed $1.5 billion, and you know that's what's needed?
    Why you didn't come up here with the same request -- no conference, we 
pick up the Senate, when he sends it over, we pick it up, we pass it, it's 
on the way to the President's desk, then he's taking pictures and taking 
credit?
    But the main thing is, the veterans will be getting the services they 
need right up front.
    And let me tell you something.  Clearly, money is not an issue, because 
there's plenty of money up here.  The problem is priority -- whether or not 
the veterans are the priority or whether the tax cut is the priority.
    Certainly we spend $1 billion a week in Iraq, $4 billion a month, but 
those soldiers today are veterans tomorrow, and we need to have the will 
to say that once they come home, "we're going to take care of you."
    Now, explain to me why you didn't ask for $1.5 billion.
    Secretary Nicholson. For us, veterans are clearly the priority.  That's 
why we're here.
    That's why I went to Iraq to meet with our forces there and went to 
Lanstuhl, Germany to visit not only the people providing that transitional 
medical care to them, but to the patients there and our veterans there; and 
that's why I go regularly to Walter Reed and Bethesda and Fran O'Brien's on 
Friday nights, to visit with them, because they are coming into our system, 
they are -- they are me.  They're veterans. That's -- nobody cares more about 
veterans.
    Ms. Brown of Florida. Sir, let me just say, everybody on this Committee 
cares about veterans.
    Let me tell you, I had a veteran to come into my office that had been home 
from Iraq for over 12 months, and had not received the proper service.  He 
came to me with tears in his eyes, with his beret, and wanted me to have it 
to note that he was in distress.  So we all have these stories.
    And it's not what we say.  We all say the right thing.  It's how we vote.  
It's how we spend our money. That's the bottom line.  It's not what we say. 
We talk a great talk, but we need to walk the walk.
    So I want to know why is it, and I want an answer on this, that we did 
not -- because this is bull.  This is going to take weeks.  Conference, 
setting up a time, appointing the conferees.
    We could finish this tonight and have it on the President's desk 
tomorrow -- 1.5 billion.  Then there's no conference. The President gets 
the credit.  But the veterans, they are the ones that will get the service 
right away.  And we as members of Congress will do our jobs, and the American 
people will be able to separate some of us and feel like, "Well, they do 
have some of our priorities."
    But as we speak today, 81 percent of them think we're not doing their 
work -- we don't have their priorities.  What we do up here is not what 
they want.
    But they want us to take care of the veterans, and we could do this just 
like that, if we had the will and cut out the bull.
    Mr. Secretary, please answer my question.
    Secretary Nicholson. Madam, Congresswoman, I -- you know, what we -- what 
we've requested here, and will come up in the supplemental request from OMB 
today, is what we need immediately to restore those items that we have already 
testified about that we were making diversions of because of our needs because 
of the increased growth.
    I don't -- I don't believe that I can testify to you why the Senate did 
what it did.  I know this.
    Ms. Brown of Florida. Did you go over there and testify before the Senate 
and discuss the needs?  Did you go over -- 
    Secretary Nicholson. I have testified, yes, ma'am. I've testified.
    Ms. Brown of Florida. Okay.  They didn't take your recommendations as a 
body?
    Secretary Nicholson. We testified very similarly for this amount that we 
were experiencing for the rest of 2005 in the Senate, yes.
    But I just wanted to add that the bill the Senate has has that for 2005 
and 2006.
    Ms. Brown of Florida. Well, good for the other body.
    My understanding is, this is just 2005.  It's just 2005.
    Secretary Nicholson. This is just 2005, yes.
    Ms. Brown of Florida. No, sir, the Senate is just 2005.
    Secretary Nicholson. I don't think so.
    Mr. Brown of South Carolina. I think the Senate really, when they 
introduced the billion-and-a-half, Mr. Secretary -- you can correct me if 
I'm wrong -- they didn't have the exact numbers from you when they passed 
the bill last night, and so they said whatever is not spent in this year 
would be carried forward to 2006, because you do have a 2006 problem that 
you haven't addressed yet, and we'll address that on a separate legislation.
    Secretary Nicholson. That's correct.  Yes, sir.
    Ms. Brown of Florida. Mr. Chairman?
    Mr. Brown of South Carolina. Yes, ma'am.
    Ms. Brown of Florida. But the question, and I know that the Chairman of 
this Committee is out working to probably come up with a proposal, but 
the point that I just made -- 
    Mr. Brown of South Carolina. You made a good point.
    Ms. Brown of Florida. -- the point is that if we have to have a 
conference -- 
    Mr. Brown of South Carolina. I understand.
    Ms. Brown of Florida. -- and all of that, this is going to take days.
    Mr. Brown of South Carolina. I understand.
    Ms. Brown of Florida. But we can send a message to the American people -- 
    Mr. Miller. Mr. Chairman, regular order.
    Mr. Brown of South Carolina. She's got a right -- 
    Ms. Brown of Florida. Excuse me.
    Mr. Brown of South Carolina. Okay.  But -- 
    Ms. Brown of Florida. Let's don't be rude.
    Mr. Brown of South Carolina. Let me just ask, if I might, that you raise a 
good point, and I'm not sure what the logistics will be.  I know they need 
immediate help, but I'm not so sure today has got to be the answer, but we 
are, at least we're working on the problem.
    And thank you, Ms. Brown.
    Ms. Brown of Florida. Yes, sir.
    Mr. Brown of South Carolina. You made a good point.
    Ms. Brown of Florida. And I would appreciate, I would appreciate that we 
take that into consideration, and if it's because I'm a Democrat, then let 
it be your amendment. It doesn't have to be mine.  My name doesn't have to 
be on it -- 
    Mr. Miller. Mr. Chairman, regular order.
    Ms. Brown of Florida. -- Mr. Miller.
    Mr. Brown of South Carolina. Okay.  Thank you very much.  Thank you, Ms. 
Brown.
    Mr. Miller, I recognize you -- 
    Mr. Miller. I thank the Chairman for recognizing me, and I did have some 
questions for the Secretary, but I would like to address the prior speaker.
    Since you've been here since 1992, you should understand how regular order 
works.  You should also understand that when we pass an interior 
appropriations bill in May and the Senate puts it on their interior 
appropriation bill, we have to conference, and that's the way it works.
    They attached it to their Interior -- 
    Ms. Brown of Florida. One darn thing, sir.  I don't have to understand 
anything, and let me tell you something.  We're not talking about Interior 
Appropriations. We're talking about VA emergency.
    Mr. Miller. Mr. Chairman?
    Mr. Brown of South Carolina. Regular order.
    Ms. Brown of Florida. You've got me mixed up with somebody else.
    Mr. Brown of South Carolina. Ms. Brown, I'm sorry.
    Mr. Miller, if you will proceed with your questions to the Secretary.
    Mr. Miller. Thank you.
    Mr. Chairman -- 
    Mr. Brown of South Carolina. Mr. Miller?
