[Senate Hearing 109-72]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 109-72
 
                   PROPOSED FISCAL YEAR 2006 BUDGET

                          FOR DEPARTMENT OF

                       VETERANS AFFAIRS PROGRAMS

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS

                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 15, 2005

                               __________

       Printed for the use of the Committee on Veterans' Affairs


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                     COMMITTEE ON VETERANS' AFFAIRS


        .........................................................


                    Larry E. Craig, Idaho, Chairman
Arlen Specter, Pennsylvania          Daniel K. Akaka, Hawaii, Ranking 
Kay Bailey Hutchison, Texas              Member
Lindsey O. Graham, South Carolina    John D. Rockefeller IV, West 
Richard Burr, North Carolina             Virginia
John Ensign, Nevada                  James M. Jeffords, (I), Vermont
John Thune, South Dakota             Patty Murray, Washington
Johnny Isakson, Georgia              Barack Obama, Illinois
                                     Ken Salazar, Colorado


                  Lupe Wissel, Majority Staff Director
               D. Noelani Kalipi, Minority Staff Director




                            C O N T E N T S

                              ----------                              

                       Tuesday, February 15, 2005

                                SENATORS

                                                                   Page


Craig, Hon. Larry E., U.S. Senator from Idaho....................     1
Akaka, Hon. Daniel K., U.S. Senator from Hawaii..................     3
Rockefeller IV, Hon. John D., U.S. Senator from West Virginia....     4
Murray, Hon. Patty, U.S. Senator from Washington.................    44
Thune, Hon. John, U.S. Senator from South Dakota.................    45
    Prepared statement...........................................    46
Obama, Hon. Barak, U.S. Senator from Illinois....................    47
Jeffords, Hon. James M., U.S. Senator from Vermont...............    48
Salazar, Hon. Ken, U.S. Senator from Colorado....................    48

                               WITNESSES

Nicholson, Hon. James, Secretary, Department of Veterans Affairs.    50
    Prepared statement...........................................    53
    Responses to written questions submitted by:
        Craig, Hon. Larry E......................................     6
        Burr, Hon. Richard.......................................    29
        Rockefeller IV, Hon. John D..............................    32
        Jeffords, Hon. James M...................................    39
        Salazar, Hon. Ken........................................    41
Perlin, Dr. Jonathan, Acting Under Secretary for Health Benefits, 

  Department of Veterans Affairs.................................    62
Gaytan, Peter S., Director, National Veterans Affairs and 
  Rehabilitation 
  Commission, The American Legion................................    75
    Prepared statement...........................................    76
Fuller, Richard B., National Legislative Director, Paralyzed 
  Veterans of America............................................    86
    Prepared statement...........................................    88
Violante, Joseph A., National Legislative Director, Disabled 
  American 
  Veterans.......................................................    90
    Prepared statement...........................................    91
Cullinan, Dennis M., Director, National Legislative Service, 
  Veterans of 
  Foreign Wars of the United States..............................    95
    Prepared statement...........................................    96
Jones, Richard, AMVETS National Legislative Director.............   100
    Prepared statement...........................................   102

                                APPENDIX

Alvarado-Ramos, Lourdes E., President, National Association of 
  State 
  Veterans Homes, prepared statement.............................   113
Corey, Thomas H., National President, Vietnam Veterans of 
  America, 
  prepared statement.............................................   117


                    PROPOSED FISCAL YEAR 2006 BUDGET



                       FOR DEPARTMENT OF VETERANS



                            AFFAIRS PROGRAMS

                              ----------                              


                       TUESDAY, FEBRUARY 15, 2005

                      United States Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
room SR-418, Russell Senate Office Building, Hon. Larry Craig 
presiding.
    Present: Senators Craig, Burr, Thune, Akaka, Rockefeller, 
Jeffords, Murray, Obama, and Salazar.

               STATEMENT OF HON. LARRY E. CRAIG, 
                    U.S. SENATOR FROM IDAHO

    Chairman Craig. Well, good morning, everyone, and welcome 
to the Committee on Veterans' Affairs here in the U.S. Senate. 
Secretary Nicholson, welcome back. Your first experience here 
was a positive one. We will at least try to keep it level 
today; how is that?
    It is a pleasure to welcome you and your staff and the 
veterans service organizations who are scheduled to testify 
this morning at this most important hearing. The subject of 
today's hearing is the proposed VA budget for fiscal year 2006. 
We will hear testimony from Secretary Nicholson and his senior 
VA officials who have accompanied him here today. Then, we will 
hear the views of five veterans service organizations on these 
budget proposals.
    Before we turn to the important business, I will note that 
while this is the Committee's third hearing of this year, it is 
the first in which we have the opportunity to hear formal 
testimony from the veterans service organizations, and I want 
to welcome the representatives of the American Legion, the 
Veterans of Foreign Wars, the Disabled American Veterans, the 
Paralyzed Veterans of America, and AMVETS, who are here with us 
this morning. Ladies and gentlemen, thank you for being here. I 
do look forward to working with you as we advance the interests 
of our Nation's veterans.
    I stated in this room a couple of weeks ago at Secretary 
Nicholson's confirmation hearing that I expected the fiscal 
environment this year to be considerably less friendly than it 
was during the flush years of the past four. Ladies and 
gentlemen, that prediction seems to have been borne out. 
Compared to prior years, this proposed budget is lean, 
particularly in the area of proposed medical care funding. But 
I do hasten to add that compared to other agencies, which have 
to endure significant cuts in funding, the veterans seem at 
this time to be better off.
    But clearly, the proposed funding increases for VA, 
particularly in the medical care area, are small. Equally 
clear, by themselves, they will not be sufficient to allow VA 
to continue to operate as it has. I think all will agree that 
the VA will need medical care funding that exceeds its 
requested appropriations increase if VA is to maintain current 
levels of service.
    With one major exception, which I will discuss in a moment, 
VA does not propose cutbacks in services; indeed, it projects 
that it will treat more veterans in fiscal 2006 than it did in 
fiscal 2005. VA also projects that it will provide more and 
better medical services in 2006 than it did in 2005 under the 
proposed VA budget. For example, improve veterans access to 
mental health care and homeless treatment services; eliminate 
long-term care co-payments for former prisoners of war; provide 
greater assistance to defraying emergency care expenses borne 
by VA enrollees at non-VA emergency rooms and increase funding 
for non-institutional long-term care services.
    So the question this year is this: how can the Congress 
fill the gap between what the VA requests in the form of 
appropriated funding and what the VA needs in order to provide 
the services that we want VA to provide? Here is what the 
Administration is suggesting: it suggests that it will improve 
efficiencies and streamline operations, thereby saving about 
$590 million.
    It states that it will collect an additional $211 million 
in fees, reimbursements, under legal authorities that currently 
govern the VA. It states that it will collect an additional 
$424 million in fees if Congress authorizes it to require more 
cost-sharing by higher-income vets who are not service 
disabled. The fees VA proposes are, one, an enrollment fee of 
$250 per year to be paid by priority 7 and 8 veterans, and two, 
an increase in prescription drug co-pay to $15, to be paid by 
the same group of veterans.
    Finally, VA proposes to save $606 million in the provisions 
of VA-provided or VA-financed institutional long-term care by 
narrowing the universe of veterans to whom such care would be 
provided. VA proposes that in the future, such care would only 
be provided to disabled veterans. It also proposes that 
Congress repeal the requirement that VA maintain nursing home 
care bed capacity at the 1998 levels.
    These four proposals would, according to VA, yield savings 
and generate revenues exceeding $1.8 billion, an amount that VA 
says would bridge the gap between what it needs and what it 
asks for. Of course, the implementation of two of VA's 
proposals: increased management efficiencies and increased 
collections under current legal authorities require no 
Congressional action. We will expect in any and all cases that 
VA implement these changes.
    The question that remains, then, is this: will Congress 
approve VA's cost-sharing proposals and its proposal to limit 
nursing home care to service-connected veterans? I, for one, 
will reserve judgment on that until I have heard all of the 
testimony. I do emphasize this, however: I have been told that 
in the past, such proposals have been declared dead on arrival, 
perhaps even before testimony was heard, and such proposals 
were finally analyzed.
    I do not intend to take that approach with respect to these 
proposals or any other proposals. One of the advantages of new 
leadership in this Committee is that proposals to do different 
things at VA should receive a fresh view, and I intend to 
consider these proposals afresh. I intend, as well, to fairly 
consider alternatives to these proposals, including the 
alternative that VA be provided more appropriated funds than it 
has requested.
    Unfortunately, I must warn all, as I did at Secretary 
Nicholson's confirmation hearing, that it may be unrealistic to 
anticipate this sort of funding increases that VA has enjoyed 
in recent years. If we cannot secure these increases, we may 
have to consider other alternatives and identify the 
alternatives that ensure that we properly care for the most 
worthy and the most needy of our veterans.
    Again, I would like to welcome the witnesses. Before I do 
that, I have been joined by several of my colleagues, and let 
me turn first and foremost to Senator Danny Akaka, the Ranking 
Democrat on this important Committee, for his observations and 
comments he would wish to make.
    Danny.

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

    Senator Akaka. Thank you very much, Mr. Chairman.
    I really look forward to working with you on this Committee 
and also with the Secretary and the Department of Veterans 
Affairs. I want to extend my welcome and, where I come from, my 
aloha to the Secretary, and I must confess, Mr. Secretary, you 
look good, and I hope I can say that at every hearing we have 
with you, and I expect that to continue. Less than 1 month ago, 
you stood before this Committee at your confirmation hearing, 
and today, you are called upon to present and to defend the 
President's budget for VA. And I look forward to a good 
discussion with you and with the veterans groups represented 
here today.
    This budget is presented as, and I quote, the best we can 
do in a tough financial climate, end quote. In my view, 
especially in a time of war, with so many competing demands, we 
can, and we should do much, much better. I have a number of 
concerns that I will discuss today and will work on it in the 
weeks ahead as we seek to shape the Department's budget for 
next year.
    There is much in this budget that is, let me say, 
misleading. What we seem to have is agreement on a certain 
level of funding, but not a commitment to appropriate that 
amount. Let me say at the outset that our starting point on the 
health care side makes our work especially difficult. There can 
be little doubt that the proposed funding for medical care is 
below the amount needed to fund current services, let alone to 
improve mental health and long-term care, and it is certainly 
not enough to provide the best care for returning 
servicemembers.
    Rather than providing sufficient funding, this budget calls 
upon veterans to shoulder the cost. We are presented with 
recycled proposals to double the drug co-payment and to charge 
a yearly enrollment fee for veterans who simply want to use VA 
care. Let me set the record straight about the types of 
veterans who would be shouldering these costs: these veterans 
are not affluent, as they have been described. They are 
veterans living in States like Hawaii where the cost of living 
is one of America's highest. We are talking about veterans 
making as little as $26,000 a year.
    The proposed cuts to long-term care are especially 
troubling. The Administration not only intends to freeze grants 
for the construction of State veterans homes, but to cut the 
daily funding for these homes. The State home program has been 
described by members of both parties as incredibly cost-
effective. Still, we have an idea on the table that imperils 
the very existence of these homes.
    The President's solution to making room for returning 
servicemembers is to literally force other veterans out of the 
system. This is short-sighted, as the proposed cuts will surely 
affect Iraq and Afghanistan veterans once the 2-year window of 
automatic VA care closes. Due to the punitive proposals in the 
budget and the fact that 2 years is simply not enough time for 
guaranteed VA care, I will be working to extend the time period 
for automatic VA care. Many health problems that can result 
from service do not surface until many years later, as we know 
it, including post-traumatic stress disorder and other mental 
illnesses.
    With regard to the VBA budget, the additional 112 
compensation staff are a 1-year only increase. VA has stated 
that it will look for solutions if work load rises higher than 
the 3 percent estimated. I am hopeful that VA can manage an 
increased work load from benefit delivery at discharge claims, 
possible legislation, or court decisions, but would urge 
caution because we have seen in the past that VA does not 
always absorb changes in law and new business processes without 
going into a nosedive.
    I will continue to monitor VA's workload and rating output, 
because our veterans deserve nothing less than their claims 
rated accurately and in a less reasonable amount of time. 
Again, welcome to all of you here today, and I look forward to 
our work on behalf of the Nation's veterans in the weeks and 
months ahead, as our Committee continues in our efforts to get 
a much better fiscal year 2006 budget for veterans programs.
    Thank you very much, Mr. Chairman.
    Chairman Craig. Senator Akaka, thank you.
    We have been joined by a variety of our colleagues. Could I 
ask this admonition of all of you, in sake of making sure that 
we get to those witnesses an adequate time? As the Chairman, I 
do believe that those who attend ought to have a right to make 
opening statements, and I am certainly going to agree to that. 
But if you could, shall we say, summarize them and place them 
in the record so that we can get at the testimony of all who 
have come today and, more importantly, get at the questions 
that follow, that would be greatly appreciated.
    And if you can agree with me on that, let me move to a 
priority of those who came in, and we will handle that as they 
came in, and I will turn to Senator Rockefeller.
    Senator.