    Mr. Miller. -- we just had a 10-minute dissertation from the gentlelady 
from Jacksonville on the fact that -- 
    Ms. Brown of Florida. Jacksonville, Florida.
    Mr. Brown of South Carolina. I'm sorry, Ms. Brown, your time is up.
    Okay, Mr. Miller.
    Mr. Miller. Mr. Chairman -- 
    Mr. Brown of South Carolina. Yes, Mr. Miller.
    Mr. Miller. -- we just had a 10-minute dissertation from the gentlelady 
from Jacksonville, a member of my delegation, expressing to everybody how 
we could solve this problem today and that the Secretary, if he had brought 
the appropriate number, we would not have to go to conference.
    The fact of the matter is a member who has been here, by her own 
admission, since 1992 should know that we would have to go to conference 
anyway.
    And I, you know, I beg to differ.  The lady is absolutely incorrect.  
And, you know, for her to say that I'm being rude to her is an egregious 
statement on her part.
    Mr. Brown of South Carolina. Mr. Miller -- 
    Mr. Miller. But I would -- excuse me.  You've allowed the Democrats to 
pontificate for the last 45 -- hour, one hour.
    Mr. Brown of South Carolina. I was going to ask you a question, if I 
might -- 
    Mr. Miller. Yes, sir.
    Mr. Brown of South Carolina. -- just a procedural question.
    Mr. Miller. As long as it doesn't come out of my time.
    Mr. Brown of South Carolina. Okay.
    The billion-and-a-half was attached to the interior appropriations, 
did you say?
    Mr. Miller. Yes, sir.
    Mr. Brown of South Carolina. And we had already passed our version?
    Mr. Miller. Ours was passed in May.
    Mr. Brown of South Carolina. So you are absolutely correct.
    Mr. Miller. Yes, sir.
    Mr. Brown of South Carolina. Okay.  You may proceed.
    Mr. Miller. Thank you.
    The Senate last night passed theirs on an appropriations bill.
    Mr. Brown of South Carolina. Thank you for that clarification.
    Mr. Miller. You know, I just don't understand, you know.  We sit here 
and we all are saying we are aggravated about this issue.  There's not a 
person in here who is not.
    And we are listening to people just go on and on and on, people calling 
for people's resignation for the sole purpose of headlines.  But if that's 
the case, let me see if I can make one.
    If my colleague, good friend from California, is so disturbed with what's 
going on, if he would offer his resignation from his congressional seat, I 
would be glad to write him a letter of recommendation to go to work within 
the budget department of the Veterans' Affairs Administration.
    Mr. Filner. Would the gentleman yield?
    Mr. Miller. I will not yield.
    And I think that it's important that we focus on the -- 
    Mr. Filner. Mr. Chairman, the gentleman addressed me personally.
    Mr. Miller. -- the issue is that we're trying to -- 
    Mr. Filner. The gentleman should learn not to address the other members 
personally if he doesn't want to be interrupted.
    Mr. Miller. -- we are trying to solve a problem here.
    Mr. Brown of South Carolina. Regular order, and let's get back to the 
subject at hand -- 
    Mr. Miller. And -- 
    Mr. Brown of South Carolina. -- and I'm sorry -- 
    Mr. Miller. -- and -- 
    Mr. Brown of South Carolina. -- Mr. Filner.
    Mr. Miller. -- and I will submit my questions for the record, but, you 
know, this -- the actions of some of the members of the other side, I just 
don't understand.  They're not trying to fix the problem.
    And I'm not directing it to anybody.  If the shoe fits, wear it.
    Mr. Filner. If the gentleman would yield, I would explain to him what 
we're doing.
    Mr. Miller. I yield back my time.
    Mr. Filner. I'd be happy to explain it to you.
    Mr. Brown of South Carolina. Mr. Filner, if you might -- Mr. Miller, do 
you have a question to the Secretary?
    Mr. Miller. I said I would submit them for the record.
    Mr. Brown of South Carolina. Very good.  Okay. Without opposition.
    [The information appears on p. 94]

    Mr. Brown of South Carolina. Dr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman.
    Mr. Secretary, I was unable to be here the last time you were here.  I'm 
one of those members that's on the Armed Services Committee, too, and it's 
good to see you.  I appreciate you taking this job.
    Is it your testimony today that this actuarial model that's used, this 
formula, the number comes out and that becomes the number that is submitted in 
the President's budget?
    Secretary Nicholson. Yes, sir, that's the basis of the development of the 
number.
    As I said, there are a few of the variables in the services that we 
provide that are not modeled, so we have to do a subjective projection of 
those, as well, but that's the basis.
    Dr. Snyder. You've heard multiple discussions about Secretary Principi. 
The question to him a year ago, when he was asked what number he had submitted 
to OMB, and he said he had submitted a number of $1.2 billion more.
    Is that because he looked at what came out of the model and decided it was 
inadequate and upped it by $1.2 billion, or is it because the model generated 
a budget number and OMB said no, we're not going to go with the model, we're 
going to cut it by $1.2 billion?
    Secretary Nicholson. Congressman, I don't know the answer, I wasn't here.  
But let me see if one of my colleagues can help me.
    Dr. Perlin. I believe the construction of the budget is in three pieces.
    The actuarial model is the first piece for those services that are 
modeled.  As the Secretary testified, there are non-modeled items, including 
CHAMPVA, the program for beneficiaries; dentistry; prosthetics; state veteran 
home per diem.  And each year, as you know, the department comes forward with 
policies, as well.
    And that is the construct of the budget, in large terms.
    Dr. Snyder. One of the issues that came about, Mr. Secretary -- and I know 
you know the history, you're a very smart guy -- when Secretary Principi 
announced here in answer to a question of Mr. Evans a year ago that he had 
submitted a budget request $1.2 billion more, that generated a series of 
events that ultimately resulted in former Chairman Smith being removed, not 
only from his Chairmanship, but from the Committee.
    I think that sent a very strong message to the Republican caucus about 
being a team player.
    My question for you is, have you sensed, since you've been on the job 
since February, that there have been any concerns expressed by any of your 
staff members that even though they thought that the budget numbers might not 
be adequate, that the model might not work because we are at war, that they 
had any fears that they could not step forward and express their views openly 
about what the true budget number should be?
    Secretary Nicholson. Well, we've had a considerable amount of discussion 
about the budget, but it's been particularly focused on the 2006 budget, 
because -- 
    Dr. Snyder. My question is -- 
    Secretary Nicholson. -- we were in 2005 budget year, of course, when -- 
    Dr. Snyder. My question is, have you sensed any apprehension about, with 
anyone on your staff, about what the ramifications might be if someone were to 
publicly acknowledge that the budget numbers or the model may not be 
adequately reflecting what's going on in the world?
    Secretary Nicholson. Yes, sir.
    We've had -- we've had discussions about growth, and increased demand and 
what -- and why and what it means and what it will mean to our numbers and our 
projections, because we, as I testified, the increase in this year that we're 
in is over 126 percent from what was forecasted, and it's about -- about 40 
percent of that total number of patients, which is about 250,000, about 40 
percent of those are returnees from the combat theater.
    Dr. Snyder. I understand that.
    Secretary Nicholson. But thus, almost two-thirds of them are not.
    And I think the reason this is happening, and this is part of what we sit 
there and discuss and try to understand is why is this happening, because 
it's a delta that's taken off, and I think it's -- I think it's because of 
the quality of the care that veterans are getting in those facilities, and 
that word is continuing to go out there.
    Dr. Snyder. Mr. Secretary, when you testified here February 16, 2005, Ms. 
Berkley, Shelley Berkley from Nevada made the following statement, and she did 
not present this to you as a question, but she made a statement, and then the 
Chairman moved on.
    She said, quote:
    "The President's budget provides $762 million less than CBO says is needed 
to maintain current services for veterans' health care."
    She went on to say:
    "And I hope you will take a good look at the proposed budget" -- 
    Mr. Turner. Mr. Chairman, I thought we were not allowed to -- there's a 
sign on the door that says we should not be using cell phones.  I would think 
that the respect for the rest of this Committee and certainly the Secretary 
would encourage Mr. Filner to at least get off the phone.
    I apologize.
    Mr. Brown of South Carolina. That's a good point. Thank you.
    Mr. Turner. Mr. Filner, I do believe the sign is for the entire room, not 
just crouching behind someone else's chair.  The sign says that it's 
disruptive of the Committee, and clearly you don't consider that you need 
to comply with the rules of the room.
    Mr. Brown of South Carolina. Mr. Filner.
    Mr. Filner. Mr. Chairman?
    Mr. Brown of South Carolina. Mr. Filner, I'll have to ask you to either 
take your cell phone off or leave the room.
    Mr. Turner. Thank you, Mr. Chairman.
    Dr. Snyder. You're doing well today, Mr. Chairman. You got a tough job 
for a stand-in.
    [Laughter.]

    Dr. Snyder. We're with you.
    Mr. Brown of South Carolina. Well, I thank you for your testimony.  Looks 
like your time has expired.  Had you concluded your question?
    Dr. Snyder. No, I had not, and I would ask your indulgence, if I might 
here.
    Mr. Brown of South Carolina. How much time do you need?
    Dr. Snyder. I did not give an opening statement, hoping we might be able 
to go around more than once. Obviously, that was misguided.
    I wanted to continue with Ms. Berkley's quote from February 16th, and she 
says, quote:
    "And I hope you will take a good look at the proposed budget and help the 
President see that some of these cuts do a tremendous disservice to our 
veterans and do damage."
    Now, that's the end of Ms. Berkley's quote.
    So she did not have a model in her office, but she did do her homework, 
and something told her -- I think it was the CBO request -- that this budget 
wasn't going to work.
    My question is, on hearing testimony, and she did not ask for a response 
from you that day, what did you and your staff do in response to her comment 
that the budget was not going to work out, it was to be close to $800 million 
short, which is very close to this number that you submitted today?  How did 
you respond to her comment?
    Secretary Nicholson. Well, we took that on board, as we do virtually 
everything that we hear.
    We recognize and appreciate the oversight responsibility and we know that 
you all are sincere in your concern about veterans, and just as we are.
    And so we've discussed that.
    One of the things that we specifically discussed about Congresswoman 
Berkley's discussion and so forth was in our construction accounts, because we 
know of her concern about that, and whether this was going to affect our CARES 
projections, and where we were on all that.
    And we have that amount in the budget, under our planned -- in adjustments 
we were planning to make through the end of the year.  It was not going to 
affect CARES or the capital construction plans for the new VA hospital.
    Dr. Snyder. Ms. Berkley's specific comment during that question was that 
3,000 nursing jobs would be cut throughout the country and that was her 
concern.
    Thank you, Mr. Secretary.  Thank you, Mr. Chairman.
    Mr. Brown of South Carolina. Thank you, Dr. Snyder.
    The chair recognizes Mr. Boozman.
    Mr. Boozman. Thank you, Mr. Chairman.
    I would like to respond to my good friend, Mr. Filner, who is a good 
friend.  I mean that sincerely.
    He made a comment earlier, that nobody was at the modeling hearing that we 
had on this side.
    I was at that hearing, and in fact, I chaired the second panel, and myself 
and Mr. Michaud were the only ones here for the second panel.  You were not 
here.
    During the second panel, and I think Mr. Michaud would agree with me, we 
had a great discussion, it was very, very good.  But what we got was testimony 
about the difference in the VA model versus the regular model, so it was a 
good hearing.
    So again, we shouldn't -- and you can -- 
    Mr. Filner. I stand corrected.  I appreciate that. Thank you.
    Mr. Boozman. I do want to thank you, Mr. Nicholson.
    I understand your work as a veteran, your credentials, and stuff like that 
are impeccable.  Okay?  I also know that you're close to the President, and I 
think that your very appointment really does speak highly of the President's 
interest in veterans.
    Now, one thing that I'd like to raise a question about that I am concerned 
with.
    Do we have a policy now that people that are enrolled, people that are 
within the system that haven't been around in a couple of years, non-service 
connected that haven't been around in two years, are they being treated as new 
patients to the system in the sense of being told that they're going to have 
to wait 18 months?
    Secretary Nicholson. Congressman, anyone enrolled in the system stays 
enrolled, and no one is disenrolled and no one under this -- this plan that we 
had, this workaround through the end of the year, was going to be disenrolled 
or denied service from the way that we've been providing it.  No, sir.
    Mr. Boozman. Again, I had heard that maybe there was a plan that those 
that had not been in the system for a while -- if that were true, you would 
be in a situation where you're really hurting the people that weren't in the 
system, that you least needed to access the system that much, but veterans 
were counting on VA health care, and that felt like they were part of the 
system, hadn't been there in a while because they didn't need it.
    I mean, I've been blessed.  I haven't been to the doctor in three years, 
probably.
    So, again, I would hope that with the increased funding that we're going 
to give, by some mechanism, it turns out -- and I think we're all committed to 
doing that -- that we get this straight, I would hope that those that are 
enrolled, the two-year deal, I hope that there's no hint of that at all.
    Secretary Nicholson. Just because I want to make sure that what I 
stated was accurate, I'm going to ask Dr. Perlin to just elaborate on it 
a bit.
    Dr. Perlin. Thank you, sir, and thank you for that question.
    It is absolutely as Secretary Nicholson said, that no one is disenrolled.  
No one is disenrolled from care.
    But if people do not come for care for two, three, for over two -- three, 
five, ten years -- they do drop off of the list.
    So I would ask for your help in notifying veterans if they continue to 
want to seek services, to make sure that they come by at least once every 
two years.
    Mr. Boozman. Again, I would argue that there's a difference in ten years 
and two years, and I would argue that we really need to look at that, and 
I think two years is probably too short.
    Dr. Perlin. We can address what the duration is.
    Mr. Boozman. Thank you.
    Mr. Brown of South Carolina. Are you through? Okay.
    Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    Mr. Secretary, now I have a number of questions, and I would appreciate if 
you confine your response to a yes or no, or a simple one sentence answer, 
because they're asked in a way that you could do that, and I apologize if I 
have to interrupt you if you tend to go on, because I have several questions 
I'd like to ask.
    Mr. Secretary, we need accurate information from you to ensure that 
veterans get access to timely high-quality health care.
    Your predecessor told us, as you heard several times today, that he had 
requested more money for veterans' health care than he got from OMB for his 
budget.
    Yes or no:  will you tell us the amount you have requested from OMB for 
veterans' health care for fiscal year 2007?  You will let the Committee know 
what you've requested, yes or no?  
    Secretary Nicholson. Yes, sir.
    Mr. Michaud. Yes or no:  will you tell us whether you have asked OMB to 
resubmit the fiscal year 2006 budget to better reflect the increased demand 
for care?
    Secretary Nicholson. Yes, sir.  I testified on that, that that's coming up 
here soon.
    Mr. Michaud. Mr. Secretary, I'm very concerned about reports that the VA 
mental health care services, including treatment for substance abuse, may not 
have been adequately funded to meet the needs of our veterans.
    Yes or no:  do the current estimates for 2005 shortfall account for the 
total unmet mental health care needs or increased needs of Operation Iraqi 
Freedom or Enduring Freedom veterans?  Do the current estimates account for 
that? Yes or no?
    Secretary Nicholson. I can't answer that yes or no, I don't think, 
Congressman.
    The answer is that it's a high priority.  We have -- those needs are 
growing and we have requested an additional $100 million for that in our 
2006 submittal.
    Mr. Michaud. In February at the hearing on the budget, I alerted you then 
that I heard that VISNs were experiencing budget shortfalls.  While you 
claimed to not have known that the VISNs were already trying to cover the 
shortfalls, you should have been aware of our keen interest in the 
possibility of a budget shortfall.
    And despite my concerns then, I never was notified by you that the VA was 
exhausting at least $1 billion to cover shortfalls and had been operating with 
shortfalls since at least January.
    You have still not even answered our post-hearing questions from February, 
and I don't know if they're just mine or the entire Committee.  It relates 
back to my opening statement that Mr. Bilirakis mentioned, dealing with your 
former position as Republican national chair, but when I read your testimony, 
you state in there, and I quote:
    "The VA staff had had a very candid dialogue" on the shortfall of its 
impact for next year's budget, but only with the majority staff.
    It makes me question whether or not you are approaching the challenges 
facing our veterans in a bipartisan manner. Your predecessor -- unlike your 
predecessor, who worked with both sides of the aisle.
    My question for a yes or no answer is:  will you from now on include 
members and staff of both sides of the aisle, especially members from this 
Committee, for that very candid dialogue about the budget?
    Secretary Nicholson. Yes, sir.
    This is not a -- this is not a partisan job, and I don't see -- I don't 
even have time to think about -- 
    Mr. Michaud. I'll answer that after I have my other two questions.
    At the February hearing, you said your information is our information.  
Yes or no:  will you share in a bipartisan manner with this Committee the 
demand model for mental health and substance abuse service?  Will you share 
that?
    Secretary Nicholson. Yes, sir.
    Mr. Michaud. And I can appreciate your saying that you want to act in a 
bipartisan manner, and I agree with you, because the men and women who serve 
in the military, they serve for our country, not for one political party or 
another.
    And the reason why I question that is because, when I read your statement, 
when your actions, you work with the majority party.  You have not informed, 
like your predecessor in the past, to inform both chairs and Ranking Members 
along with majority and minority staff.
    And it's written in your testimony today, and I would encourage you to 
work in a bipartisan manner.
    I'm not looking to point fingers at you.  I'm looking to make sure that we 
have the adequate information, and the only way we're going to be able to get 
that adequate information is if we have access to the information in a 
bipartisan manner.
    So I appreciate that, Mr. Secretary, and look forward to working with you 
to solve this problem.
    Secretary Nicholson. May I respond with one other point, Mr. Chairman, to 
just try to add emphasis to my statement that I don't consider this a partisan 
job at all. My job is about taking care of veterans.
    But in March, on March 24th, I sent a letter to the Chairman of the 
Appropriations Committee, Military Quality of Life and Veterans' Affairs, 
announcing my intention then of this transfer of money to the medical services 
division, and I sent a copy of that letter to Congressman Edwards, and we have 
had significant communication from my office with Ranking Member Evans here.
    But if we -- and it sounds like we do, because perceptions are important 
-- need to be communicating more, we will do that.  I have no difficulty with 
that.
    Mr. Michaud. I want to thank you, Mr. Secretary, and as I stated, my 
questions are a reflection of this Committee, not the Appropriations 
Committee, and probably we're so used to working with the former secretary 
of the VA, Secretary Principi, in a bipartisan manner, and I just don't see 
that with you thus far, and I'm going by your statement as it relates to this 
Committee on Page 8, where you talk about meeting with staff on June 3rd, 
the majority staff, not the minority staff or the Ranking Member or chair.
    So I appreciate that, Mr. Secretary, and will look forward to working with 
you in a bipartisan manner to make sure that we do provide adequate health 
care for our veterans.
    Thank you.
    Mr. Brown of South Carolina. Thank you, Mr. Michaud.
    Mr. Secretary, if I might, we have other folks that want to ask questions, 
too, not to cut you off on this.
    But I would recommend that the same information that you share with 
appropriations, if you would share with the authorizers, we certainly would 
appreciate that.
    And I know it might sound like this Committee has gotten to be very 
partisan, but I'm telling you, we've always operated in a non-partisan 
spirit.  We believe that the veterans is a non-partisan issue.
    I certainly commend you for your service, as short a time as it might be.  
You know, the whole blame looks like it's focused on you, and we understand 
that you just arrived back in February and you're not responsible for all 
the sins of the past, and we certainly look forward to continuing to work 
with you in the future.
    With that, Mr. Bradley, do you have a question?
    Mr. Bradley. Thank you very much, Mr. Chairman.
    I would ask for a little bit of extra indulgence, because I also, like Doc 
Snyder, did not submit an opening statement.
    Mr. Secretary, first of all, thank you for your service to our country.  
Certainly you've honored the uniform.
    And we also thank you for your service in the last five months.  This has 
probably been a very difficult time, jumping from the frying pan into the 
fire, and certainly you've seen that this morning.
    I think all of in this room, and a number of people have left, would admit 
that, as you have accurately, that we have a huge funding problem.
    One thing that probably hasn't been noted enough is, and I hear this all 
the time, the VA service, bar none, is the best in the country in terms of 
medical quality of care, and as we try to deal with the funding issues, that 
all of us have responsibility for, in a bipartisan way, let's also not 
forget that the quality of care is excellent, and not only is that a 
tribute to your staff and your predecessor's, but the hard work that all 
of the people throughout our country do in serving our nation's veterans.