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

    Senator Rockefeller. Thank you, Mr. Chairman, and I will be 
very brief, and I also want to apologize not only to you, Mr. 
Chairman, but also to you, Secretary Nicholson. I have to go to 
a Commerce Committee hearing, which is doing transportation 
security, for which I, on my meager side of the aisle, am 
responsible, so you will forgive me if I submit my questions.
    First of all, Mr. Chairman, again, even on our second 
hearing, for me, at least, I feel your fairness and your 
evenness and your good attitude in the way you chair the 
Committee. It makes all the difference in the world to all of 
us.
    Also, Secretary Nicholson, I fully understand that while 
the budget was being prepared by others, you were not here; you 
were elsewhere, and that makes it very difficult. You know, I 
think, without my telling you that I have the highest regard 
for you, and we have had very, very good conversations. I guess 
your problem is that you are now responsible for this budget, 
even though you had nothing to do with the making of it, and 
that puts a burden on you, but it is a moral burden, and Mr. 
Chairman, I want to say that things can be changed.
    I remember once when I was Chairman of this Committee, I 
prevailed upon Vice President Gore in a not particularly 
pleasant conversation to increase the amount of funding. You 
cannot do that with OMB, but you can if you can get to either 
the President or the Vice President. It is not just Secretary 
Nicholson, but it is all of us who have to fight for this 
increase.
    I will just quickly say that the doubling of prescription 
drug co-payments and the $250 deductible, I just predict to you 
will not reach halfway to first base. I mean, it just will not. 
It has been there before; it has not gotten there before. It is 
just an automatic rejection, I think, in both houses.
    The budget does not even equal the cost of inflation and VA 
payroll, so these are important matters. The PTSD that Senator 
Akaka mentioned is huge. We do not just have the soldiers that 
we are already responsible for, but the ones who are coming 
back in enormous numbers. I would say with respect, Mr. 
Chairman, to State veterans nursing homes across the country, 
we are fortunate in Clarksburg that we have one that is 
underway, but there are a lot of States that do not, and I 
worry about that. I also worry about the commitment to research 
on what we used to call the Persian Gulf War Syndrome, which I 
guess is now called the Gulf War Veterans Illness.
    I spent about 10 years, literally, on this Committee doing 
research on Gulf War Veterans Illness. We had a special 
investigative unit; came out with all kinds of things. Dr. 
Stephen Joseph, who is still at DoD, never replied to anything 
we had to say, and I think we are being proven correct, that 
pyridostigmine bromide was a problem; other things were a 
problem. I believe that defective babies of returning soldiers 
only emphasized how serious that problem was.
    Last year, Secretary Principi pledged $60 million. $9 
million has been cut. That means a lot, because general 
research is not just a matter of research into issues, but it 
is also a question of the nature and the quality of the doctors 
who are recruited. In turn, they attract others who come, and 
as you know, 50 percent of our physicians do some training at 
the VA hospital in the course of their careers.
    There are a lot of areas, and I, like the Chairman, want to 
keep an open mind in terms of looking at alternative solutions, 
but at some point, you just cannot get around money, and that 
is where I think all of us here have a responsibility, and I 
want to work with you, Mr. Secretary, in terms of making the 
best possible outcome.
    I thank you, Mr. Chairman. Can I submit my questions to 
you?
    Chairman Craig. Without objection, your questions will be a 
part of the record, and we will submit the questions in writing 
to the Secretary.
    [The questions follow:]
Department of Veterans Affairs Responses to Post-Hearing Questions From 
                        Chairman Larry E. Craig
    Question 1. With respect to the Administration's proposal that VA 
increase prescription drug co-payments:
    A. Are these proposals the same ones that VA has made in prior 
years? Since Congress has previously declined to approve such fee 
proposals, why has the Administration submitted them again?
    Response: The proposals are similar to those previously presented. 
Eligibility reform legislation requires the Secretary to decide 
annually whether VA has adequate resources to provide timely, high 
quality care for all enrolled veterans. For several years, VA has 
proposed cost-sharing policies for Priority 7 and 8 enrollees as a 
means of balancing veteran demand for VA health care and available 
resources and ensuring that VA has the capacity to serve those veterans 
who need us most--veterans with service-connected medical conditions, 
special needs, and low incomes.
    B. How does VA know that these new fees and co-payments will 
generate an additional $424 million in new revenues? Is it possible to 
be that precise?
    Response: Milliman, Inc., a private-sector health care actuarial 
firm, produces the estimates of veteran demand for VA health care, 
including enrollment, utilization, and expenditures, that are the basis 
of the Veterans Health Administration (VHA) budget. Milliman also 
produced the estimate of the revenue expected from the enrollment fee 
and prescription drug co-payment increase. These estimates are based on 
actuarially sound assumptions regarding those enrollees who are 
expected to pay the enrollment fee and their estimated prescription 
drug utilization.
    C. You propose to increase co-payments from $7 to $15 (for each 30-
day supply of prescription medications). How did you arrive at the $15 
number?
    Response: The $15 co-payment for a 30-day supply of medication was 
considered to be a low level of cost-sharing for Priority 7 and 8 
enrollees who wished to access prescription drugs through the VA health 
care system.
    D. If the proposed increases in co-payments do become a reality, do 
you anticipate increasing the monthly and annual caps on out-of-pocket 
payments by veterans to reflect the new costs? If so, what will those 
new caps will be?
    Response: The proposed increase in the prescription co-payment 
applies only to Priorities 7 and 8. The prescription drug co-payment 
caps apply to enrollees in Priorities 2-6, not enrollees in Priorities 
7 and 8; therefore, the caps will not be affected.
    Question 2. Current law (38 U.S.C. Sec. 1722A(a)(2)) prohibits VA 
from requiring a veteran to pay an amount: in excess of the cost to the 
Secretary for medication provided to the veteran. The most recent 
information supplied to the committee showed that VA's average cost per 
30-day of medication is just under $15 (approximately $14.85). Are you 
seeking to remove from statute the prohibition on charging veterans 
more than VA's cost for prescription medications? If so, are you at all 
concerned about the prospect of turning VA's prescription drug benefit 
into a profit-making endeavor? Why should Congress allow that?
    Response: A legislative proposal accompanying the fiscal year 2006 
budget submission would allow VA to increase the prescription drug co-
payment of $15 per 30-day-supply of medication for priority 7 and 8 
veterans. Consistent with Secretary Nicholson's February 16, 2005, 
testimony before the House Committee on Veterans' Affairs, the $15 co-
payment was considered to be a reasonable cost share for veterans who 
have no compensable service-connected disabilities and do have the 
means to contribute to the cost of their care. VA does not anticipate 
making a profit on its prescription drug benefit. Only a small 
percentage of prescriptions would cost less than $15 (co-payment plus 
administrative cost). The cost of more expensive prescriptions would 
far outweigh those that are less than $15.
    Question 3. Your drug co-payment proposal would create the 
following categories of VA co-payment payers: (1) Those whose incomes 
are below the pension level (who would pay no co-payments); (2) Those 
whose incomes are above the pension level, but below the priority 7 
income ``cut off'' (who would continue to pay $7); and (3) Those in 
Priority 7 & 8 (who would now pay $15). Do you believe that VA has the 
ability to capture the correct information on which patients should pay 
which co-payments? Can you assure me that if you move forward in this 
area that indigent veterans won't start receiving drug co-payment bills 
for $15 each month for each medication he or she receives?
    Response: Veterans are presently charged medication co-payments 
based on income and eligibility status. The proposal to incorporate a 
$15 co-payment for Veterans in Priority Groups 7 and 8 does not require 
VA to establish new income analysis procedures. VA already has income 
information available and uses it for medication copayment and medical 
care co-payment determination purposes as well as for enrollment 
priority assignment. VA performs these income assessments on a regular 
basis. Indigent veterans who provide requisite financial information to 
VA will not be inappropriately billed a $15 medication co-payment as a 
result of this legislation.
    Question 4. Last year, Congress enacted the Medicare Modernization 
Act which, for the first time, provides Medicare beneficiaries with 
prescription drug coverage.
    A. Has VA conducted any assessments of the impact this legislation 
will have on the number of veterans who rely on VA health care to 
provide prescription drug coverage? If so, what has this assessment 
shown?
    Response: Milliman, Inc., the private-sector actuarial firm that 
develops projections of veteran demand for VA health care, has advised 
VA that the impact of the new Medicare drug benefit on VA enrollment, 
utilization, and expenditures is expected to be minimal. The biggest 
impact is expected to come from reductions in employer-based 
prescription drug coverage. However, the impact may not become 
significant until as late as 2016 since the most recent cutbacks have 
been for future retirees only; those eligible for retirement (over age 
55) have been grandfathered into employer's current plan. Based on 
recent estimates of retirees who could lose benefits, enrollment in VA 
health care could increase by an estimated 35,000 (less than 1 percent) 
within the 10-15 year period following the start of the Medicare 
prescription drug benefit.
    B. Does VA believe that there is a way VA can work in concert with 
Medicare on the provisions of prescription medications for Medicare-
eligible veterans? If so, has VA leadership approached the leadership 
of the Centers for Medicare and Medicaid Services to discuss and 
proposals?
    Response: VA currently provides prescription medications to 
enrolled veteran patients who are also eligible for Medicare. VA will 
continue to provide this prescription coverage to Medicare eligible 
veterans who chose VA as their health care provider, even after 
Medicare Part D is fully implemented.
    VA believes that VA and the Department of Health and Human 
Services' Centers for Medicare and Medicaid Services (CMS) can work 
together so that beneficiaries who chose to use both VA and CMS 
prescription benefits do so in a safe and cost-effective manner.
    To that end, VA Pharmacy Benefits Management staff and staff from 
the Centers for Medicare and Medicaid Services (CMS) have had 
preliminary discussions about potential VA/CMS patient safety and 
electronic prescribing initiatives.
    Question 5. VA has also proposed that it be allowed to charge an 
annual ``enrollment fee'' of $250 to Priority 7 & 8 veterans.
    A. What is the purpose of this proposed fee?
    Response: VA has proposed cost-sharing policies for Priority 7 and 
8 enrollees as a means of balancing veteran demand for VA health care 
and available resources and refocusing the VA health care system on 
those veterans who need us most. With the implementation of the 
enrollment fee, we expect that 71 percent of those using VA's health 
care system in 2006 will be veterans with service-connected medical 
conditions, special needs, and low incomes, up from 66 percent in 2004.
    B. Is it not the case that enrolled veterans who do not ``show up'' 
for VA care cost VA nothing? If these enrollees do not cost VA 
anything, what is the problem that VA is trying to solve here?
    Response: While some enrollees may not use any VA health care 
services in a given year, they have the potential to use VA health care 
services as long as they are enrolled. VA believes that the annual $250 
enrollment fee is a modest level of cost sharing for those Priority, 7 
and 8 enrollees who wish to access the VA health care system; and is in 
line with the premium of $230 paid by military retirees in TRICARE. 
Enrollees are expected to make an economic decision as to whether or 
not to pay the enrollment fee, based in large part on whether or not 
they have other health care coverage options.
    Question 6. VA's budget proposal seems to indicate that the 
proposed ``enrollment fee'' will cause nearly 'I million veterans to 
leave the rolls.
    A. Is it true that approximately 900,000 (or 82 percent) of those 
who would ``disenroll'' are not users of the system today?
    Response: It is estimated that from fiscal year 2005 to fiscal year 
2006, the implementation of a $250 enrollment fee and increased 
pharmacy copay ($15) as of October 1, 2005 would result in a net 
reduction in P7/8 enrollment levels of 1.1 M, and a net reduction in 
the numbers of P7/8 patients of 203K. These FY05 to FY06 decreases are 
``net'' decreases, as they include both projected new growth in P7 
enrollments and in P7s' usage of health care as well as projected 
declines in P7/8 enrollments and P7/8 usage due to the implementation 
of the enrollment fee and increased pharmacy copay. Of the 1.1 M net 
reduction in the numbers of P7/8 enrollees between FY05 and FY06, it is 
estimated that about 900K could be categorized as ``non-users'' of the 
VA health care system. As this is a ``net'' end of fiscal year figure, 
it includes some veterans who are enrolled now and who will later 
decide to disenroll, as well as some who have not yet enrolled, but who 
will eventually enroll and also later decide to disenroll.
    B. While I can understand why someone who doesn't use the system 
might not want to pay $250 for the privilege of just staying enrolled, 
why do you believe that nearly 200,000 users of the health care system 
would leave? Do you believe that most of these patients have private 
insurance? Or is this group predominately those without insurance who 
can't afford the new $250 fee?
    Response: About 25 percent of all Priority 7 and 8 patients have 
private coverage, and about 69 percent of all Priority 7 and 8 patients 
have Medicare. When all sources of coverage are considered, about 85 
percent of P7/8 patients have some type of health insurance coverage. 
Many P7/8 users of VA health care are largely low intensity users of VA 
health care services, such as pharmacy only, and since most of them 
have other health care options, which often include drug benefits, they 
would be inclined to disenroll rather than pay the $250 enrollment fee 
and the increased pharmacy copay.
    Question 7. Your proposals to overhaul long-term care programs are 
ambitious. VA projects that if it narrows eligibility for long-term 
institutional care services to service-disabled veterans only, the 
number of long term care beds that VA will need will drop by almost 30 
percent (from almost 14,000 to 9,795).
    A. As I understand it, VA wants to deemphasize so called 
``geriatric care'' and limit that type of service to service-connected 
and catastrophically disabled veterans. Why is that? Isn't there a need 
for geriatric care as well as ``rehabilitative'' care?
    Response: VA will continue to emphasize the provision of a spectrum 
of institutional and non-institutional geriatric and extended care 
services to enrolled veterans. However, in a time of constrained 
national resources, VA proposes to restrict the provision of long-term 
maintenance nursing home care to our highest mission priority, service-
connected disabled veterans and those with special needs not generally 
met in the community. VA's proposal is more generous than current law, 
which mandates nursing home care only for veterans who are 70 percent 
or more service-connected disabled.
    VA is projecting a substantial increase in both workload and 
funding for the non-institutional programs it supports. The average 
daily census in these home and community-based care (HCBC) programs is 
projected to rise from 30,118 in fiscal year 2005 to 35,540 in fiscal 
year 2006 (an 18 percent increase). Funding is projected to increase 
from $339 million in fiscal year 2005 to over $400 million in fiscal 
year 2006 (also an 18 percent increase). The projected increases in 
HCBC programs will serve to offset some of the reductions in nursing 
home care. HCBC is preferred by most patients and their families and is 
more cost effective than inpatient care. VA believes the proposals on 
long-term care in this budget provide an appropriate balance between 
congressionally mandated nursing home services and the national trend 
toward increased use of non-institutional home and community-based 
services in preference to nursing home care.
    B. Assuming there is a need for geriatric care, why doesn't VA want 
to meet the need? Who will meet it if VA does not?
    Response: The projected need for long-term maintenance nursing home 
care is far beyond VA's capacity to meet alone. As noted above, VA must 
focus its efforts on its core mission in a time of constrained national 
resources. The remaining need will be met by other Federal and State 
programs (e.g. Medicare and Medicaid), personal insurance and private 
payments.
    C. Please explain how you arrived at a projected bed level of 
9,795? Will that number allow you to continue to provide so called 
``geriatric care'' to the service connected and the catastrophically 
disabled who need those services?
    How many of those beds would be used for ``rehabilitative'' nursing 
care as opposed to ``geriatric'' nursing care?
    Response: VA's Long-Term Care Planning Model projects that an 
average daily census of 9,795 veterans in VA Nursing Home Care Units, 
combined with additional capacity in the community and State Veterans 
Home. programs also supported by VA, will be sufficient to provide: 
long-term maintenance care to all service-connected and special needs 
veterans who need long-term care, as well as short-term rehabilitative, 
hospice, and respite care for all priority groups of veterans who need 
short-term care. The average daily VA Nursing Home Care Unit census 
will include approximately 2,440 veterans receiving short-term care and 
7,355 receiving long-term maintenance care.
    Question 8. The State Home program, by most accounts, has been a 
successful partnership between the Federal and State governments for 
the care of aging veterans. Yet VA proposes to modify its past per diem 
payment policies--a change in policy that VA says will reduce the 
number of State home beds by more than 50 percent.
    A. Why does VA want the States to reduce the number of State home 
beds? Even if VA does not want to provide institutional care to the 
non-service-connected, why does it want to discourage States from 
meeting that need?
    Response: VA is proposing a change in per diem payment policy. VA 
is not proposing that the states reduce the number of State Home beds. 
The states are responsible for the operation and management of the 
State homes and the VA is prohibited by law from intervening in 
operation and management. However, in a time of constrained budgets, VA 
determined to focus its resources on our highest mission priority 
(service disabled veterans and veterans with specialized and short-term 
nursing home care needs). With this shift in mission, reductions were 
proposed for VA support of all three VA nursing home care programs.
    VA recognizes the proposal on nursing home eligibility has 
challenged our relationship with State Homes. However, other portions 
of the State Veterans Home Program, the per diem for the domiciliary 
facilities, hospitals, and adult day healthcare, experience no 
reductions in the fiscal year 2006 President's Budget.
    B. Under this proposal, VA would no longer pay per diems to support 
the care of poor veterans. Don't these veterans need help in meeting 
these expenses? If these patients are ``priority'' patients for 
purposes of eligibility for VA medical care, why does VA want to 
discourage the provision of this care by the States?
    Response: VA would continue to pay per diems for the highest 
mission priority veterans and remains committed to providing long term 
care to these veterans. The cost of care in a State Veteran Home varies 
by State home. Provision of coverage and financial assistance varies by 
State. Some States cover all expenses that VA per diem does not cover, 
and some costs are met by other Federal and State programs (e.g., 
Medicare and Medicaid). All states remain at liberty to provide care 
for poor veterans to the extent State resources permit.
    C. Does VA assume such closures will occur when payments for non-
priority veterans (those without a service-connection) cease? Does VA 
believe that it has the legal authority to simply stop paying per diem 
payments to states for the care of veterans VA doesn't define as a 
priority?
    Response: VA is seeking legislative authority to align VA per diem 
payments to State veterans homes with VA's revised long-term care 
eligibility policy. Enactment of this proposal would ensure fairness 
and consistency in how VA treats veterans needing long-term care across 
all venues, including VA nursing homes, community nursing homes, and 
State nursing homes. We are unable to comment on how individual States 
would respond to this change in policy.
    D. It seems to me that VA encouraged the States to build long-term 
care capacity by offering them construction subsidies. Would a change 
in the ``rules of the game'' after these State homes have been built 
not break the bargain that the Federal Government has struck with the 
States?
    Response: The VA State Home Construction Grant Program assists 
States in construction and renovation costs for nursing homes, 
domiciliary facilities and adult day healthcare. The program does, not 
require the State to participate in the State Veteran Home Per Diem 
Grant Program, or guarantee the ongoing subsidy of per diem payments. 
The law is separate for each of the programs.
    E. Is VA proposing that current law, which requires that at least 
75 percent of the beds in a State home be occupied by veterans, be 
changed to a lower ``veteran occupancy'' requirement so that the homes 
can remain open in spite of the fact that veterans may not be the 
primary occupants? If this change is not on your radar screen, how do 
you propose the homes stay open with 66 percent less patients?
    Response: State homes will continue to be occupied to the extent 
that individual states discharge their fiscal responsibility for the 
operation and management of the homes. The VA has not proposed that the 
current law requiring 75 percent of the beds in a State home be changed 
at present. The VA will work with the State Veterans Homes to consider 
alternative options, and may need to amend current laws.
    Question 9. The description of your new policy on long-term care 
notes that VA will provide ``the full spectrum of long-term care 
service to service-connected and catastrophically disabled veterans 
with special needs.'' As you know, current law requires VA to provide 
needed nursing home care to any veteran for a service-connected 
condition and those who are 70 percent: service-connected disabled or 
higher. How does your new policy differ from the mandate of current 
law? Am I correct that your new policy is more generous than your 
current mandate. But, not as generous as your current practice?
    Response: You are correct. Under current practice, nursing home 
care is provided to all veterans for whom it is mandated by law if they 
need such care (Priority Group 1A), and to other priority groups as 
resources permit. Under the new policy, VA will continue to provide 
short-term rehabilitative, hospice, and respite nursing home care to 
all priority groups, but will restrict long-term maintenance care to 
Priority Groups 1, 2, and 3 and to those veterans with special needs 
that cannot be met in the community, such as spinal cord injury. 
Therefore, our new policy will continue to provide institutional long-
term care beyond the mandate of current law.
    Question 10. Part of your proposed increase in funding includes a 
new $100 million initiative to implement the VA Mental Health Task 
Force recommendations. However, the details of new services for mental 
health are lacking in your budget submission. Could you please 
elaborate on some of the actual things VA would do with another $100 
million to provide . mental health services? For example, what 
specifically is needed to close the ``variability and gaps in care'' 
that you wrote about in your budget proposal?
    Response: VHA has established priorities for additional funding of 
programs based on the recommendations of the Secretary's Mental Health 
Task Force as well as the initiatives contained in the Mental Health 
Strategic Plan. Areas identified for priority funding are expansion of 
PTSD services, OIF/OEF post-deployment mental health services, 
expansion of Substance Abuse programs, expansion of mental health 
services in CBOCs, creation of new MHICM teams and programs for the SMI 
(Seriously Mentally III) veteran, new Homeless Domiciliaries, and 
creation of case manager positions for the Grant and per Diem program. 
New Capital Asset Realignment for Enhanced Services (CARES) projections 
for mental health services were recently completed. This data is broken 
down by mental health program and is specific to the CARES markets. 
These data will soon be available to the VISNs who will then be able to 
identify where there may be gaps in services within their markets. The 
$100 million will be used to correct service gaps once the Networks 
come back with specific strategic plans on how these gaps need to be 
addressed. Priority for funding will be based on service need as 
identified by the Networks. The Under Secretary for Health has agreed 
to establish a team of Mental Health experts to continue to work with 
the actuarial data to develop a model that attempts to identify the 
gap.
    Question 11. The 116th Calvary Brigade Combat Team of the Idaho 
Army National Guard are now stationed overseas in Iraq and fighting in 
Operation Iraqi Freedom. Like all National Guardsmen, when they return 
from active duty they will resume their duties of working under the 
command of the Governor of Idaho.
    A. What will their eligibility be for VA services, including health 
care and benefits, be when they separate from active duty service?
    Response: Army National Guard personnel activated by Federal 
declaration and who served on active duty in a theater of combat 
operations which includes Operation Iraqi Freedom are eligible for 
hospital care, medical services, and nursing home care. Public Law 105-
368 gave VA authority (Title 38, USC, 1710(d)(D)) to provide a 2-year 
post-discharge period in which returning combat, veterans receive cost-
free care for conditions potentially related to their combat service. 
Veterans who enroll with VA under this authority retain enrollment 
eligibility, regardless of any enrollment restriction that may be in 
effect after this 2-year post-discharge period.
    For those veterans who do not enroll with VA during this 2-year 
post-discharge period, eligibility for enrollment and subsequent care 
would be based on other factors such as a compensable service 
connection rating, VA pension status, catastrophic disability 
determination or the veteran's financial circumstances.
    In addition to health care benefits, they are also eligible for a 
full array of benefits offered through the Veterans Benefits 
Administration (VBA) to include:
     Disability Benefits
     Education & Training Benefits
     Vocational Rehabilitation and Employment Home Loans
     Life Insurance Burial Benefits Dependents' and Survivors' 
Benefits
    B. Does the Department have any programs in place that will 
continue to follow these Guardsmen after their completion of their 
combat mission and they return home to a civilian life?
    Response: Under 38 U.S.C. Sec. 1710(e)(1)(D) and 
Sec. 1710(e)(3)(C), OIF/OEF veterans may enroll in the VA health care 
system and, for a 2-year period following the date of their separation 
from active duty, receive VA health care without co-payment 
requirements for conditions that are or may be related to their combat 
service. After the end of the 2-year period, they may continue their 
enrollment, but may be subject to any applicable co-payment 
requirements. For OIF/OEF veterans who do not enroll with VA during the 
2-year post-discharge period, eligibility for enrollment and subsequent 
health care is, of course, subject to such factors as a service 
connected disability rating, VA pension status, catastrophic disability 
determination, or financial circumstances.
    OIF/OEF veterans have sought VA health care for a wide-variety of 
physical and psychological problems. The most common health problems 
have been musculoskeletal ailments (principally joint and back 
disorders); diseases of the digestive system (with teeth and gum 
problems predominating); and mental disorders (predominantly adjustment 
reactions). The medical issues we have seen to date are those we would 
expect to see in young, active, military populations, and no particular 
health problem stands out among these veterans at present. We will 
continue to monitor the health status of recent OIF and OEF veterans to 
ensure that VA aligns its health care programs to meet their needs.
    Following is a brief description of VA initiatives that have been 
developed in response to the service needs of veterans from Operations 
Iraqi Freedom (OIF) and Enduring Freedom (OEF). Many of these are brand 
new programs that were developed to meet these needs. All of them 
represent ``lessons learned'' from VA's experiences responding to the 
health care and other benefits needs of veterans returning from the 
1991 Gulf War, and from the Vietnam War before that.
    Immediate Health Care Needs for Combat Veterans: In response to 
immediate health concerns for OIF and OEF veterans, on March 26 and 27, 
2003, VA developed a program called ``Caring for the War Wounded,'' 
which was broadcast over the VA Knowledge Network satellite broadcast 
system. This program provided timely and relevant information about the 
anticipated health care needs of veterans of the current conflict in 
Iraq, included VA experts on treatments for traumatic injuries; 
chemical warfare agent health effects; infectious diseases; 
radiological health effects; and post-deployment readjustment health 
concerns, and was converted into a new Veterans Health Initiative (VHI) 
health care provider independent study guide, called ``Caring for the 
War Wounded,'' which is available online at vaww.va.govNHI/ and on the 
Internet at http://www.appcl.va.gov/vhi/.
    New Clinical Guidelines for Combat Veteran Health Care: In 
collaboration with DoD, VA developed two Clinical Practice Guidelines 
on combat veteran health issues, including one general guideline to 
post-deployment health, and a second dealing with unexplained pain and 
fatigue. The new clinical guidelines give our health care providers the 
best medical evidence for diagnoses and treatment. VA highly recommends 
these for the evaluation and care of all returning combat veterans, 
including veterans from OF and OEF. The value of the guidelines in 
providing care to returning veterans is described in a video ``The Epic 
of Gilgamesh: Clinical Practice Guidelines for Post-Deployment Health 
Evaluation and Management,'' at www.va.gov/Gilgamesh.
    New Specialized Combat Veteran Health Care Program: In 2001, VA 
established two new War Related Illness and Injury Study Centers 
(WRIISCs) at the Washington, DC, and East Orange, NJ, VAMCs. Today, the 
WRIISCs are providing specialized health care for combat veterans from 
all deployments who experience difficult-to-diagnose, but disabling 
illnesses. Concerns about unexplained illness are seen after all 
deployments including OIF/OEF, but VA is building on our understanding 
of these illnesses. More information is available online at www.va.gov/
environagents under the heading ``WRIISC Referral Eligibility 
Information.''
    Expanded Education on Combat Health Care for VA Providers: In 
addition to the programs already described, VA has developed several 
Veterans Health Initiative (VHI) Independent Study Guides relevant to 
veterans returning from Iraq and Afghanistan:
     ``A Guide to Gulf War Veterans Health'' was originally on 
health care for combat veterans from the 1991 Gulf War. The product, 
written for clinicians, veterans and their families, remains very 
relevant for OF and OEF combat veterans because many of the hazardous 
exposures are the same.
     ``Endemic Infectious Diseases of Southwest Asia'' provides 
information for health care providers about the infectious disease 
risks in Southwest Asia, particularly in Afghanistan and Iraq. The 
emphasis is on diseases not typically seen in North America.
     ``Health Effects from Chemical, Biological and 
Radiological Weapons'' was developed to improve recognition of health 
issues related to chemical, biological and radiological weapons and 
agents.
     ``Military Sexual Trauma'' was developed to improve 
recognitions and treatment of health problems related to military 
sexual trauma, including sexual assault and harassment.
     ``Post-Traumatic Stress Disorder: Implications for Primary 
Care'' is an introduction to PTSD diagnosis, treatment, referrals, 
support and education, as well as awareness and understanding of 
veterans who suffer from this illness.
     ``Traumatic Amputation and Prosthetics'' includes 
information about patients who experience traumatic amputation during 
military service, their rehabilitation, primary and long-term care, 
prosthetic, clinical and administrative issues.
     ``Traumatic Brain Injury'' presents an overview of TBI 
issues that primary care practitioners may encounter when providing 
care to veterans and active duty military personnel.
    All are available in print, CD ROM, and on the web at www.va.gov/
VHI.
    Outreach to Combat Veterans: VA has many new products to offer 
combat veterans and their families.
     The Secretary of Veterans Affairs sends a letter to every 
newly separated OF and OEF veteran, based on records for these veterans 
provided to VA by DoD. The letter thanks the veteran for their service, 
welcomes them home, and provides basic information about health care 
and other benefits provided by VA.
     In collaboration with DoD, VA published and distributed 
one million copies of a new short brochure called ``A Summary of VA 
Benefits for National Guard and Reservists Personnel.'' The new 
brochure does a tremendous job of summarizing health care and other 
benefits available to this special population of combat veterans upon 
their return to civilian life (also available online at www.va.gov/
EnvironAgents).
     ``Health Care and Assistance for U.S. Veterans of 
Operation Iraqi Freedom'' is a new brochure on basic health issues for 
that deployment (also at www.va.gov/EnvironAgents).
     ``OIF and OEF Review'' is a new newsletter mailed to all 
separated OIF and OEF veterans and their families, on VA health care 
and assistance programs for these newest veterans (online at 
www.va.gov/EnvironAgents).
     ``VA Health Care and Benefits Information for Veterans'' 
is a new wallet card that succinctly summarizes all VA health and other 
benefits for veterans, along with contact information, in a single, 
wallet-sized card for easy reference (also at www.va.gov/
EnvironAgents).
    Special DU Program: OIF veterans concerned about possible exposure 
to depleted uranium can be evaluated using a special DU exposure 
protocol that VA began after the 1991 Gulf War. This program offers 
free DU urine screening tests by referral from VA primary care 
physicians to veterans who have concerns about their possible exposure 
to this agent.
               combat veteran health status surveillance:
    Today we can monitor the overall health status of combat veterans 
very efficiently by using VA's electronic inpatient and outpatient 
medical records. This surveillance summarizes every single visit by a 
combat veteran including all medical diagnoses. VA has developed a new 
Clinical Reminder (part of VA's computerized reminder system) to assist 
VA primary care clinicians in providing timely and appropriate care to 
new combat veterans.
    Question 12. As we discussed at your confirmation hearing, I 
believe VA transition efforts have traditionally been focused on the 
needs of returning soldiers who are leaving service--and not on the 
needs of the returning Reservists or National Guard members who are 
returning to reserve duty in the States after active duty in the war 
zone. In your written remarks you State that VA will make it a top 
priority to provide ongoing benefits and services to these individuals. 
What special steps is VA taking to provide outreach to members of the 
National Guard and Reserve when they return home and transition back 
into civilian life? Does this proposed budget request separate funding 
for special outreach efforts to these returning troops?
    VBA Response: Outreach to Reserve/National Guard members is part of 
the overall VBA outreach program. In peacetime this outreach is 
generally accomplished on an ``on call'' or ``as requested'' basis. 
With the activation and deployment of large numbers of Reserve/National 
Guard members following the September 11, 2001, attack on America, and 
the onset of OEF/OIF, VBA outreach to Reserve/National Guard members 
has been greatly expanded. National and local contacts have been made 
with Reserve/National Guard officials to schedule pre- and post-
mobilization briefings for their members. Returning Reserve/National 
Guard members can also elect to attend the formal 3-day TAP workshops. 
The following chart shows the number of pre- and post-deployment 
briefings for Reserve/ National Guard members:

                    Reserve/National Guard Briefings
------------------------------------------------------------------------
            Fiscal Year                 Briefings        No. Attendees
------------------------------------------------------------------------
2003..............................                821             46,675
2004..............................              1,399             88,366
2005*.............................                974         68,351,448
------------------------------------------------------------------------
*Through March 2005

    VA recently established a working group with the National Guard 
Bureau and representatives of the military reserve components to 
identify where improvements can be made in our working relationships to 
ensure that information and assistance are available to returning 
Reserve/ National Guard members and their families. Recommendations 
from the working group are being reviewed by VA top management 
officials and the National Guard leadership prior to implementation. It 
is anticipated that a memorandum of agreement will be signed by the end 
of April outlining our respective responsibilities to ensure that a 
robust outreach program is available on a continuous basis to returning 
Reserve/National Guard members and their families.
    VA's planned 2006 outreach efforts to members of the National Guard 
and Reserve are part of our general outreach effort and are not 
separately funded.
    VHA Response: VHA's transition efforts focus on the needs of all 
returning service members, including members of the Reserve and 
National Guard. The Vet Center program's capacity to provide outreach 
to veterans returning from the Global War on Terrorism (GWOT) in the 
theatres of combat operations in Afghanistan and Iraq has been 
augmented by VA. Specifically, the Vet Centers have hired and trained 
up to 50 new outreach workers from among the ranks of recently 
separated GWOT veterans at targeted Vet Centers. Augmented Vet Center 
outreach is primarily for the purpose of providing information that 
will facilitate a seamless transition and the early provision of VA 
services to new returning veterans and their family members upon their 
separation from the military. These positions are being located on or 
near active military out-processing stations, as well as National Guard 
and Reserve facilities. New veteran hires are augmenting Vet Center 
services by providing briefing services to transitioning servicemen and 
women regarding military-related readjustment needs, as well as the 
complete spectrum of VA services and benefits available to them and 
their family members. These Vet Center points of contact for OIF/OEF 
provide the link to other members of the VA team at VBA and VHA for 
additional services to meet the veteran/family needs. The new veteran 
hires are also organizing local community activities and ``town hall 
meetings'' to provide information and education about VA, DoD, and 
other community support services available to veterans and family 
members. During these community offerings new veterans are also able to 
view the video ``We Are By Your Side'' to increase their knowledge of 
other benefits that they might be eligible to receive.
    Extensive VA outreach briefings have been conducted to the senior 
leadership in the Army National Guard and Army Reserve. Letters from 
the Secretary of Veterans Affairs, information toolkits and a copy of 
the video ``We Are By Your Side'' have been sent to the Chiefs of Staff 
for all services and the Reserve Chiefs. Treatment activities are 
provided by trained and licensed health care practitioners at VA 
healthcare facilities and by licensed and/or masters degree level 
counselors at Vet Centers. Outreach activities are performed through 
national intervention, by VA medical centers, community based 
outpatient clinics, and Vet Centers. The Secretary of Veterans Affairs 
has sent a letter to all accessible returning service members on the 
DoD roster (over 290,000) notifying them of their access to benefits 
and healthcare services and providing contact phone numbers for further 
information. (Separated service members were not contacted if 
information from VA indicated that address information provided by DoD 
was incorrect.). Additionally, VA sent letters to all Adjutants General 
of the National Guard/Reserve to enlist their support in the 
distribution of printed and videotape information on VA eligibility and 
healthcare to their troops.
    VBA outreach coordinators and Vet Center staff provide further 
information to service members at mobilizationsites as part of the 
Transitional Assistance Program (TAP) for National Guard/Reserve 
personnel who are separating from active duty to reserve or civilian 
status. VA Outreach coordinators will also be allowed blocks of time on 
the unit training schedule and during family programs to brief on VA 
Benefits/Services and home station.
    VA's planned 2006 outreach efforts to members of the National Guard 
and Reserve are part of our general outreach effort and do not have 
separate funding. We are confident that our fiscal year 2005 budget and 
the President's fiscal year 2006 budget request contain sufficient 
funding to allow us to continue outreach efforts to OIF and OEF 
veterans, including returning members of the National Guard and 
Reserve.
    Question 13. The President has requested a civil service pay 
increase of 2.3 percent and a military pay increase of 3.1 percent. In 
recent years Congress has provided civil service employees with a pay 
increase equal to the military pay increase. If Congress adheres to 
past practice and enacts a 3.1 percent increase for both service 
members and Federal civilian employees, by how much would VA 
discretionary appropriations need to increase?
    Response: Should Congress enact a 3.1 percent pay raise as opposed 
to the 2.3 percent increase that was included in the President's fiscal 
year 2006 request, VA would be required to fund an additional $88.7 
million in payroll costs.