    I would second the comments of a number of people, in particular 
Congresswoman Brown-Waite.  I also serve on the Budget Committee, and I worked 
with Chairman Nussle this year to submit, between the efforts of the two of 
us, about a $900 million increase to this year's budget, and projected out 
over the next several years, well over $1 billion in the budget.
    I was pleased that Chairman Walsh, his mark included $1 billion more than 
the President's request, and I felt, and I think a lot of people felt, because 
the vote on that was fairly bipartisan, that the situation in regard to the 
veterans returning from Iraq and Afghanistan was well accounted for, and then 
unfortunately, the modeling errors, the shortfall have hit us, and we have to 
solve this problem, and hopefully with a supplemental budget today we will 
address that, at least to begin with.
    So here are my questions, and if I have gone over my time a little bit, I 
ask your indulgence.
    $975 million.  Does that do the job for this budget year, and it is -- are 
you certain of that?
    Secretary Nicholson. Yes, sir.  This will -- this will do the job and get 
us through the rest of this fiscal year.  Yes.
    Mr. Bradley. Have you, because the Independent Budget writers -- and I 
have my notebook of the testimony that they submitted in February -- have you 
worked with the authors of the Independent Budget on this $975 million 
proposal so that we can have faith that outside interests have sort of 
looked over your shoulder to say, ``You know what, this is an accurate 
number that will solve the problem,'' and, you know, give us greater 
faith that that's the case?
    Secretary Nicholson. Not specifically with these numbers.  We have 
continuing discussions with the VSOs about budget, and they don't hesitate to 
express themselves to us about that.
    But I cannot say that, as to these specific categories, that, you know 
I've listed, that we've had that kind of detailed discussion, no, sir.
    Mr. Bradley. And my last question is more one for the future, and as we 
look to the future, how we can more accurately predict the needs.
    And I go back to the former Chairman of the Committee, Chris Smith's bill, 
which nobody has brought up here today, which called for an independent panel 
to submit to OMB recommendations based on the VA's recommendations of service, 
and then that would be incorporated, as I understand it, into the OMB budget 
submittal, and it would be a more transparent process and a process that 
hopefully would not have the influence of trying to arbitrarily fit a budget 
into tight budget parameters, which we all know exist today, but would be a 
budget submittal, transparent, that would more accurately reflect the actual 
needs of veterans as opposed to the needs of a political process for the 
budget.
    Is it time, Mr. Secretary, for a format similar to Chris Smith's bill, to 
say nothing of veterans' health care being mandatory spending?
    Secretary Nicholson. I don't think that I can answer that right now, Mr. 
Bradley.
    I'm not familiar enough with how that panel would work and what would be 
the juxtaposition of that with the, you know, the constitutional process and 
the legislative process.
    I will say I'd be interested in taking a look at it. I don't know much 
about it.
    Mr. Bradley. Well, and I would just leave you with this thought -- thank 
you, Mr. Chairman, for your indulgence -- that first of all, I think we all 
should appreciate the clarity of the answers that you gave to my colleague 
from Maine, whose district adjoins mine, that you're going to work with us 
on a quarterly basis to make sure that the information that we have is up 
to date, that you'll work with us in a bipartisan fashion, and that the 
information that you have will be our information.
    And as part of that, I think it would be appropriate as we continue with 
these discussions of how to resolve the 2006, the 2007, and beyond budgets, 
that you also look at Mr. Smith's proposal.
    I think it was a very interesting proposal, somewhat modulated back from 
mandatory spending, but one that would hopefully remove some of the political 
process out of veterans' health care spending and something that certainly 
might be something that would be a model for how to proceed.
    Mr. Brown of South Carolina. Let me just say thank you, Mr. Bradley, for 
your leadership on this Committee, and in particular on the Budget Committee, 
you and Ms. Brown-Waite, and that was a good amendment you were able to  
incorporate.
    The gentlelady from South Dakota, Ms. Herseth.
    Ms. Herseth. Thank you, Mr. Chairman.
    Mr. Secretary, I'd like to reiterate Mr. Bradley's comments as well as 
others on the Committee in thanking you for your very distinguished military 
service -- your record speaks for itself -- as well as your service as 
Secretary over the last number of months, and your work to address these 
challenges we're identifying today.
    Just a couple of questions, some followups, but one I'd like to start out 
with, just in terms of accessibility of various information.
    Because of the concerns that many of us have had about the potential 
budget and funding shortfalls, Mr. Evans sent a survey to the VISNs about 
the budget, and its' our understanding that the surveys have been completed 
by the field, but they're stuck in Central Office.
    Would you please make a priority the return of the survey information to 
us as the field reported?
    Secretary Nicholson. Yes.  That is sitting on my desk, and I have looked 
at it, and I need to review that.  But I would anticipate being able to get 
that to him soon.
    Ms. Herseth. That would be helpful.
    I know you've heard some anecdotal evidence here from various members of 
the Committee about what's happening in their districts at various facilities, 
so it would be nice to see what trends and patterns might be out there to 
better address their concerns and their service to the veterans.
    We've talked in last week's hearing about some of the shortfalls of the 
modeling.  Have there been discussions either back when we were preparing the 
2005 request or as we have done so now for 2006 and as the VA is preparing to 
do for 2007, as it relates to, you know, the 28-to-30 percent of the shortfall 
that's based on OIF and OEF?
    Have you talked specifically about not only the projected mental health 
care needs but the fact that because of the quality of the emergency care in 
the field, that thankfully we have a higher rate of survivorship among the 
soldiers, has that been part of the modifications that may be integrated into 
the modeling?
    Secretary Nicholson. Yes, it has.
    Again, the war is a new phenomenon to the model, and certainly for 2007, 
which is what we're really in the middle of right now, it's a very germane 
category, and we're trying to understand that as best we can, and we certainly 
are aware of that phenomenon that you've cited, which is we have relatively more 
casualties than fatalities, and that most of those will eventually take off 
their uniform and become veterans and be in our system.  Yes, ma'am.
    Ms. Herseth. And then let me move to what you've provided in the breakdown, 
and go to the next very large number of the $975 million, because I have a 
particular interest, even outside of the work on this Committee, on the costs 
associated with long-term care, and long-term care costs being a ticking time 
bomb in our entire health care system in this country.
    So specifically, and we're talking about the VA system, can you describe, 
either you, Mr. Secretary, or Dr. Perlin, a little bit more about these two 
segments here on VA long-term care, why it is that the modeling is so 
underestimating the cost of the long-term care for the veterans?
    Secretary Nicholson. I'll ask Dr. Perlin to respond to that.
    Ms. Herseth. Okay.
    Dr. Perlin. Thank you very much for the question.
    There was a technical error in preparation of the 2006 budget on long-term 
care.
    Historically, there has not been actuarial data to model long-term care.
    We now contract with Duke University, and they're developing more reliable 
estimates to develop actuarial modeling, and just as previous discussion 
suggested, things that aren't modeled should be modeled to improve accuracy, 
long-term care will be incorporated into our modeling and budget projection.
    So in short, the two elements are, one we're going to actuarial 
projection, and two, there was a technical error that underestimated the 
resource need, and that's being rectified with this.
    Ms. Herseth. I appreciate the response.
    And if you might be willing to share with the Committee the results of 
your ongoing discussions and work with Duke University, so that we're better 
informed as to what the actuarial modeling will be that they're doing, that 
might actually help us in some of the other work that we're doing on other 
health care related issues in Medicaid spending and elsewhere to deal with 
long-term care costs.  We would appreciate that.
    Thank you, and I'll yield back.
    The Chairman. Thank you, Ms. Herseth.
    Mr. Strickland, you're recognized for five minutes.
    Mr. Strickland. Mr. Secretary, I also want to join others who have thanked 
you for your service to our country.
    As I said in my opening statement, I did not wear the uniform.  I know our 
Chairman has, and does, and others have.
    And so I hope that nothing that we say here that could be viewed as 
critical of the VA or the administration of the VA would in any way reflect 
upon our admiration for the service that you and others have provided to the 
country.
    Dr. Snyder's questioning sort of intrigued me a little earlier, when he 
was talking about the modeling, and can you say to me, or perhaps you weren't 
here at the time, Dr. Perlin, can you say to us as a Committee that the 
recommendations that have come to this Committee from the administration have 
been at least as robust as that suggested by the modeling, or even more 
robust?
    Can you tell us that?
    Dr. Perlin. Yes, the model is incorporated.
    As I mentioned earlier, the three elements of the budget are the model 
items, the non-model items, including CHAMPVA, prosthetics, long-term care, 
state home per diems, and then policies on top of that.
    Mr. Strickland. The reason I ask the question is that, you know, it seems 
that much of the blame for the condition that we find ourselves in now is 
being attributed to faulty modeling, and so the question that I would ask is, 
have we received, as a Committee, budget requests that are at least as robust 
as would be suggested by the modeling?
    Secretary Nicholson. I'm going to respond, Congressman, and then invite 
either of my colleagues to comment.
    I was not here during that formulation.
    Mr. Strickland. I know you weren't, Mr. Secretary, and I appreciate that.
    Secretary Nicholson. But I feel comfortable in saying that the answer is 
yes, because what has happened is that we've had a real growth spurt, and 
while it has put more load on the VA system, and it perforce is costing more 
money to us, it's also -- and this is a very positive aspect of this whole 
discussion that we're having, I think -- is that people are coming to our 
facilities in ever greater numbers, and they're coming because -- 
    Mr. Strickland. I understand.
    Secretary Nicholson. -- we're doing a good job.
    Mr. Strickland. I understand that.
    But what I don't understand is that Secretary Principi sat there and he 
told this Committee that he had requested I think $1.3 billion more than came 
to this Committee from the President's budget.
    Now, was Secretary Principi just simply pulling a number out of the air, 
or was the Secretary's request to the President in line with what the modeling 
suggested was needed, and did OMB or others decide that was just more money 
than they were willing to spend?
    That's the question, and I think it gets to something very basic here as 
we're trying to sort through this.
    Dr. Perlin, could you answer that?
    Dr. Perlin. In my involvement with this, the model data are used in their 
entirety.
    Mr. Strickland. I'm sorry, sir?
    Dr. Perlin. In my experience with this, the model is taken, and as I 
indicated, there are three elements of the budget going together.
    Mr. Strickland. If I can just understand, what I think I'm hearing here is 
not a clear answer.
    What I'm hearing is that the administration may be looking at the model or 
the modeling process as an excuse for what we find here today when other 
factors were considered, at least two other factors, rather than simply the 
modeling projections.
    So maybe we should be, rather than just scrutinizing the effects of the 
modeling on our current situation, maybe we should look at the other factors, 
as well.
    One more question, quickly, because my time is almost up.
    Mr. Secretary, for the last two budget periods at least, the President has 
sent a budget where he's listed management efficiencies as a way to save 
money.  He's also asked for an annual user fee to be imposed upon veterans 
as a way to get more resources, an increase in cost of prescription drugs, 
and the exclusion of hundreds of thousands of Priority 8 veterans.
    My understanding is that you're assuming these cost savings in your future 
budget projections.  That's just not going to happen.  This Congress is not 
going to go along with the President's desire to do these -- you know, to 
impose these costs.  So how do you factor that into the model?
    I mean, the Congress has said on at least two budget periods that they're 
not going to do this, and we keep getting that from the administration.
    Do you expect that that is likely to be dropped from future budget 
considerations, or are we going to -- I think it's sort of playing a game, 
because it's not going to happen. It's very clear that the Congress is not 
going to tolerate it.
    Secretary Nicholson. I couldn't speculate further out, Congressman, but I 
think for the 2006 budget, where they were in there as requested, they will 
not be approved.  They did anticipate revenue, so that revenue will need to 
be replaced because they will not be enacted for 2006.
    Mr. Strickland. Thank you.
    Secretary Nicholson. Mr. Chairman?
    The Chairman. Yes, Mr. Secretary.
    Secretary Nicholson. I would request, if I could, a recess of just a 
couple of minutes.  I need to walk down the hall.
    The Chairman. I understand.  The Committee will stand in recess for five 
minutes.
    [Recess.]

    The Chairman. The chair recognizes Ms. Hooley for five minutes.
    Ms. Hooley.  Thank you, Mr. Chair.
    I also want to thank the Secretary for appearing here today and for your 
service.  We do appreciate that.
    I have some comments and some questions.
    I think you've told us that patient care was not being affected by the 
shortfall this year, but we've seen recent reports that detail that, in fact, 
patient care has been affected.
    And again I'll use the example of Portland VA Hospital, which now is 
delaying all non-emergency surgery by six months; it's eliminating beds 
because it's short 150 staff; they needed 13 million in equipment and got 2 
million.
    How do you explain this contradiction?
    Secretary Nicholson. I'll ask Dr. Perlin to respond.
    Ms. Hooley.  Thank you.
    Dr. Perlin. Thank you, Congresswoman, for that question.
    I'm aware of some of the challenges that have occurred at Portland.  There 
has been a turnover of senior management in the network.
    And I, in fact, working with Max Lewis, who in fact I'm sparing from our 
Central Office here, to make sure that the services are delivered more timely, 
more effectively, more reliably.
    Ms. Hooley.  Thank you very much.
    And again, the people that are in the system and are being taken care of 
think they get a great treatment.  It is the waiting lists and elimination of 
beds, and that waiting list keeps getting longer and longer.
    Mr. Secretary, I just have a question, because I don't understand this.
    If you knew about the shortfall in April, why did it take you two months 
to let us know?
    Secretary Nicholson. Well, as I've testified, Congresswoman, I -- I, 
actually in March -- March -- sent a letter to the Chairman of the 
Appropriations Committee, and I sent, April 5th sent a letter to the Chairman 
of the -- of the Appropriations Committee in the Senate indicating that the 
trends were up and that we were looking at reallocating resources to cover 
this.
    Dr. Perlin testified in the Senate on April 7th, responded with a post-
hearing letter on April 12th, acknowledging that we were making shifts for 
operational needs in health care delivery.