 
----------------------------------------------------------------------
                                                                                    3.1 Percent
                                                                                     Payraise
                                                                    2.3 Percent     (Additional
                                                                     Payraise       Amount for    Total Required
                                                                    (Budgeted)       Military
                                                                                      Parity)
--------------------------------------------------------------------------
Medical Care....................................................          $247.2           $81.7          $328.9
VBA.............................................................            14.0             4.8            18.8
NCA.............................................................             1.6             0.5             2.1
Staff Offices...................................................             4.9             1.7             6.6
    VA Total....................................................          $267.7           $88.7          $356.4
--------------------------------------------------------------------------

    Question 14. The Administration's budget proposal estimates that 
fiscal year 2006 disability claims productivity will remain stagnant at 
109 claims completed per assigned employee.
    A. What accounts for the flat level of expected productivity? 
Shouldn't productivity increase if the Veterans Benefits Administration 
(VBA) expects additional Benefits Delivery at Discharge claims, claims 
which are supposedly easier to adjudicate than other types of claims?
    Response: The projected productivity level of 109 disability claims 
per employee does not include all types of claims workloads. In 
addition to the disability claims, regional offices are also addressing 
the appeals inventory, trying to strike a successful balance between 
incoming claims and appellate workloads. The performance standards for 
our field station directors include both claims inventory targets and 
appellate reduction targets. This approach emphasizes the importance of 
both initial claims and appellate work and works toward reducing the 
inventory in both areas.
    Claims received through the Benefits Delivery at Discharge (BDD) 
process are generally easier to develop than regular claims because the 
servicemember usually has all medical and military records available to 
submit with his/her claim. However, BDD claims are usually more complex 
both in terms of the number of issues claimed, as well as the 
complexity of the issues themselves. As a result, while development may 
be somewhat easier, the actual adjudicative process tends to be more 
complex.
    B. What information technology investments will have the biggest 
impact on individual worker productivity in the future? Can future 
productivity gains be quantified for each of those investments?
    Response: VBA has invested in numerous information technology 
solutions intent on increasing worker productivity. The following is a 
comprehensive list of IT solutions that directly impact productivity 
and offer potential gains for the future. However, we are unable to 
specifically quantify those gains.
                        compensation and pension
Veterans Service Network (VETSNET)
    VETSNET is the replacement system for the Benefits Delivery Network 
(BDN). The BDN system is technologically obsolete, making it extremely 
difficult to maintain and virtually impossible to expand to include new 
applications or enhancements that are vital to VBA's current and future 
operations.
    The VETSNET suite of applications includes the following:
    1. Modern Award Processing-Development (MAP-D)--supports claims 
establishment and development.
    2. Ratinq Board Automation (RBA) 2000--supports the rating of 
disability claims.
    3. Award--used to prepare benefit awards
    4. Financial Accounting System (FAS)--supports generation of 
benefit payments.
    VETSNET is user friendly and provides a standard payment and 
accounting system for veterans' benefits programs. It corrects various 
material weaknesses related to BDN, and provides end-to-end claims 
processing, including claims establishment and development, decision, 
award, payment, and accounting. It generates and displays detailed 
claims information for customer service and provides data for cycle 
time management. Additionally, VETSNET retains rating information for 
subsequent ratings, so that data will not have to be entered again at a 
later date. It also captures and retains award lines and supporting 
data for subsequent adjustments and automatically calculates 
retroactive awards and overpayments.
                                 capri
    Compensation and Pension Records Interchange (CAPRI) is a current 
IT application used by VBA to search electronic health records 
maintained by the Veterans Health Administration (VHA). CAPRI is also 
used for requesting and returning compensation and pension (C&P) 
examinations between VBA and VHA. Future investment in the Federal 
Health Information Exchange (FHIE) and CAPRI will allow VBA users 
enhanced access to DoD electronic health records as additional 
categories of medical treatment are added to FHIE. Future investment in 
the Bi-Lateral Health Information Exchange will enable bi-directional, 
real-time data sharing between VA and DoD healthcare providers.
    We can expect improvement in productivity measured by reduced 
claims processing time when the veterans' DoD service medical records 
are available electronically in CAPRI. Future enhancements are planned 
for the C&P examination request and return process to improve the 
quality of both the VBA C&P examination request and the VHA C&P report 
of medical examination. This will positively impact productivity by 
providing VBA employees better quality rating data earlier in the 
claims adjudication process.
                          pies/dpris interface
    Regional office (RO) personnel can electronically request imaged 
personnel records from the Army, Navy, and Marine Corps through the 
Personnel Information Exchange System (PIES)/Defense Personnel Records 
Imaging System (DPRIS) interface. Since the process is automated, users 
typically receive a response to their requests within 48 to 72 hours. 
During the first quarter of fiscal year 2005, ROs submitted more than 
3,000 requests a month through the PIES/DPRIS interface. Programming 
changes are pending that will allow users to request personnel records 
from the Air Force through the PIES/DPRIS interface by November 2005.
                               virtual va
    Virtual VA is a web-based suite of nine different information 
solutions that provides electronic ``e-Folders'' to aid in both 
compensation and pension processing. Through the use of imaging, 
document management technologies and integration with the output 
capabilities of several other VA systems, users are able to perform a 
multitude of functions traditionally completed by accessing stand-alone 
applications and paper documentation. With future enhancements such as 
integration with payment and accounting systems, more streamlined 
claims processing and greater efficiency are possible. The impact 
Virtual VA has on claims efficiency will be measured through a study 
scheduled to begin in August 2005.
                               education
The Education Expert System (TEES)
    The information technology investment that will have the biggest 
impact on individual worker productivity in the future in the Education 
Program is TEES. TEES will allow education benefits claims to be 
processed automatically without human intervention. TEES is envisioned 
to be a system that receives electronic input from claimants, training 
facilities, and other sources (e.g., DoD). Using a predefined set of 
business rules, TEES will process the information, issue certificates 
of eligibility and denial and award letters, authorize awards, and 
provide data for payment. TEES will collect, process, maintain, manage, 
and share all information pertaining to education claims.
    Once TEES is fully implemented, we expect to gain improvements in 
customer service, reduce average days to process a claim, increase 
payment accuracy, and reduce labor costs involved with claims 
processing.
                             loan guaranty
Web-Based Loan Summary (WBLS)
    This internet-based application offers a low/no-cost way for 
lenders to submit paperless applications for guaranty. It provides a 
24-hour turnaround time for guaranty, and eliminates 15 sheets of paper 
and up to 54 manual coding actions per guaranty. WBLS was implemented 
in November 2004, and already handles approximately two-thirds of all 
guaranties issued. The Loan Guaranty program is considering making use 
of WBLS mandatory in all applications for guaranty, and we expect that 
after doing so, WBLS will handle 99.9 percent of guaranties. WBLS 
increases worker productivity by freeing up Loan Guaranty staff to 
perform other more important tasks than manual data coding, and 
processing of paper forms.
                              e-appraisals
    This application provides electronic ordering, submission, storage 
and manipulation of appraisals. It eliminates the need for hard-copy 
appraisals, and facilitates electronic communication between VA and 
appraisers. The Loan Guaranty program has realized timesaving in the 
appraisal review process, since employees can electronically access the 
required appraisal information from any location. This allows them to 
perform the necessary reviews in a more timely fashion. E-Appraisal 
also provides the capacity for national oversight and workload 
management. Through implementation and use of the E-Appraisal 
application, service to veterans and lenders continues to improve.
Automated Certificate of Eligibility (ACE)
    The ACE system allows lenders to electronically request a 
determination of a veteran's eligibility for Loan Guaranty benefits. 
The system makes a determination, and generates an online Certificate 
of Eligibility (COE). In cases where data in the system is not 
sufficient to determine eligibility, the system refers the lender to a 
Loan Guaranty Eligibility Center. The ACE system handles approximately 
25 percent of all eligibility determinations. This has freed up Loan 
Guaranty staff, especially at the Loan Guaranty Eligibility Centers to 
concentrate on more complex or difficult cases, and to provide better 
customer service to lenders and veterans requesting eligibility. The 
Loan Guaranty program intends to expand ACE usage through a Veterans 
Automated Certificate of Eligibility (or VACE) system, which will allow 
veterans themselves to log in and request a copy of their COE. VA 
expects an additional increase in productivity, and further improved 
customer service once the VACE system is developed and implemented.
                        loan guaranty web portal
    The Portal provides approved users with a single point of entry 
into Loan Guaranty systems and applications. Features include single-
sign on / single password for users to access Loan Guaranty systems and 
information, and the ability to have personalized content 'pushed' to 
users, based on an established user profile. The Portal provides a one-
stop-shop for veterans and for program stakeholders, as well as a 
faster, more effective means of communicating program information. 
Because Loan Guaranty has migrated its applications to the Portal, 
access to data and systems is timelier since we are no longer reliant 
on the antiquated technology and programming skill sets inherent to 
mainframe applications. Improved data access and manipulation 
capability provide the Loan Guaranty program with an improved planning 
and decisionmaking process, capabilities, which greatly enhance the 
productivity and effectiveness of the Service.
VA Loan Event Reporting Interface (VALERI)
    VALERI is the loan data servicing system being built to support the 
newly redesigned business environment that resulted from the Loan 
Administration ReDesign (LARD) initiative. The LARD initiative 
standardized the Loan Guaranty program's internal servicing procedures, 
and VALERI will be built,. incorporating these new business processes. 
Examples of how employees will use VALERI include accessing private-
sector servicers' data, performing nationwide oversight and identifying 
servicer and Loan. Guaranty employee training needs. These 
functionalities will allow Loan Guaranty staff to work more efficiently 
and more productively.
            vocational rehabilitation and employment (vr&e)
    Corporate WINRS will migrate the VR&E Program to a paperless data-
centric processing environment. In VR&E, the gathering, storage, and 
subsequent analysis of veterans' personal, medical, social, vocational, 
and training information are critical to the delivery of rehabilitation 
and employment services. Currently, this information is largely 
submitted and stored in paper form or hand-keyed into processing 
applications. The evolution toward electronic submission, storage, and 
access of that data will have a beneficial impact on worker, 
productivity, allowing VR&E professional staff more time to focus on 
counseling and planning activities with the veteran.
    Question 15. The Administration's budget proposal projects an 
increased disability claims workload from separating service personnel 
from Operations Enduring Freedom and Iraqi Freedom.
    A. How many of those separating personnel do you expect to come 
from National Guard or Reserve units? What resources does this budget 
devote to ensuring that demobilized National Guard and Reserve 
personnel know about their disability benefits and receive expedited 
claims decisions?
    Response: In the period leading up to September 11, 2001, almost 
37,000 active members of the National Guard and Reserve were receiving 
VA disability compensation. Based upon the current level of 
mobilization of National Guard and Reserve forces, we anticipate 
approximately 10,000 claims in fiscal year 2006 from veterans who will 
return to their previous National Guard or Reserve status. VA is 
committed to providing priority case-managed care and claims processing 
to all returning seriously injured veterans, including members of the 
activated reserve forces. VBA will also continue to provide outreach 
and information to returning individual reservists and units shortly 
after their return. In 2004 VA provided benefits briefings to more than 
88,000 members of the National Guard and Reserve.
    B. Its there a discrepancy in the amount of assistance VA provides 
to separating service members belonging to regular components of the 
Armed Forces and demobilized Guard/Reserve personnel?
    Response: The assistance VA provides to seriously injured 
servicemembers is the same, regardless of the branch or component of 
the service to which they belong.
    Active component service personnel who are not seriously injured 
can participate in Transition Assistance Program (TAP) briefings and 
the Benefits Delivery at Discharge (BDD) Program, usually during the 
two-to-six-month period immediately prior to their actual separation. 
Members of the reserve components are normally demobilized as a unit 
within days of their return from their overseas assignments. This 
prevents VA from conducting its normal TAP and BDD Program for 
returning Reserve and National Guard members. We therefore aggressively 
pursue pre- and post-deployment outreach to the Reserve and National 
Guard members to ensure they receive information and assistance on all 
VA benefit programs. In fiscal year 2004, VA conducted benefits 
briefings for more than 88,000 members of the reserve forces.
    C. What are your thoughts about providing priority assistance to 
claimants who file claims within a year or two of discharge during the 
Global War on Terror?
    Response: VA provides priority claims processing and case-
management assistance for all seriously injured returning service 
members. We provide expedited claims processing for active component 
personnel through the Benefits Delivery at Discharge Program and 
conduct specialized outreach to returning National Guard and Reserve 
personnel. VA also prioritizes claims from veterans of all periods of 
service who are identified as terminally ill, in great financial 
difficulty, or homeless. We believe that most veterans who delay filing 
their claims until the second year or so following separation are less 
likely to be seriously disabled. As such, we believe that their claims 
should normally be processed as other claims received by VA.
    Question 16. The strategic goal VA wishes to achieve for the 
average number of days to complete a disability claim has been lowered 
from 100 days to 125 days, primarily on account of built-in delays to 
processing created by the Veterans Claims Assistance Act. What time 
delays built into the system result in such lengthy and increasing 
average processing times? What are the opportunity costs of these 
built-in delays, i.e., does time and effort devoted to claimants taking 
advantage of their rights under these built-in delays harm the quality 
and timeliness of service provided to other claimants?
    Response: VA fully supports the Veterans Claims Assistance Act of 
2000 (VCAA). We believe that a well-informed claimant can proactively 
participate in the claims process toward achieving the most favorable 
decision possible, consistent with the law. Nonetheless, the 
implementation of VCAA did introduce new ``wait times'' in the claims 
adjudication process that make attainment of an average processing time 
of 100 days in a non-BDD environment very difficult to attain. The 
initial VCAA notice calls for a 60-day wait time before VA can proceed 
if the claimant fails to respond or responds incompletely. When a 
claimant asks for our assistance in obtaining private medical evidence, 
VA must wait an additional 60 days for the provider to respond. In many 
instances private sources do not respond or respond by requesting 
payment of a fee for the needed information. VA has no authority to pay 
such fees. In circumstances where no reply is received or a fee is 
requested, VA must advise the claimant that we were unsuccessful and 
provide the claimant with an additional 30 days to provide the 
information. Finally, veterans may identify additional conditions that 
they believe should be service connected in the course of the 
adjudication of their claim. In such circumstances we consider these 
additional claimed conditions to be part of the original claim, but are 
required to provide a separate VCAA notice for them with the resulting 
60-day wait tirne. VA does not consider the amount of time devoted to 
adjudicating a specific claim and insuring claimants are fully informed 
to be harmful to the quality or timeliness of service to other 
veterans.
    Question 17. It is expected that a large portion of returning Iraq 
and Afghanistan veterans will have mental health problems, in some 
cases severe mental health problems like PTSD. Are VA claims 
adjudicators trained to quickly and accurately decide disability claims 
from these veterans?
    Response: Yes, journey-level claims adjudicators are trained to 
quickly and accurately decide these types of disability claims. 
Additionally, VBA is developing a number of training tools for its 
recently hired employees to prepare them to adjudicate these important 
issues.
    VBA has the following computer-assisted training initiatives on 
PTSD under development to be included in our Training and Performance 
Support System (TPSS):
     Introduction to PTSD for Rating Veterans Service 
Representatives (RVSRs)--Overview of PTSD issues, history, sensitivity 
awareness--TPSS module to be released September 2005
     Rating Cases with PTSD claims--TPSS module for RVSRs to be 
released February 2006
     Introduction to PTSD for Veterans Service Representatives 
(VSRs)--Overview of PTSD issues, history, sensitivity awareness with 
focus on VSR tasks--TPSS module to be released December 2005
     Electronic Performance Support System (EPSS) electronic 
job aid for VSRs on development issues for PTSD claims--To be released 
August 2005
    Question 18. The backlog of disability claims on appeal has been 
steadily growing in the last few years. What is the cause of this 
growth? What resources are being devoted to reduce the number of 
appeals? Is the appeals problem more than a resource issue, i.e., are 
there structural problems that Congress needs to address?
    Response: Cause of growth of appeals workload. The most important 
factors in the current appeal volume are the increasing volume of 
incoming claims and increased output of claims decisions. Over the last 
3 years, VBA not only completed as many claims as were received, but 
also reduced the inventory of pending rating claims (which stood at 
over 432,000 in 2002 and was reduced to 253,000 claims by the end of 
fiscal year 2003). While the numbers of initial appeals have increased, 
the rate ( percentage appealed) has not increased significantly, 
averaging around 10 percent.
Resources Devoted to Appeals Reduction
    VA regional offices each have an appeals team, exclusively devoted 
to processing appeals from the notice-of-disagreement stage to 
certification to the Board of Veterans' Appeals. Generally, 5--10 
percent of the Veterans Service Center staff members are dedicated to 
the appeals team.
    In addition, in 1991 VA fully implemented a Decision Review Officer 
(DRO) program, affording a claimant the right to a de novo review of a 
denied claim by a DRO who was vested with the authority to review the 
appeal and render a new decision without deference to the prior 
decision under review. The intent of this program is to provide for 
earlier resolution of appeals, reduce the number of appeals certified 
to the BVA and increase veteran satisfaction with the process. The DRO 
process was designed to achieve these goals early in the process by 
assisting veterans in identifying and obtaining evidence that would 
support the benefit he/she seeks; clarify the basis for the decision; 
and provide an independent review, ensuring all benefits supportable by 
the evidence of record are granted. The DRO program has met a number of 
these objectives.
    To address the remanded appeals workload, VBA established the 
Appeals Management Center (AMC) in 2003. The AMC now serves as a 
centralized processing site for this appellate workload. The AMC has 
received approximately 18,000 remands per year from BVA, more than the 
number of remands initially anticipated. As a result, 46 additional 
employees were identified in fiscal year 2005 to support the AMC in 
addressing this workload. We will continue to devote this level of 
resources until the remand workload is reduced.
Structural Problems with the Appeals Process
    Many studies have been conducted on the appeals process over the 
past 10 years with recommendations for structural reform of the 
process. Certain recommendations have been consistently made:
     The ability of the claimant to continually submit evidence 
or request a hearing at any time during the claims and appeals process 
makes it difficult to achieve a resolution of the claim.
    Recommendation: close the record after full development of the case 
prior to certification of the claim to the Board of Veterans' Appeals.
     A claimant can ask for a hearing at anytime, and many 
times at the regional office level, the Decision Review Officer level, 
the Board of Veterans' Appeals level--even if there is no additional 
evidence for VA to consider.
    Recommendation: limit the number of hearings provided for the same 
claim.
    Question 19. What resources are being devoted this year to put into 
effect the collocation of the Boise VA Medical Center and Regional 
Office? What are projected for next year?
    Response: In fiscal year 05, staff resources in VBA will accomplish 
the following:
     Secured a letter from the GSA initiating the transfer of 
the 2.13-acre parcel to VA. Obtain the signature of the Secretary of 
Veterans Affairs accepting transfer and control of the property.
     Complete a concept paper and Exhibit 300 business case 
application for construction of a new office building for the Boise 
Regional Office on the subject property. Obtain Departmental approval 
of the concept paper and Exhibit 300.
     Award a contract to an architect/engineer (A/E) firm to 
prepare a preliminary design and a request for proposals (RFP) for a 
Design-Build contract for the construction of the new office building. 
Funds from the Minor Construction program will be allocated to this 
contract.
     Begin the preliminary design for the new office building.
    In fiscal year 06, staff resources in VBA will accomplish the 
following:
     Complete the preliminary design and the RFP for the 
Design-Build contract.
     Work with the VHA contracting officer to prepare the 
solicitation for the Design-Build contract.
     Advertise the project in the FedBizOps for a contract 
award in early fiscal year 07.
     Identify the necessary minor construction funds in the 
fiscal year 07 budget for the construction contract.
    Question 20. What accounts for the doubling of ``individual 
unemployability'' cases in just 6 years? What standard is used to 
determine if an individual is ``unemployable''? Is that a permanent 
designation or is it periodically reviewed? Are quality reviews 
conducted on these cases to ensure that correct decisions have been 
made?
    Response: Increase in Individual Unemployability claims. VA has 
been reviewing the issue of individual unemployability (IU) and the 
increasing number of veterans granted this benefit. While we do not 
have complete answers for the significant rise in the number of 
claimants receiving IU benefits, we have identified a number of 
contributing factors.
     VA must consider findings of other Federal agencies such 
as the Social Security Administration. (See Murincsak v. Derwinski, 2 
Vet. App. 363, (1992)). The provisions of the Veterans Claims 
Assistance Act of 2000 reinforce this requirement. Where such an agency 
finds a veteran entitled to disability benefits for the same conditions 
for which that veteran is service connected, that evidence is given 
great weight, often resulting in a grant of benefits.
     In claims for an increased rating, where the veteran's 
evaluation(s) meets the minimum criteria for a grant of IU benefits, 
and there is evidence of current unemployability due to service-
connected disability, VA must consider entitlement to IU benefits even 
if the veteran has not claimed this benefit. (See Norris v. West, 12, 
Vet. App. 413 (1999); Roberson v. Principi, 251 F.3d 1378 (Fed. Cir. 
2001))
     VA regulations prohibit the consideration of age in making 
IU determinations. (See Hatiestad v. Brown, 5 Vet. App. 524 (1993))
    In addition, the general aging of the Vietnam veteran population 
and the relatively high number of veterans service connected for 
psychiatric conditions at the 70 percent level, may contribute to the 
number of veterans receiving IU benefits.
Standard for Determininq Unemployability
    The veteran's disability evaluations must meet specific regulatory 
requirements.. one service-connected disability evaluated as 60 percent 
disabling, or two or more service-connected disabilities that combine 
to a 70 percent evaluation, with one of them rated at least 40 percent. 
In addition, there must be evidence that the veteran is unable to 
maintain substantially gainful employment solely because of his/her 
service-connected disabilities.
    Proving an inability to maintain substantially gainful employment 
for IU benefits does not require the claimant to prove 100 percent 
unemployability. (Roberson v. Principi, 251 F. 3d 1378 (Fed. Cir. 
2001)). VA will consider a total disability to exist when there is 
present any impairment of mind or body that is sufficient to render it 
impossible for the average person to follow a substantially gainful 
occupation due to his or her service-connected disability. VA does not 
consider marginal employment, with earnings below the poverty level, to 
be a substantially gainful occupation.
Periodic Review of IU Determinations and Quality Reviews
    VA once required veterans receiving IU benefits to certify their 
employment status on an annual basis until age 60. Although that 
process was discontinued several years ago, we are reinstating it, 
pending OMB approval of the annual certification form. Additionally, 
all veterans receiving IU benefits are subject to wage verification 
through a Social Security Administration income verification match. 
While no separate quality review of IU cases is conducted, IU cases are 
part of the mix of cases that are reviewed in the national quality 
review program (referred to as STAR), conducted by VA's Compensation 
and Pension Service.
    Question 21. VA offers the Benefits Delivery at Discharge program 
(BDD) at 139 sites in three countries. The program offers transitioning 
service members the ability to take compensation physicals prior to 
leaving active duty and, as result, they can have a compensation rating 
prior to discharge. The budget projects an increase of $13.3 million in 
fiscal year 2006 for the BDD program. To what is that attributed? How 
many providers of contract exams are there for BDD program 
participants?
    Response: The estimated increase in the Compensation and Pension 
Contract Exam reimbursement for fiscal year 2006 can be attributed to 
two factors: an increase in the average cost per veteran and an 
increase in the number of contract examinations that QTC will perform.
    The average cost per veteran is expected to increase due to a 
projected increase in the contract cost per exam, as well as a greater 
number of disabilities claimed per veteran. A veteran separating from 
service and examined under the BDD program will generally claim more 
disabilities than a veteran that has been separated from service for 
several years. As the number of disabilities increases, there is often 
more than one examination scheduled, and frequently specialty 
examinations are required. This causes the BDD examination process to 
be more complicated and expensive.
    QTC is the only provider of contract exams and currently performs 
approximately one half of the BDD examinations. The number of contract 
exams will increase as more servicemembers separate through the BDD 
program. In addition, the number of contract exams requested to support 
non-BDD claims workload is also expected to increase.
    Question 22. Has the quality of VHA-provided disability 
examinations been improving? How is examination quality measured? To 
what extent has VBA taken advantage of the expanded contract disability 
examination authority granted it under Public Law 108-183?
    Response: The Compensation and Pension Examination Program (CPEP) 
Office has developed and implemented a multi-faceted quality 
improvement process that has resulted in dramatic results on a national 
scale. The CPEP Office worked with the STAR staff, the Clinical 
Advisory Board, and other experts in VBA, VHA, and the Board of 
Veterans' Appeals to carefully select representative indicators to 
measure the quality of C&P examination reports.
    During fiscal year 2004, the national performance score (a CPEP 
index measure of examination report quality) for the 10 most frequently 
performed examination types improved substantially. The results are 
summarized below:
     National baseline exam report quality: 54 percent met at 
least 90 percent of CPEP indicators (1St quarter fiscal year 2003)
     October 2003 national performance score: 48 percent met at 
least 90 percent of indicators
     November 2004 national performance score: 71 percent met 
at least 90 percent of indicators
    The quality of C&P examination reports was added as a VISN 
Director's performance measure in fiscal year 2004. The ``met'' level 
for the measure is 64 percent and the ``exceptional'' level is 75 
percent.
    VBA has not expanded the use of contract disability examinations as 
provided under Public Law 108-183.
    Question 23. The Administration's budget proposal budget states 
that due to cost constraints computer upgrades and/or replacement of 
peripheral applications will be deferred in fiscal year 2006. What 
affect will deferring computer upgrades and replacements have on 
efficiency? What level of funding is necessary to ensure VA's workforce 
has the best equipment to fulfill its mission?
    Response: For the past 2 years, VBA has had to realign funds to its 
payroll accounts in order to maintain an adequate number of FTE to 
support the President's initiative to reduce the claims inventory and 
improve the timeliness of claims processing. This has had a significant 
adverse impact on our operational accounts. During this time we have 
been unable to complete our planned 25 percent annual replacement/
upgrade of computers and peripheral equipment. The one-time transfer of 
$75 million from Medical Care to VBA in 2005 allows us to obligate $7 
million for computer replacements this year. As we noted in our 
Compensation Budget submission, the FY2006 information technology 
investments, while lower than FY2005, are in fact returning to normal 
levels. Our FY2006 budget submission performance objectives are in line 
with maintaining our FY2005 levels of performance.
    Question 24. One of the performance measures used by the VA's 
Compensation Service is ``Overall Satisfaction.'' The strategic target 
is 90 percent, but the actual rate has remained in the mid-50 range. 
Given that some veterans are denied compensation, is 90 percent a 
realistic goal and, if not, what is?
    Response: The most recent customer satisfaction survey results 
released in March 2004 show that the overall customer satisfaction rate 
increased from 55.7 percent in 2000 to 59.4 percent in 2003.
    The strategic goal of 90 percent was initially developed as part of 
the 2003-2008 VA Strategic Plan in accordance with the Government 
Performance and Results Act (GPRA) and Executive Order 12862, Setting 
Customer Service Standards, to provide the highest quality of service 
possible ``equal to the best in business.'' At the time we set the 
goal, we elected to only survey a sample of those who had applied to VA 
for benefits during the previous year rather than to also sample the 
entire population of over 3 million beneficiaries receiving VA 
compensation and pension benefits during that year. We believe that the 
90 percent strategic goal would be a more realistic strategic goal if 
we sampled from the entire population of current VA beneficiaries as 
well as recent applicants for benefits.
    We have deferred making any changes in the survey process or our 
strategic goal for customer satisfaction until the agency-sponsored 
periodic program evaluation is completed for the compensation program 
and the Disability Benefits Commission has completed its work. We 
anticipate that the information provided through this evaluation will 
assist us in determining what changes are appropriate.
    Question 25. I note a significant increase in the number of 
education claims projected through the remainder of the decade. Will 
staffing need to be increased to address the increased workload? Or 
will further improvements in productivity continue to allow the 
workforce to do ``more with less''?
    Response: Provided that technological improvements are funded at an 
adequate level, workforce productivity can continue to increase to 
match the workload.
    Question 26. What affect will the new educational assistance 
benefits for Reserves, enacted as part of the Fiscal Year 2005 National 
Defense Authorization Act, have on the budget for education 
administration? Will additional dollars be required to implement a new 
pay system for this program?
    Response: The new educational assistance benefits for activated 
reservists, enacted as part of the fiscal year 2005 National Defense 
Authorization Act, will increase the aggregate number of beneficiaries 
for all VA educational assistance programs. Many of the beneficiaries 
under the new program would have received benefits under either the 
existing Montgomery GI Bill--Selected Reserve or Montgomery GI Bill-
Active Duty programs. Since the monthly benefit for the new program is 
higher than monthly benefits under the current Selected Reserve 
program, the total dollars paid in educational assistance benefits will 
also increase. Based on Department of Defense estimates, the number of 
students receiving benefits under the new program will average more 
than 50,000 each year over the next 5 years. Based on these same 
estimates, we anticipate paying $100 million more in benefits each year 
over the next 5 years. We are reviewing the need for modification of 
our existing processes with the Department of Defense.
    Question 27. The Administration's budget proposal supports a 
continued reduction in FTE for housing administration, a reduction that 
began during the 1990s. The FTE reduction has occurred without any 
deterioration in services to veterans; rather, service has vastly 
improved. To what level can FTE levels be reduced for housing 
administration without affecting the quality of service provided to 
veterans? If default rates on loans guaranteed by VA were to increase, 
would staffing also need to increase to provide foreclosure-avoidance 
services on those loans?
    Response: The level of FTE requested in the President's fiscal year 
2006 budget is sufficient to provide home loan benefits, including 
Specially Adapted Housing Grants and Native American Direct Loans. It 
also provides for the appropriate level of resources to assist veterans 
who are delinquent on their guaranteed loans. The home loan program is 
a relatively small percentage of VBA's total employment. Under credit 
reform, the administrative costs of the program are appropriated each 
year; therefore, if default rates were to increase over time, VBA would 
adjust its future year requests as needed.
    Question 28. One of the issues cited in the Administration's budget 
proposal with respect to Vocational Rehabilitation and Employment 
(VR&E) as a barrier to employment for some disabled veterans is 
employer attitudes toward veterans and a lack of understanding of the 
value of military service. This barrier would not appear to be unique 
to disabled veterans; rather, it would appear to apply to all veterans. 
What is VA doing, if anything, to help remove this barrier? Are the 
services provided by Department of Labor's DVOPS being duplicated by 
VA? What can be done to improve employers' perceptions of veterans and 
is that a role that VA should fill?
    Response: VA's Vocational Rehabilitation and Employment Program 
(VR&E) has a number of strategies to assist veterans in overcoming 
negative employer attitudes:
     A new video, ``Working Partners,'' was developed and 
released to VA field stations. VR&E Counselors and Employment 
Specialists use the video to educate private sector and public sector 
employers to focus on abilities, not disabilities. The video 
illustrates the value of a veteran's transferable skills, training, and 
prior military experience to a new employer.
     Employment Specialists and Vocational Rehabilitation 
Counselors at VA's Central Office and field stations meet with 
potential employers to educate them about veterans, their abilities, 
and overcoming pre-existing stereotypes.
     Employment Specialists and Vocational Rehabilitation 
Counselors participate in community Disability Awareness Seminars, 
Career Fairs, and other employer-related events in order to explain the 
VR&E Program and the value of employing veterans.
     The new Five-Track Employment Model, recommended by VA's 
Vocational Rehabilitation and Employment Task Force, focuses on 
building effective partnerships with Department of Labor (DOL), One-
Stop Career Centers, national employers, local employers, union 
apprenticeship programs, training facilities, and faith-based and 
community agencies. VR&E recently developed memorandums of 
understanding with Home Depot, Helmets to Hard Hats, and the YMCA.
    DOL is a vital employment services partner for VR&E. VR&E does not 
intend to duplicate services where DVOPs or LVERs are available and 
accessible to veterans participating in a VR&E program. However, one 
aspect of the new Five-Track Employment Model is the establishment of 
Job Labs. Job Labs enhance our ability to fully execute a plan of 
effective vocational services in those areas where DVOPs or LVERs are 
not co-located or available to assist during the initial vocational 
evaluation phase of the rehabilitation process. The tools associated 
with the new Five-Track Employment Model allow VR&E staff to provide 
more robust resources to assist veterans in career-exploration 
activities, including research of the current; local labor market. Easy 
access to this type of information assists the veteran and the VR&E 
counselor in developing successful rehabilitation plans with solid, 
well-researched employment goals. This type of ready access to 
employment information is also critical to veterans whose life 
circumstances change to the point that their rehabilitation strategy 
needs to be significantly modified and new employment goals need to be 
established.
    DVOPs and LVERs co-located with VR&E regional offices can be more 
efficiently and effectively integrated into the delivery of employment 
services if they are able to access the same full range of Job Lab 
resources and on-line technologies available to VA staff. Under the 
Five-Track Employment Model, DOL is a vital employment services partner 
with VR&E.
    Question 29. One aspect of helping service members recover from 
disabling injuries is to help them find and maintain suitable 
employment. But the healing process can take time. To what extent does 
VA's VR&E component work with other VA components to ensure that 
service-connected veterans are also receiving other services, like 
counseling, they may need?
    Response: To deliver effective case management services to veterans 
with disabilities, VR&E works with several other VA components. VR&E 
works closely with the Veterans Benefits Administration's (VBA) 
Compensation and Pension, Loan Guaranty, and Education programs to 
ensure that veterans are compensated for their service-connected 
disabilities; referred to Loan Guaranty's Specially Adapted Housing 
Program, when appropriate; aware of educational and work-study 
opportunities; and advised of and assisted in applying for any other VA 
benefits to which they may be entitled.
    In addition, the Veterans Health Administration (VHA) is one of 