    April 19th, we briefed here on this.  April 21st, I met with the director 
of the OMB on this subject.
    Ms. Hooley.  Mr. Secretary, can we get those letters?  Because at least I 
didn't receive the letter and didn't know about it.
    So I don't know about the rest of the Committee members, but if we could 
get that letter, I'd really appreciate it.
    You know, the talk about modeling, I have a little experience in that, not 
much, but I know it depends -- a model depends on what information goes into 
the model.
    And when I got this list, I was actually sort of blown away by the fact 
that the 2005 -- and again, I know you've only been here a short time.  I 
know how hard it is to take over in a new spot in the middle of a budget 
season.
    But to not forecast the impact of extending -- extended continuing 
operations in Iraq and Afghanistan, both for 2005 and 2006, I mean, that just 
sort of blows me away.
    I mean, this is -- the war is the elephant sitting in the middle of the 
room.  How could we not have put that into our model?
    Anyone that wants to answer.  I'm just -- 
    Secretary Nicholson. Well, I'll take another crack at it.
    Ms. Hooley.  Okay.
    Secretary Nicholson. Because again, this lag time in developing budgets in 
this system -- as I said we're working on 2007 now and we're modeling 2004 
data.
    So when we were doing 2005, we were modeling 2002. There was no Operation 
Iraqi Freedom.
    Ms. Hooley.  You may have been -- 
    Secretary Nicholson. But we monitor, we monitor as we're into the year.  I 
mean, we're not just sitting there thinking that this, you know, this is 
somehow all going to magically work.  This is monitored.
    And through the first six months of this year, it was operating, it 
operating right on the plan, and it wasn't -- I mean, you could see, you know, 
some trends that we were looking at in our monthly reviews, but it was 
basically in the framework.
    Ms. Hooley.  Right.  But we knew how many people were over there and when 
they were coming back.  I'm just surprised it wasn't in there.
    I have one quick last question, because I know my time is running out.
    This is a followup to Ms. Brown's question, from Florida.
    We were told last year that we were $1.3 billion short.  I offered an 
amendment, several people have offered amendments to backfill that $1.3 
billion.  The Senate asked for a $1.5 billion.  You've come to us with $975 
million.
    I'm -- why didn't you ask for the $1.5 billion?  I'm really concerned that 
what you asked for is so tight and then if there's any slippage or any 
shortfall, you'll be back again.
    I mean, why didn't you ask for the $1.5 billion?  Is there a reason?
    Secretary Nicholson. Well, we asked for what we've calculated that we're 
going to need to get through the end of fiscal 2005, which is another 90 days.
    As to 2006, which starts, as you know, on October 1st, we are asking for a 
million six, approximately a million six -- billion -- in addition to or on 
top of the netting out of those legislative proposals that we've asked for 
and that, as we've discussed, will probably not be approved.
    If they're not approved, that's another $1.1 billion that we will need.
    Ms. Hooley.  But again, you can always carry over that money.
    I guess my concern is, when we knew last year that we were $1.3 billion 
short -- 
    Secretary Nicholson. For 2005?
    Ms. Hooley.  We knew that we were short that amount of money, at least 
according to the former Secretary.
    I'm through with my questions.  Thank you, Mr. Chair.
    The Chairman. Thank you, Ms. Hooley.
    Ms. Berkley, you're now recognized for five minutes.
    Ms. Berkley. Thank you, Mr. Chairman.
    I think I could say without fear of contradiction that this hearing has 
not been the high point of my congressional career.
    When Mr. Snyder mentioned that in February when I gave my opening 
statement we calculated that there was an $800 million shortfall, I can 
assure you that I am not a financial genius, I don't have a modeling 
background, my staff is young and doesn't have a background in budgets, but 
we were able to look at the submission, we were able to look at the needs 
and look at what was going to be cut in anticipation of the budget request, 
and come up with a number that turns out to be pretty accurate.
    And if we could figure that out, it would seem to me, with all of the 
expertise and knowledge in your department, that you could have taken a good 
look at that and realized that we had a serious shortfall far sooner than you 
acknowledged.
    I've got a piece of paper here that I'd like to submit for the record that 
demonstrates that the VA underestimates health care workloads every year, and 
it shows here what the VA submission is, and then the bar next to it has the 
actual figures.
    And in 2002, 2003, 2004, and 2005, the submission is always far below the 
actual.
    So I would figure, after this happens time and time again, that we would 
figure out how to do this better, and we need to do this.
    I hope you take a look at this, and I would like to submit it for the 
record.
    [The information appears on p. 101]
    Ms. Berkley. I'd also like to submit, and I hope that you read this too, 
it's: "A War of Disabilities - Iraq's hidden costs are coming home," by Ronald 
Glasser, and it talks about what to expect when our soldiers come back and 
they are veterans, and what they are going to need from their government, 
both in health care and medical and mental health care.  That's something 
we need to take into consideration.
    [The information appears on p. 102]
    Ms. Berkley. The information is there.  I am sure the VA has it, and we 
need to take it into account when you come before us with requests for 
funding for our veterans.
    I have many interests when it comes to veterans.  I concentrate on what's 
important to my district, because that's my job and I'm the only person here 
that would forward the interests of the veterans in southern Nevada.
    I know on Tuesday, in front of the Senate Committee, you responded to 
Senator Ensign from Nevada's question discussing plans for a veterans' medical 
complex in Vegas and the funding for the construction of this facility, which 
is in the 2006 budget, and you assured him that it will not be affected by the 
department's shortfall.
    Can you give me that assurance on the record here today, so we have it in 
both Committees, on both sides of the aisle, and in both houses?
    Secretary Nicholson. Yes, ma'am.  For the 2005, the cycle that we're still 
in, we have architecture and planning in there, $60 million, and as you know, 
that's underway, and that is not in jeopardy, and for 2006, there's $200 
million.
    Ms. Berkley. $199 million.
    Secretary Nicholson. And hoping to be able to start construction by 
probably late, late in that fiscal year, and get that project done.
    Ms. Berkley. I thank you for that.
    And with all due respect, and I know your background and it's truly 
exemplary and extraordinary, I think you need to know more about the 
department that you are heading when you come back and testify again to this 
Committee, and I say that with all due respect.
    Thank you.
    The Chairman. Thank you, Ms. Berkley.
    Mr. Secretary, one thing that we haven't discussed here today, it's the 
accounts receivables. We will have a follow-on, we will continue our oversight 
with regard to the methodology of the health modeling.
    I know that on June 10th there was a briefing for the majority and 
minority staff whereby we were informed that the accounts receivable as of 
that date were in excess of 600 million.
    Can you tell me what the number is today, and how the accounts receivable 
were taken into consideration with regard to the request that you had made to 
me earlier in this hearing?
    Secretary Nicholson. I'm going to call on staff for the specific numbers, 
Mr. Chairman, and proceed with an overview.
    There's a real emphasis on increasing our collections.  I think that it's 
also worth noting that the department has done a pretty exemplary job in 
recent years in going from collecting very little to now collecting in excess 
of $2 billion, I think.