VR&E's primary partners, providing comprehensive services to assist 
service-connected disabled veterans obtain necessary medical services, 
prosthetics, prescriptions, and specialized counseling services. 
Annually, VR&E field staff submit about 15,000 requests to VHA 
facilities for Chapter 31 recipients needing a variety of clinical and 
support services.
    VR&E also refers veterans for outpatient counseling services to the 
Veterans Readjustment Counseling Program (VET Centers). VR&E 
counselors, as appropriate, schedule regular office hours at VET 
Centers, staff mutual cases, and accept referrals from VET Center 
staff.
    VR&E, VHA, and VET Center Staff cooperate in joint activities that 
result in improvements in meeting disabled veterans' treatment needs. 
Recently, field guidance was jointly developed for the provision of 
timely access to any VA health care services for participants in the 
VR&E Program.
    Question 30. The Administration's budget proposal states that VA 
will establish ``Job Resources Labs'' in each VA regional office. Each 
lab would provide veterans and VR&E staff a resource for preparing for 
and conducting a job search. Would this effort duplicate the Department 
of Labor's ``one-stop'' centers, which, by law, are required to give 
veterans preference in services provided?
    Response: The Job Labs and the online employment technologies are 
specific resources necessary to support the Five-Track Employment 
Model--the cornerstone of the new employment-driven service delivery 
system recommended by the VA Vocational Rehabilitation and Employment 
Task Force in their 2004 report to the Secretary of Veterans Affairs. 
The Job Labs and online employment technologies are part of a Five-
Track Employment Model pilot test at four regional offices (Montgomery, 
Alabama, St. Louis, Missouri, Detroit, Michigan, and Seattle, 
Washington). Conducting the pilot allows VR&E to fully integrate, 
measure, modify, and deliver a tested product for national deployment.
    The Five-Track Employment Model is designed to expedite services to 
disabled veterans in the most efficient and effective manner possible. 
VR&E's recently released orientation video, the Job Labs, new online 
technologies, and the addition of the employment coordinator position 
are all components of a new service delivery system that emphasizes 
returning disabled veterans to suitable employment.
    The Five-Track Employment Model and the new Job Labs significantly 
enhance VR&E's ability to execute a plan of services in those areas 
where DVOPs or LVERs are not co-located or available to assist during 
the initial vocational evaluation, or in researching local labor market 
information and developing a rehabilitation or employment plan. 
Additionally, those DVOPs and LVERs co-located with VR&E staff can be 
more efficiently and effectively integrated into the delivery of 
employment services if they are able to access the same full range of 
Job Lab resources and online technologies available to VA staff.
    Under the Five-Track Employment Model, the Department of Labor is a 
vital employment services partner. Resources will not be duplicated, 
but instead will be enhanced and available to both VA and DOL as they 
work together to help veterans become employed.
    Question 31. VA's National Cemetery Administration (NCA) has 
received outstanding customer satisfaction ratings. What is NCA doing 
to ensure that customers continue to receive the highest quality 
service they have come to expect?
    Response: NCA has a number of initiatives in place that are focused 
on maintaining our cemeteries as the national shrines they are intended 
to be and continuing to provide the high level of dignity, respect and 
compassion that veterans and their families deserve. NCR's Operational 
Standards and Measures furnish cemetery directors and their staffs a 
road map to measure the progress of all national cemeteries in meeting 
the standards of appearance commensurate with their status as national 
shrines. The standards define the attributes of service that veterans 
expect at the committal service, at the burial, and in the care and 
appearance of headstones and markers, the grounds, and the facilities. 
NCR's Organizational Assessment and Improvement Program is based on the 
Baldrige Criteria for organizational excellence and our Operational 
Standards. The program combines cemetery self assessment with regular 
independent site visits to validate performance and progress toward 
achieving superior results.
    A key strategy NCA has employed for improving the quality of 
service is to obtain feedback from veterans and their families on the 
quality of service provided at the national cemeteries. NCR's annual 
Survey of Satisfaction with National Cemeteries and the 
Administration's participation in the American Customer Satisfaction 
Index ensure that cemetery managers have regular access to customer 
perspectives and expectations. Feedback of this nature enables NCA to 
assess, review, modify and improve customer service.
    NCA is also using information technology to enhance service to 
veterans. NCA continues to expand the number of kiosk information 
centers at national cemeteries to assist visitors in finding the exact 
gravesite locations of individuals buried there. In 2004, NCA launched 
a Web-based (Internet) Nationwide Gravesite Locator system. This 
innovation will make it easier for anyone with Internet access to 
search for the gravesite locations of deceased family members and 
friends, and to conduct genealogical research. The nationwide gravesite 
locator contains more than three million records of veterans and 
dependents buried in VA's national cemeteries.
    Another critical success factor is maintaining a high-performing 
workforce. Toward this end, in 2004, NCA established the NCA Training 
Center to focus on the unique training needs of cemetery staff. As 11 
new national cemeteries become operational, the Training Center will 
ensure consistency in operations and well-trained staff for key 
positions.
    NCA has also developed new performance metrics that will be used to 
improve the appearance of its national cemeteries. Baseline data were 
collected in 2004 for three new performance measures designed to assess 
the condition of individual gravesites, including the cleanliness and 
proper alignment of headstones and markers. With this baseline data, 
NCA has identified the gap between current performance and the 
strategic goal for each measure.
    Question 32. In 2002, NCA concluded that its National Shrine 
Commitment would require nearly $280 million in needed repairs. Given 
the tighter budgetary request this year, what is NCA doing to address 
these deficiencies? Assuming NCA receives the level of funding 
requested in the Administration's budget proposal, how much in 
remaining repairs of the original $280 million will remain outstanding?
    Response: The Veterans Millennium Health Care and Benefits Act 
Report to Congress on the condition of VA's national cemeteries 
identified the need for 928 repair projects at an estimated cost of 
$280 million. Through fiscal year 2004, NCA has completed an estimated 
$77 million of the repairs identified in the report, including work on 
89 projects. NCA has also initiated work on additional gravesite 
renovation projects, which are currently in process. With the resources 
included in this budget, approximately $160 million in repairs will 
remain outstanding.
    In planning to complete the large number of repair projects 
identified in the report, repair projects are evaluated and prioritized 
on an annual basis to take into account the current condition of 
cemetery assets. This assessment is conducted within the Department's 
budget and planning processes. The funding requested in the 2006 budget 
will allow VA to continue to make steady progress in improving the 
appearance of its national cemeteries. A multi-year effort will be 
required, and VA is committed to ensuring that a dignified and 
respectful setting appropriate for each national cemetery is achieved.
    NCA has also established an Organizational Assessment and 
Improvement Program to ensure consistent assessment of performance 
against established standards and to direct resources to those areas 
most in need of improvement. Each national cemetery is evaluated 
through site visits on a cyclical basis. In addition, NCA will continue 
to identify and evaluate new innovations and process improvements to 
make the most effective use of existing resources in meeting cemetery 
maintenance needs.
    Question 33. In fiscal year 2004, NCA had 1,588 employees to carry 
out 94,000 interments (which roughly equates to 1 FTE per 60 
interments). NCA estimates annual interments to reach approximately 
115,000 in 2010. If NCA were to be staffed at the above-referenced FTE 
per internment ratio, it would need 1900 FTE, nearly 330 more than it 
has in fiscal year 2004. Does VA see a need to increase NCA FTE levels 
to meet future burial needs? If not, then what steps are occurring to 
ensure NCA's quality of service does not suffer as interments increase?
    Response: As veteran deaths increase and new national cemeteries 
are opened, annual interments in national cemeteries will continue to 
increase. The number of interments is estimated to increase from 95,900 
in 2005 to 102,700 in 2006, an increase of 7 percent. Each year, NCA 
evaluates the annual resource requirements to address growing workloads 
in order to maintain service levels. The President's budget request 
provides an additional $891,000 and 13 FTE to meet the estimated 
increase in interment workloads in 2006.
    Approximately 40 percent of fiscal year 2004 obligations in the NCA 
Operations and Maintenance account are attributed to support of burial 
(interment) operations. The remaining 60 percent is linked to cemetery 
maintenance activities and the administration of the headstone and 
marker, Presidential Memorial Certificate, and State Cemetery Grant 
programs. Establishing a ratio for total FTE per interment does not 
take into account these other missions.
    NCA continually evaluates improvements in its operational 
processes. Some of these improvements have allowed NCA to increase its 
efficiency to make the most efficient use of its resources. For 
example, NCA is expanding the use of pre-placed lawn crypts at its 
national cemeteries. These crypts are installed at the time of 
construction and help to reduce long-term maintenance needs and the 
time involved in conducting individual interments. Pre-placed crypts 
are essentially pre-excavated graves, and only require removal of 
approximately 18 inches of soil in order to perform the interment. In 
this way, the interment process is shortened and simplified.
    Question 34. The budget request for the Office of the Secretary 
touts an increased success rate for the average processing time for 
adjudication, or otherwise appropriate disposition, of Office of 
Employment Discrimination Complaint Adjudication (OEDCA) claims from 90 
days in fiscal year 2002 to 65 days in fiscal year 2004. It also notes 
that VA anticipates that the trend will continue into fiscal year 2005, 
with reductions to 60 days and to 55 days in fiscal year 2006. Has this 
speed efficiency come at the expense of the accuracy of these 
decisions?
    Response: OEDCA's efficiency in complaint adjudications and other 
dispositions has not come at the expense of accuracy. Since 
commencement of operations, OEDCA has enjoyed, and continues to enjoy 
outstanding success at the appellate level before the Equal Employment 
Opportunity Commission. The vast majority of OEDCA decisions reviewed 
on appeal by the Commission involve appeals by employees or applicants 
for employment who are challenging a finding of no discrimination. 
Since 1998, OEDCA's overall affirmance rate on the merits (i.e., 
decisions affirmed in whole) on appeal has been high--85.9 percent to 
date. The reversal rate on the merits (i.e., dispositions reversed in 
whole or in part) has been low--only 3.6 percent. The remaining 10.5 
percent involve miscellaneous dispositions unrelated to the merits of 
the complainant's appeal (e.g., dismissal of the appeal on procedural 
grounds, withdrawal/abandonment of the appeal, improper denial of a 
hearing by an EEOC judge, etc.). These affirmance/reversal rates attest 
to the quality and accuracy of OEDCA's decisions. OEDCA's increased 
speed and efficiency have resulted from a combination of streamlining 
its case processing procedures and contracting out certain types of 
cases that can be handled more efficiently by a contractor than by in-
house attorneys.
    Question 35. In fiscal year 2003, over $3 billion, more than 31 
percent of VA's total acquisition dollars, were spent on goods and 
services from small business vendors. Notwithstanding, the 
Administration's budget proposal states that there is a disturbing 
trend showing a decline in small business program accomplishments 
during the past several years. Does this proposed budget provide enough 
for the outreach efforts to inform the VA acquisitions professionals 
and service-disabled veteran-owned small businesses of contracting 
opportunities?
    Response: The Office of Small and Disadvantaged Business 
Utilization believes the fiscal year 2006 budget is sufficient for the 
necessary outreach efforts to inform VA acquisition professionals and 
service-disabled veteran-owned small businesses of VA contracting 
opportunities.
    Question 36. VA's Board of Veterans Appeals (BVA) is the component 
of the agency responsible for making a final decision on behalf of the 
Secretary for thousands of veterans' benefit claims that are presented 
for appellate review. After the advent of judicial review in the early 
1990's, BVA's backlog of pending cases rose due, apparently, to slowed 
decisionmaking productivity. More recently, BVA has reversed the trend 
and productivity has increased to pre-decline levels. Yet the added 
problem of a 75 percent remand rate has caused additional backlog 
concerns. What resources, if any, does this proposed budget anticipate 
will specifically address the remand problem?
    Response: The Board's remand rate for fiscal year 2004 was 56.8 
percent. For fiscal year 2005 to date (as of March 14, 2005) the annual 
remand rate stands at 44.43 percent, but it is trending lower due to 
remand reduction initiatives. The remand rate stands at 39.26 percent 
for the period February 1, 2005, through March 14, 2005, and the trend 
continues to improve.
    The Department has initiated measures to reduce avoidable remands. 
The Board conducted training for all attorneys and judges in ways to 
decrease avoidable remands. Under the direction of the Deputy 
Secretary, the Board and VBA together developed a tracking system to 
identify the causes of remands. When identified, the most persistent 
reasons for remands are addressed through training, or we may revise 
procedures. The Board will address the remand issue within existing 
resources.
    Question 37. It is my understanding that resources expended by BVA 
per case adjudicated for fiscal year 2004 was $1,302. For fiscal year 
2005, the cost is estimated to be $1,546, and for fiscal year 2006 the 
cost is projected to be $1,647. VA bases these estimates on the inverse 
relationship between the appeals decided per Veterans Law Judge and the 
dollar resources devoted to personal services. However, it is unclear 
how you count those personal service dollar resources. Are you 
combining and aggregating all FTE salaries at the Board to arrive at 
the figures? If so, are the anticipated increases due to cost-of-living 
increases for those employees or to actual incurred costs in processing 
claims?
    Response: The cost per case is determined by dividing the estimated 
number of decisions into the Board's total budget allocation. The 
actual cost per case for fiscal year 2004 was lower due to the remand 
conversion decisions and an increased number of decisions produced by 
overtime work. It is not anticipated that this will be the case in 
fiscal year 2005 or fiscal year 2006.
    The increases for fiscal years 2005 and 2006 reflect the projected 
cost of living increases for employees as well as reduced numbers of 
decisions processed. Final decisions take more time to produce than 
remand decisions.
    The Board issued several thousand remand decisions in cases that 
had previously been involved in Board evidence development during 
fiscal year 2004. The Board development process was invalidated by 
Disabled American Veterans v. Secretary of Veterans Affairs, 327 F.3d 
1339 (Fed. Cir. 2003), so the Board chose to remand all cases involved 
in development. Those cases were processed quickly by converting 
previously drafted development memoranda to remands; therefore, the 
cost per case was lower in fiscal year 2004.
    Question 38. Currently, BVA has transcription services performed by 
a unit in Wilkes-Barre, PA. This unit handles 59 percent of BVA's 
claims cases. It is suggested in the budget request that any overflow 
backlog of transcription requirements would be met by contractors. 
Would contracting out transcription services sacrificing accuracy?
    Response: Board internal quality reviews of transcripts produced by 
the transcription contractors found that the use of contractors does 
not sacrifice accuracy. The Board did discontinue two transcription 
contractors because their quality was inadequate. The Board continues 
to monitor contractors to ensure that they produce quality, accurate 
transcriptions.
    Question 39. As I understand it, BVA conducted 7,259 hearings in 
fiscal year 2004, and it expects an increase of 14 percent in hearings 
in fiscal year 2005 and another 9 percent in fiscal year 2006. How do 
you arrive at these numbers?
    Response: The projected 2005 and 2006 increases are based upon 
increased requests for hearings by appellants. The workload estimate is 
based upon the number of appeals pending with hearing requests, the 
resources available to the Board to conduct those hearings, and the 
historical percentage of claimants who appear for the scheduled 
hearings.
    Question 40. While the Office of General Counsel (OGC) has done a 
stellar job of settling tort claims administratively (89 percent), have 
there been any internal studies of the common aspects of the cases that 
required judicial action? Is there something further OGC can do to 
increase its performance level?
    Response: Although there have been no formal internal studies of 
the common.aspects of cases that are litigated rather than resolved 
administratively, OGC attorneys who handle administrative tort claims 
alleging medical malpractice cite the following reasons: (1) OGC finds 
that there is no liability for the claim, which the claimant may choose 
to dispute in court; (2) OGC finds there is exposure to liability on 
the claim, but the claimant and VA are unable to agree on the damages 
payable based on that exposure; and (3) OGC is unable to complete its 
investigation within the 6-month administrative claim period under the 
Federal Tort Claims Act, and the claimant decides to file suit rather 
than await VA's decision. The first and second reasons show that some 
litigation is necessary to assure the integrity of the administrative 
process. OGC should not settle claims with no liability or for more 
than their value. Of course, claimants may disagree with OGC's decision 
and litigation ensues. The third reason best lends itself to 
improvement, and OGC is working with the Veterans Health Administration 
to improve response times on claims by obtaining medical records more 
quickly so that a claims investigation may begin, and in obtaining more 
timely medical expert reviews that are the key to determining liability 
and the extent of damages.
    Question 41. The OGC has asked for an increase in its overall 
budget of some $3.2 million. Most of these increased funds (approx. 
$2.7 million) would be devoted to anticipated payroll requirements 
brought about by the expected COLA, and the balance would be expended 
for non-payroll items. The Administration's budget proposal states that 
OGC has borrowed over the years from the non-payroll account to support 
payroll requirements. Has OGC done an internal audit of its personnel 
requirements to ascertain why this seems to be a chronic problem? If 
so, what was the result of that audit? If not, does the OGC plan to do 
such an audit in the future?
    Response: The Office of General Counsel (OGC) audits its personnel 
requirements continuously to ensure that the number of attorneys and 
support personnel in the headquarters and field locations are 
sufficient to deliver quality, timely legal services to the Department. 
We have determined through this continuous audit process that 670 full-
time employees will allow us an adequate number of human resources to 
accomplish our mission. We have not had the budget authority during the 
past several years to meet that requirement.
    In each of the last 3 years, the pay raises exceeded projections by 
1.5 percent in FY 2003, 2.1 percent in fiscal year 2004 and 2 percent 
in fiscal year 2005. As OGC's payroll constitutes 95 percent of its 
budget authority, the unanticipated pay increases significantly affect 
the number, of employees that the budget will support. Specifically, 
with our average payroll cost per employee of approximately $98,000, 
(with benefits) for each 1 percent of unanticipated increase in payroll 