    There are difficulties in this, systemic difficulties which we're also 
working on, particularly on the IT side of our endeavor, because the hospitals 
have dissimilar back office procedures.
    Each of these hospitals, it seems like, has sort of grown up on its own, 
and they're not as standardized as they need to be, and that is a goal of 
mine, is to enhance that so that the IT part that's needed to refine this 
system of collections can be put in place, but I don't want to minimize the 
difficulty and challenge of that because of the dissimilar systems that 
seems to be in each of these hospitals.
    Having said that, let me call on Dr. Perlin to try to respond to you 
specifically.
    Dr. Perlin. Thank you, Mr. Secretary.
    Mr. Chairman, just as the Secretary said, this year the total collections 
are approaching almost $2 billion.  The goal is 1.879.  This reflects double 
digit growth for each of the past years.  In fact, it's up 200 percent since 
fiscal year 2001 when it was really less than $600 million.
    But our ability to collect is improving.  We'll benefit from the 
information systems.
    I need to get back to you with the exact number on the accounts receivable 
that is outstanding, I believe.  Mark Loper, our chief business officer, would 
have that at hand.
    The Chairman. Would you concur that the number that was briefed to 
minority and majority staff, that it's in excess of 600 million, is still 
accurate, and the number could even be larger?
    Dr. Perlin. I'd have to get back to you.  I would be remiss in 
speculating, in terms of not knowing exactly what debt is truly collectible 
and what debt is not good debt.
    The Chairman. All right.  I'm not interested in quibbling with you, Mr. 
Secretary, nor your staff.
    We recognize that, you know, when we say with regard to the uncollected 
third party debt, ranges between 1 billion and 3 billion are a pretty wide 
variance.  And we don't even know what the total universe is to be collected.
    So Dr. Perlin, and Mr. Secretary, and the general counsel, the three of 
you, we are trying to be helpful to you.
    So in cooperation with the appropriations staff, you know, we did the 
pilot out in Ohio, and now this Committee recently just passed a second pilot, 
competitive pilot for you to improve this.
    Mr. Secretary, when you mention the IT, we want, and as a matter of fact 
are sending you dollars to the business office so that you can do the redesign 
of the business processes on collection.
    Obviously, in your modeling, you also do your accounts receivables, and if 
we're going to move into this era of the 7s and 8s and caring for the veterans 
for non-disabled illnesses and injuries, we have to be able to collect those 
monies, because Congress said that we will open up the system based on the 
need and the means.
    And so in your modeling, if you're saying, ``Well, we think that we're 
going to be collecting this money,'' and now we've got 600 million or more 
that's not even being collected -- wow!  I mean, we have problems in there 
business process systems which have to be corrected.
    So with regard to this legislation on the second pilot, to the general 
counsel, to please proceed at all due speed would be my request of you, and 
Mr. Secretary, if you have any follow-on that you would like to make on 
accounts receivables, I would ask your comments.
    Secretary Nicholson. We'll get back to you as quickly as possible on the 
specific answer to that 600 million.
    The Chairman. All right.  If you're able to do that in the next several 
hours, please contact my staff so I can be in touch with the Appropriations 
Committee.
    Mr. Secretary, I apologize that I had to leave the room.  I took your 
request of a supplemental appropriation, and notified the leadership.
    I've spoken with Chairman Walsh.  They are drafting the legislation.  I am 
most hopeful that sometime before we break on this July recess that Congress 
will act upon your request.
    Secretary Nicholson. Thank you, Mr. Chairman.
    The Chairman. And we will do that.  I appreciate you coming before the 
Committee.  I appreciate, Dr. Perlin, your candor in response to this last 
week and the work that you've done with this in the meantime.
    And Mr. Secretary, you also were picking up the same evidence that every 
member of this Committee was with regard to our own VA hospitals and our 
veterans.
    I know you proposed workaround solutions.  You were trying to see if you 
could do it within your budget.  I respect you for your leadership to come 
before this Committee and to make this request for a supplemental 
appropriation, and we will be acting on it hopefully today.
    Mr. Michaud. Mr. Chairman?
    The Chairman. Yes?
    Mr. Michaud. If I understand you correctly, we're going to request the 
amount that's on this sheet?
    The Chairman. The 975 million, yes.  The only thing that may change is, I 
need to talk about this accounts receivable question.
    Mr. Michaud. Okay.  My second question, Mr. Chairman, looking at the sheet 
the department passed out, it looks like they cut off something over here when 
they Xeroxed this off, and I'm just wondering, since the department requested 
additional funding for 2006, if that is the case, can we -- 
    The Chairman. I asked for that to be copied, and they had notes written on 
the side.  I said, "I don't want your notes, just give me what you can right 
now."
    Mr. Michaud. Okay.  Since they have requested for 2006, can we get 
categories similar to this from what the additional -- 
    The Chairman. They have not, as far as I know. We are going to work with 
the administration with regard to an 2006 budget amendment, so what was done 
today will be the supplemental on 2005.
    Mr. Michaud. Yes, what's done for today, but my -- 
    The Chairman. Today a supplemental appropriation, I'm hopeful, will be 
done for fiscal year 2005 in the amount of 975 million.
    We will continue to work with the administration with regard to a budget 
amendment which they will submit to us, that could occur in July or in 
September, and that's why this Committee will continue its further oversight 
with regard to this modeling and methodology on how we get this right.
    We're going to get it right.
    Mr. Michaud. But my question is, they had mentioned that it appears that 
in 2006 they're going to be short $1.6 billion.
    Under that assumption, they must know where that shortfall is going to be.
    And I guess my question to you is, could we have them -- and it might 
change -- could we have them provide us where their assumption currently is?
    The Chairman. We're going to continue that dialogue, Mr. Michaud, and I'll 
assure you you'll be a part of that process.
    Ms. Herseth?
    Ms. Herseth. Mr. Chairman, thank you.
    Just a quick followup before we adjourn, to Dr. Perlin, based on some 
questioning I was -- 
    The Chairman. Without objection.
    Ms. Herseth. -- on long-term care.
    The Chairman. One question.
    Ms. Herseth. You had mentioned that the projections were off for long-term 
care because of a technical error, and so if you might, in addition to what I 
requested about what you're working on with Duke University, if you could 
provide the Committee and staff with a copy of the long-term care projections 
for 2006 and for 2005, given that's what we were talking about earlier, given 
that that's a substantial part of the shortfall, that would be appreciated.
    Thank you.
    The Chairman. I just want to make sure.
    You concur with the actions of the Committee here for us to focus on the 
redesign of the business processes to capture the total universe on these 
collections and to move at due speed, correct?
    Secretary Nicholson. Oh, yes, sir.  Indeed, we welcome your support.
    The Chairman. All right. Very good.
    [The statement of Hon. Luis V. Gutierrez appears on p. 81]
    The Chairman. This hearing is concluded.

    [Whereupon, at 1:10 p.m., the Committee was adjourned.]
    

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