costs, we are unable to support eight employees. Accordingly, we have 
fallen short of our employment projections by 9 employees in fiscal 
year 2003, 20 employees in fiscal year 2004, and. 8 employees in fiscal 
year 2005. Moreover, differences between payroll projections and actual 
pay raises compound from year-to-year, as higher than budgeted pay 
raises must be absorbed during the following fiscal year. For example, 
we did not know what the final enacted fiscal year 2003 pay raise would 
be when we prepared the fiscal year 2004 budget.
    As a result of these factors, we instituted a hiring freeze in 
fiscal year 2003, because we exhausted non-payroll funding to pay for 
unfunded payroll expenses. At the end of fiscal year 2003, OGC offered 
buyouts to eligible employees, because our budget projection for fiscal 
year 2004 could not support the FTE we had on board in fiscal year 
2003.
    The difference between budgeted and actual pay raises for three 
consecutive years has had a significant impact on OGC's ability to fund 
budgeted FTE. Because 95 percent of OGC's requirements are payroll, 
they are unable to absorb these costs in non-payroll funding. However 
the additional funds included in this budget will help OGC address its 
pay and non-pay requirements.
    Question 42. The Administration's budget proposal states that OGC 
has hired paralegals using the funding transferred from non-payroll to 
travel and personal services, and it states this hiring has increased 
the capacity of attorneys to provide legal services. How has the OGC 
measured this increased productivity? What results were obtained?
    Response: During fiscal year 2005, the Office of General Counsel 
(OGC) fully implemented the use of a case and time management system 
(GCLAWs) that allows for comprehensive monitoring of workload and the 
time that our employees spend to address that workload. We are just 
beginning to develop the data from GCLAWs that will enable us to 
provide a comprehensive analysis of the increased capacity provided by 
paralegal specialists. We have developed a policy that promotes the 
hiring of paralegals, and that will ensure that our subordinate 
managers employ paralegals to extend the capacity of our attorneys in 
providing legal services.
    Our existing paralegal staff has demonstrated that they are able to 
make our attorneys more productive. Our paralegals interview witnesses, 
provide legal research, draft dispositive motions that limit or avoid 
time consuming and expensive hearings, and prepare documents and 
materials for depositions and hearings. This allows our attorneys to 
concentrate their efforts on preparing significant cases for hearing or 
trial and finalizing work started by the paralegals. The attorneys have 
the capacity to complete more cases--more effectively--with the 
assistance of qualified paralegals.
    We look forward to the opportunity to update the answer to this 
question as we develop analytical tools from GCLAWs to measure the 
impact described in the previous paragraph. We estimate that measurable 
data will be available by early in fiscal year 2006 to demonstrate the 
increased productivity allowed by our paralegal staff.
    Question 43. The Administration's budget proposal projects the 
opening of an Office of Inspector General (OIG) office at the Bay Pines 
VA Medical Center Office. Why is this necessary? What will this 
office's mission be? How long does VA anticipate that it will operate? 
What measures did OIG take to redeploy existing resources to meet its 
staffing needs in Bay Pines?
    Response: In order for the OIG's independent, objective oversight 
to keep pace with VA's expanding services and delivery locations, OIG 
is opening a regional office at the Bay Pines VA Medical Center. 
Staffed with auditors, health care inspectors, and criminal 
investigators, the OIG's Bay Pines office will provide the full range 
of audit, inspection, and investigative services across all VA programs 
and operations in the Southeast on a permanent basis. For the reasons 
cited below, and in consideration of the temporary deployments the OIG 
made during the Bay Pines and CoreFLS review last year, key 
stakeholders and VA found existing oversight resources inadequate.
    In 1996, the Congress enacted legislation expanding eligibility for 
the complete continuum of VA care, including outpatient care and 
prescription drugs, to all 25 million veterans. From 2000 through 2003, 
Bay Pines VA Medical Center, Veterans Integrated Service Network (VISN) 
8, had experienced a 69 percent increase in unique patients. VA 
operations in Florida today involve a VISN headquarters, 6 medical 
centers, 10 outpatient clinics, 30 community based outpatient clinics, 
11 veterans centers, 4 national cemeteries, and VBA's largest regional 
office. With the implementation of VA's Capital Asset Realignment for 
Enhanced Services plan, Florida as well as Puerto Rico will increase 
service to one of the largest veteran populations in the United States. 
With the expansion of VA services and the increase in number of 
veterans served comes; the opportunity for additional instances of 
waste, criminal activity, mismanagement, and abuse.
    As a result of these changes, the workload of OIG has dramatically 
increased. The Office of Investigations' current caseload approximates 
20 cases per FTE with a backlog of unassigned criminal and 
administrative cases. The Office of Audit has numerous audits and 
reviews identified to address significant areas of vulnerability that 
have the potential for millions of dollars in savings and recoveries, 
but continually has to suspend or postpone higher priority national 
audits to address an ever-increasing reactive workload. During the past 
several years alone 75 identified national reviews were either never 
started or were suspended. The Office of Healthcare Inspections, with 
36 operational FTE, had been operating on a ratio of I health care 
inspector for every 40 VA health care facilities and one Inspector to 
review every 1.3 million patient encounters. In addition, the Office of 
Healthcare Inspections has been able to investigate less than 10 
percent of the health care service and malpractice complaints received. 
In excess of 90 percent of the health care complaints received had to 
be referred to the Veterans Health Administration for internal review 
in order to receive timely review of a complaint.
    Question 44. What accounting methodologies did VA use to arrive at 
the return-on-investment of $49 to $1 (dollar impact of $3.24 billion/
cost of OIG operations at $66.4 million)?
    Response: The Inspector General Act of 1978, as amended, mandates a 
rigorous system of accountability through semiannual reporting to both 
Congress and the VA Secretary. Throughout the year, the OIG records 
results in the form of published reports and investigative actions. In 
the period in question, the OIG reported a better use of funds in the 
amount. of $2.8 billion; fines, penalties, restitutions, and civil 
judgments totaling $258 million; Fugitive Felon Program results in the 
form of overpayments and cost avoidance amounting to $117 million; 
dollar recoveries of $24 million; and questioned costs in VA programs 
of almost $17 million. The largest element of monetary impact comes 
from funds put to better use, which is defined by statute in the 
Inspector General Act, at Section 5(f)(4). These amounts come from 
actual dollar recoveries or as the result of agreed upon monetary 
impact. After aggregating the monetary impact of OIG operations, they 
establish a ratio between impact and general operating expenses for the 
period in order to calculate the return-on-investment measure.
    Question 45. The OIG has conducted an audit of part-time physicians 
to reassess time and attendance practices. Does it plan any future such 
audits of other professional health care workers such as specialized 
nurses in similar settings?
    Response: The OIG has conducted audits of part-time physicians to 
assess time and attendance practices as one aspect of the OIG's program 
to ensure that VHA patients receive appropriate medical care from 
privileged providers in the proper setting. The OIG considers the time 
VA physicians allocate to patient care activities, when compared to 
other duties, critical to the successful and efficient delivery of 
health care. The OIG also conducted a related review on nurse staffing, 
where they made recommendations to improve the management of nursing 
resources, promote high quality patient care, facilitate nursing 
recruitment and retention efforts, and enhance nurses' job 
satisfaction. The OIG will continue to focus on time and attendance 
issues, as a pulse point in its Combined Assessment Program reviews, as 
part of an overall effort to ensure that VHA employs the hospital staff 
that is appropriate to the medical needs of the hospital population.
    Question 46. The Office of Information and Technology (OIT) has 
requested an additional 76 FTE for fiscal year 2006 to prepare for 
staff losses due to projected retirements. The estimated FTE level for 
fiscal year 2006 is 532, up from 287 in fiscal year 2004. How much of 
this increase is necessary to provide direct support and how much is 
for gearing up for retirements? Once the retirements occur, what is the 
ideal staffing level for OIT and when does VA expect to be there?
    Response: All FTE are for new responsibilities (for example):
     Enterprise Project Management
     IT Exchange Consolidation
     508 Compliance
     Seamless Transition
     VA Web Page Consolidation and Hosting
     Enterprise Cyber Security Infrastructure ProgramNirtual 
Private Network (ECSIPNPN)
     Security Configuration and Management Program (SCAMP)
     Continuity of Operations (COOP)
     Enterprise Architecture
     Data Architecture Development
     Data Registry and Repository
     Registration Eligibility Contact Management
     Critical Infrastructure Protection
     Project Management Certification
    These all include continuing efficiencies or new requirements.
    The increase in FTE does not include the need for replacing 
upcoming retirements--that in itself is a one-to-one replacement. OI&T 
is acutely aware that the potential workforce must consist of a 
younger, diverse employee and include hires with new competencies and 
skills needed to accomplish future requirements. OI&T expects to be at 
end strength of 532 by the end of fiscal year 2006.
    Examples of hiring programs being used by OI&T:
     Vet IT--Hiring disabled veterans who have returned from 
Iraq and Afghanistan. Presently we have hired five disabled veterans 
that have recently been discharged from the military and three pending 
direct hire immediately upon discharge. VA Central Office has several 
disabled military soldiers that have volunteered to work at the VA 
while being treated at WRAMC--this allows them to receive valuable on-
the-job training in a real time work environment so they may be better 
prepared for a different career upon being discharged from the 
military.
     VA IT Intern Program--over 20 college graduates have been 
hired to begin their career in an IT environment with the Office of 
Information and Technology.
     College recruitment for special skills--The Office of 
Information and Technology has started to recruit from special programs 
in local colleges. An example is our efforts to recruit from the George 
Washington University Masters in Cyber Security Program. Programs like 
this are preparing graduates with state-of-the-art education in Cyber 
Security and bring valuable learning experiences to VA.
     Project Management certification--VA is making a concerted 
effort to increase the number of certified Project Managers to run all 
major projects. At this point, we have a certified Project Manager for 
each Project 300 submitted to OMB.
                               __________
  Department of Veterans Affairs Responses to Post-Hearing Questions 
                       From Senator Richard Burr
    Question 1: According to the NIH, more than 18 million people in 
the U.S. have diabetes and the disease has substantial costs on 
Medicare and veterans health programs. Veterans diagnosed with diabetes 
on average cost the Department of Veterans Affairs considerably more 
than those without diabetes. In fact, the American Diabetes Association 
(ADA) says diabetes is the main cause of kidney failure and new onset 
blindness in adults and a major cause of heart disease, limb amputation 
and stroke, and costs the Nation about $100 billion each year.
    At the same time we've begun to understand diabetes' deadly and 
costly complications, research has firmly established the importance of 
tight control of blood glucose levels to successfully manage diabetes 
and prevent its complications.
    The VA is currently considering a proposal to standardize blood 
glucose testing equipment made available to veterans suffering with 
diabetes. Since there is often a clear patient preference for a 
particular type of testing equipment, concerns have been raised about 
the impact on patient care and VA health system costs of moving to a 
single award contract. Standardization of certain products purchased by 
VA has shown savings in some areas, but diabetes may be different. 
Should access to varying types of diabetes testing equipment be limited 
in the VA at the same time health experts and other Administration 
initiatives are working to advance diabetes self monitoring?
    Please detail the efforts of the Department of Veterans Affairs to 
standardize diabetes testing equipment and explain what the expected 
effect of such standardization will be.
    Response: While VHA plans to continue to explore some form of 
standardization in this area, as the initiative moves forward it will 
be different from the initial concept, especially in one very important 
way. The initial concept contemplated an award for a single Self 
Monitoring of Blood Glucose (SMBG) device, which would be utilized, 
exclusively across VA, except when medical need dictated the use of an 
alternate device. The current evaluation and planning is focused on 
allowing each VA patient to continue to use their existing device, 
while identifying a single device that would be used for newly 
diagnosed diabetic patients. This ``new'' device could be one of the 
three commonly used by VHA, or it could potentially be a device not 
currently used by large numbers of VA patients. This approach will 
result in no fewer devices and potentially one additional device, and 
patients will not be required to stop using their existing devices.
    At this time, VHA has not completed its interdisciplinary SMBG 
review. However, VHA believes that by modifying its approach to 
standardization as described below, when an initiative is pursued it 
will be in compliance with the intent of the House Report 108-674 
statement that multiple vendors provide the best opportunity for 
competition.
    VA agrees that veterans with diabetes must receive the best care 
possible, including the use of reliable, state-of-the-art SMBG 
equipment with which they are comfortable. Therefore, if the 
interdisciplinary review team's decision is to pursue a national 
contract for a SMBG device, VHA will identify only those patients who; 
1) are newly diagnosed, or 2) request conversion from their present 
device as candidates for the contracted device.
    No veteran will be forced to change equipment; however, introducing 
new equipment as an option may allow VA to achieve significant savings 
on equipment and supplies provided to veterans. By allowing veterans to 
continue to use their existing devices, if that is their preference, VA 
will indeed be using multiple vendors to supply SMBG equipment and 
induce competition as included in the House Report language. In fact, 
the Veterans Integrated Service Networks (VISNs) are already 
successfully employing separate standardized SMBG contracts at the VISN 
or local level.
    A. Quality of care: While the National Diabetes Fact Sheet (Centers 
for Disease Control and Prevention) notes that 8.7percent of the U.S. 
population over 20 years of age had diabetes in 2002, over 19 percent 
of the veteran population has diabetes--making the veteran population a 
very high-risk population. Accordingly, VHA is committed to giving the 
best possible health care and to embrace the latest technology and test 
equipment in a cost-effective manner, to appropriately manage this 
population to prevent higher rates of morbidity and mortality. VA 
believes it is possible to improve SMBG standardization as well as 
maintain and/or improve the quality of care for our diabetic patients.
    The role that SMBG can potentially play in the treatment of 
patients with diabetes remains a topic of debate. While studies exist 
which support SMBG can provide clinical benefit in some patients with 
type I diabetes, the evidence for similar benefit in type 2 diabetes 
patients, which is the predominate type of diabetes in VA, is much less 
convincing.
    Before VA began consideration of further SMBG standardization, a 
clinical determination of its feasibility was performed by reviewing 
published studies about the beneficial outcomes resulting from glucose 
monitoring and discussing the issues with key clinical staff. While 
some studies have shown modest benefits with intensive control for type 
2 diabetic patients who are not using insulin, there is no randomized 
trial linking frequent home blood glucose monitoring with improved 
clinical outcomes. Presently, studies on SMBG have only evaluated the 
laboratory test HbA1 c as a surrogate endpoint. Whether or not SMBG 
plays a role for patients with type 2 diabetes achieving or even 
maintaining glycemic control remains an issue of legitimate debate.
    The vast majority of SMBG studies to date have been unable to show 
that frequent monitoring of blood glucose results in improved HbA1 c 
values, while only a few have shown only modest benefit. In fact, a VA 
study showed that reducing the number of strips dispensed did not 
result in deterioration of glycemic control. Patients who demonstrate 
good glycemic control while on a stable oral regimen may require few or 
no strips. In most cases, periodic HbA1c is sufficient to ascertain the 
level of glycemic control. Another recent study showed that SMBG did 
not result in improved HbA1 c values in patients with good or adequate 
glycemic control; however, SMBG (6-10 strips/month) did benefit those 
with very poor glycemic control at baseline. VA recognizes that when 
metabolic control of otherwise stable patients worsens or changes due 
to illness, exercise, diet or as adjustments are made to their 
medication regimen, SMBG requirements may increase.
    Impact of switching testing equipment: Each of VA's 21 Veterans 
Integrated Service Networks (VISNs) has been standardized to a single 
outpatient blood glucose monitoring device for many years. Three VISNs 
standardized to the Lifescan system, six VISNs to the Abbott system, 
and twelve VISNs to the Roche system (both of the previous VISNs which 
now comprise VISN 23 use the Roche system). Most, if not all of these 
past standardization efforts required some degree of conversion from 
one device to another. VA is unaware of any significant quality, 
safety, or patient satisfaction issues that may have been caused by 
these past standardization efforts.
    Since SMBG standard ization'has been successfully demonstrated at 
both the local and VISN levels, it is not expected that changing the 
scope of standardization effort from the VISN level to the national 
level would introduce any quality of care concerns.
    B. Direct and indirect costs: VA has estimated a range of capitated 
conversion costs should we move forward with some form of SMBG 
standardization. The costs range from $5 per person to $25 per person 
and are dependent upon the conversion method used. Based on the level 
of discount expected, the $5 conversion would be recouped with the 
first 2-month supply of strips issued and is based on a group education 
model. Similarly, the $25 conversion cost would be recouped with the 
first 10-month supply of strips issued and is based on one-on-one 
education model.
    It is not possible to determine the overall cost to the entire VA 
health care system until such time as an award is made. For example, if 
an award is made to one or more vendors who currently have a large 
market share in VA, there will be less cost than if the vendor has a 
smaller VA market share.
    In order to minimize the direct and indirect conversion costs of 
SMBG standardization, VA can develop contract options which: 1) require 
the manufacturer to provide free equipment upgrades, at VA's 
discretion; 2) mandate stable pricing over the entire length of the 
contract (up to 8 years); and 3) not require mandatory national 
conversion to a single device, but allow individual VISNs to implement 
the contract at their own pace.
    While precise estimates cannot be projected until an award is made, 
VA estimates that the savings can potentially far out weigh transition 
costs. This estimation is based on current cost data and past 
contracting experience. VA's purchase of SMBG strips has increased 70 
percent in 5 years--from 91 million strips in fiscal year 1999 to 156 
million strips for fiscal year 2004. From fiscal year 1999 through 
fiscal year 2004, VA's average cost per strip and total number 
purchased, with total costs was:

 
----------------------------------------------------------------------------------------------------------------
                              Year                                Price/Unit       Volume             Cost
----------------------------------------------------------------------------------------------------------------
FY 1999.........................................................       $0.46        91 million     $41.9 million
FY 2000.........................................................        0.41       106 million      43.5 million
FY 2001.........................................................        0.37       123 million      45.5 million
FY 2002.........................................................        0.35       136 million      47.6 million
FY 2003.........................................................        0.34       144 million      49.0 million
FY 2004.........................................................        0.34       156 million      53.0 million
----------------------------------------------------------------------------------------------------------------

    Based on past standardization contracting experience, it is 
estimated that VA could realize a cost savings of approximately $11 
million to $18 million per year for a total of $88 million to $144 
million over the life of an 8-year contract. By carefully crafting a 
contract solicitation, VA can minimize conversion costs so that the 
majority of the cost reductions accrue directly to VA.
    Should the work group recommend further SMBG standardization in VA 
and should VA move toward that goal, the SMBG work group, Pharmacy 
Benefits Management office, and VISN clinicians will develop measures 
and monitor implementation efforts overtime.
    C. Public input: VA has a well-established and independently 
validated process of using an objective, evidence-based approach for 
all of its pharmacy standardization efforts and is applying these 
techniques to its review of SMBG devices. In September 2003, VA formed 
a multidisciplinary medical professional advisory committee to conduct 
the literature and product reviews. This advisory committee is 
comprised of physicians, nurses, diabetic educators, medical 
technologists, pharmacists, and contracting staff whose charge is to 
conduct an evidencebased SMBG standardization feasibility assessment.
    VA will allow existing patients to continue using their present 
devices and only require use of a new device for: 1) newly diagnosed 
patients; 2) patients who need replacement devices; and 3) patients who 
desire a switch to the contracted device. As is the case for any 
pharmaceutical or medical device, patients who have a demonstrated 
clinical need for a particular SMBG device will be able to obtain that 
device, even if it is non-contract, through VA's non-formulary request 
process.
    While VA is relying exclusively on the advisory group for 
recommendations and guidance, VA has also received a large amount of 
input from other stakeholders and incorporated all information received 
into the deliberative process. VA continues to welcome stakeholders to 
forward relevant information to the SMBG work group.
    Question 2: Public Law 106-419, which was enacted on November 1, 
2000, directed the Department of Veterans Affairs to conduct an 
independent follow-up study of the National Vietnam Veterans 
Readjustment Study (NVVRS) cohort that was first assessed in the mid-
1980's and report on the findings by October 1, 2004. This follow-up, 
known as the National Vietnam. Veterans Longitudinal Study (NVVLS), 
will produce important information about the long-term health 
consequences of combat exposure at a time when a new cohort of 
combatexposed troops could benefit from the information. The deadline 
passed months ago, and no report of findings has been submitted. Can 
you explain why not? What is Department of Veterans Affairs' plan for 
complying with the Public Law 106-419 mandate, and when will the report 
of these important study findings be delivered to Congress?
    Response: In December 2003, the Office of the Inspector General 
(OIG) was asked to conduct an audit to assess the effectiveness of the 
procurement and project management processes used for the National 
Vietnam Veterans Longitudinal Study. That same month, VA officials met 
with staffs of the House and Senate Committees on Veterans' Affairs to 
advise them of the delay in completing the study. The OIG has recently 
released a draft report on the issue and plans to issue a final report 
soon. VA is carefully reviewing the information in this draft report 
and is considering management options based on the findings.
                               __________
Department of Veterans Affairs Responses to Post-Hearing Questions From 
                     Senator John D. Rockefeller IV
    Question 1: Co-payments and fees as budget gimmicks: Why does this 
Administration persist in submitting a budget that suggests doubling 
prescription drug co-payments and imposing a $250 enrollment fee on 
some of our middle income veterans when such provisions have been 
consistently rejected?
    Response: Eligibility Reform opened VA health care to all veterans 
and established an enrollment system based on priority levels as a tool 
to manage demand for VA health care within available resources. By law, 
the VA Secretary must decide annually whether VA has adequate resources 
to provide timely, high quality care for all enrolled veterans. Each 
year, VA reviews actuarial projections of the expected demand for VA 
health care in light of the expected budgetary resources and develops 
policies accordingly. The cost-sharing policies proposed in the fiscal 
year 2006 Budget follow from this mandated use of enrollment priority 
levels to manage demand for care within available resources and is in 
line with the premium of $230 paid by military retirees in TRICARE. VA 
strongly believes that these policies represent the best opportunity 
for VA to secure the necessary resources to serve our core population--
veterans with service-connected disabilities, those with lower incomes, 
and veterans with special health care needs.
    Question 2: General Budget: How can you justify submitting a budget 
that only increases VA health care by $522 million--not even enough to 
cover inflation and VA employee payroll?
    Response: The 2006 estimate of $22.377 billion represents a 3.5 
percent or $761 million increase over the 2005 estimate in Medical 
Services budget authority. Given the current fiscal environment, it is 
more important than ever that VA concentrate its resources, policies 
and strategies on those veterans identified by Congress as highest 
priority. These resources will allow VA to treat more than 5.2 million 
patients. Those in Priorities 1 to 6 will comprise 78 percent of the 
total number of veteran patients in 2006. This will represent the third 
consecutive year during which our core constituency will increase as a 
percentage of all veterans treated.
     About 9 of every 10 medical care dollars in 2006 will be 
devoted to meeting the health care needs of our highest priority 
veterans.
     The budget ensures continuation of the Presidential 
priority where VA is working closely with the Department of Defense to 
ensure that service members returning from Iraq and Afghanistan and 
their families are provided timely, high-quality services.
     The 2006 budget request calls for a total investment of 
$2.2 billion in enhanced mental services, which is $100 million above 
the 2005 funding level. This budget proposal ensures a full continuum 
of care for veterans with mental health issues, to include 
comprehensive treatment for those veterans with post-traumatic stress 
disorder (PTSD).
     The 2006 budget calls for $1.2 billion for prosthetics and 
sensory aids, a $100 million increase over 2005.
     Funding for non-institutional care would increase by more 
than 18 percent over 2005, with a total investment of $400 million in 
the President's proposed budget.
     Funding allows for VA to address inflation by $540 million 
and payroll item increases by $859 million.
    Follow-up Questions: How is VA planning to serve the more than 
192,000 returning veterans, including our National Guard and 
Reservists, from fighting in Iraq and Afghanistan? How have these new 
veterans affected the workload in VAMC to date? And in our Vet Centers?
    Response: VA will serve the Reservists and National Guard members 
using its expansive healthcare system and will capitalize on the 
capacity and success of its Vet Centers. It is important to note that 
not all veterans will present to VA for care or services. Our latest 
data indicate that as of December 2004, 244,054 Operation Iraqi Freedom 
(OIF) and Operation Enduring Freedom (OEF) veterans had separated from 
active duty. Approximately 20 percent of these veterans (48,733) have 
sought health care from VA. A very small number (930) have had at least 
one episode of hospitalization. Reservists and National Guard members 
make up the majority of those who have sought VA health care (27,766, 
or 57 percent). Separated active duty troops have accounted for 43 
percent (20,967). All in all, OIF/OEF veterans have accounted for only 
slightly more than 1 percent of our total veteran patients (4.7 million 
in fiscal year 2004); however, many of them will, of course, have 
suffered much greater acute trauma.
    Since the inception of the Vet Center program in 1979, the Vet 
Centers have served over 2 million veterans. Annually, the Vet Centers 
see, on the average, approximately 130,000 veterans and provide over 
1,000,000 visits to veterans and family members. In fiscal year 2003, 
the Vet Centers saw 1,931 OEF/OIF veterans, and in fiscal year 2004, 
they saw 9,597 OEF/OIF veterans. We are estimating that in fiscal year 
2005, we will see 11,184 returnees from Afghanistan and Iraq in the Vet 
Centers. OEF/OIF veterans and their family members had 2,450 visits to 
Vet Centers in fiscal year 2003 and 18,819 visits in fiscal year 2004. 
At current rates of utilization, we are projecting 29,000 visits for 
OEF/OIF veterans for fiscal year 2005. The Vet Centers are complemented 
by the medical care capacity of medical centers and community based 
outpatient clinics (CBOCs), which support a full spectrum of clinical 
care.
    Meeting the comprehensive health care needs of returning OIF and 
OEF veterans who choose to come to VA is one of the Department's 
highest priorities. We are confident that our current budget and the 
Presidents' fiscal year 2006 budget request contain sufficient funding 
to allow us to continue to provide for all the health care needs of 
these veterans.
    Question 3: PTSD: Medical experts warn that one in six veterans or 
more returning from Iraq and Afghanistan will face serious issues on 
Post-Traumatic Stress Disorder (PTSD). How is VA in general preparing 
for this huge issue?
    Response: We believe that our capacity to care for veterans with 
PTSD is sufficient.
    As of December 2004, 4,783 patients at VAMCs were coded with a 
diagnosis of suspected PTSD. In addition, 2,082 veterans received 
services for PTSD through our Vet Centers. Allowing for those who have 
received services at both VAMCs and Vet Centers, a total of 6,386 
individual OIF/OEF veterans had been seen with potential PTSD at VA 
facilities following their return from Iraq or Afghanistan. To put this 
number in the context of our capacity, in fiscal year 2004, we saw 
approximately 279,000 patients at VA health care facilities for PTSD 
alone and 63,000 in Vet Centers. Thus, OIF and OEF veterans account for 
only about 2 percent of VA's PTSD patients.
    To address the PTSD needs of these veterans, and, indeed, of all 
veterans with PTSD, we have in place some of the most comprehensive 
programs and initiatives in the country.
     VA developed a computerized clinical reminder for its 
clinicians. This reminder opens for all OIF/OEF veterans and reminds 
clinicians to screen the patient for symptoms of PTSD, substance use 
disorder, or depression.
     VA will invest funding in new programs for PTSD, OIF/OEF 
veterans, and for substance use disorder treatment programs as it 
implements the mental health provisions of PL 108-170.
     VA will invest additional funds in fiscal year 2005 in 
establishing PTSD Clinical Teams in those medical centers and large 
CBOCs that currently do not have those programs. Other funds will be 
invested in fiscal year 2006 to continue expansion of PTSD services and 
OIF/OEF mental health services.
     The Vet Center program is a special VHA program designed 
to provide readjustment counseling to veterans exposed to the uniquely 
stressful rigors of military service in a combat theater of operation. 
VA's Vet Center program consists of 206 community based Vet Centers 
located across the country, outside of the larger medical facilities, 
in easily accessible, consumer-oriented facilities with staff that are 
highly responsive to the needs of local veterans. Vet Centers have had 
over 35,000 encounters with more than 15,000 veterans returning from 
Afghanistan and Iraq.
     VA Readjustment Counseling Service (RCS) is in the process 
of adding 50 Global War on Terror (GWOT) veterans as peer counselors to 
assist troops in the transition from military to civilian life. These 
peer counselors provide a natural connection to separating service 
members to outreach on issues of readjustment and PTSD.
     Letters have been sent by the Secretary to over 230,000 
returning OIF and OEF troops informing them of the availability of VA 
to meet their healthcare and readjustment needs, including the 2-year 
eligibility for care provided under Directive 2002-049.
     Through the Seamless Transition Task Force, and now the 
Seamless Transition Office, VA has established skilled points of 
contact in each VAMC and has instituted outreach to demobilization 
centers by Vet Center and VBA staff. VHA placed Social Work case 
managers in major DoD hospital facilities such as Walter Reed Army 
Medical Center, Madigan Army Medical Center, and National Naval Medical 
Centers, Bethesda to facilitate the transition of OIF/OEF Veterans to 
VA.
     144 Specialized PTSD programs exist in all VA's 21 
Networks, including outpatient, inpatient and residential care 
programs.
     VA, in conjunction with DoD,. established a Clinical 
Practice Guideline (CPG) for the treatment of PTSD. To our knowledge 
this is the first CPG for PTSD that was ever created.
     In 2004 a new Mental Illness Research, Education and 
Clinical Center (MIRECC) was established at VAMC Durham to focus on 
issues of post-deployment health for returning OIF/OEF Veterans. It 
will collaborate with the National Center for Post-Traumatic Stress 
Disorder (NCPTSD) and the nine other MIRECCs as well as with DoD and VA 
Office of Research and Development and Employee Education Service.
     VHA also established a new MIRECC, Denver, CO to focus on 
suicide and its prevention--a growing concern in the OIF/OEF 
population.
     VA maintains the National Center for PTSD, which promotes 
research, and education on PTSD within VA and in collaboration with 
DoD. The NCPTSD web site, www.ncptsd.org, describes the NCPTSD 
Divisions and their accomplishments. and provides valuable Fact Sheets 
for clinicians, veterans, their families and the general public.
     NCPTSD Divisions include the Executive Division (White 
River Junction) which houses the Published International Literature on 
Traumatic Stress (PILOTS) data base of all English language 
publications on PTSD and some in foreign languages as, well.
     The Behavioral Sciences Division (Boston) has carried out 
many collaborative studies on PTSD psychotherapy and created assessment 
tools for PTSD. Boston is also home for the Women Veterans Health 
Division of the NCPTSD, created in 1992 to address the issues of the 
increasing numbers of women veterans in our Armed Forces.
     The Biological Sciences Division (West Haven) focuses on 
basic science of PTSD, identifying the physiological and 
neuroanatomical changes associated with PTSD and biological process to 
PTSD care.
     The Clinical Laboratory and Education Division (Palo Alto) 
provides practical training for advanced students of PTSD care from 
across the Nation. This division, in collaboration with VA Employee 
Education Service, also created the award-winning series of videotapes 
on the unique PTSD issues of ethnic/cultural groups of veterans 
including Native Americans, African Americans, Hispanic Americans and 
Asian/Pacific Islander Americans. Videos for each group address mental 
health clinicians, other health care providers and veterans and their 
families.
     The NCPTSD created the Iraq Clinician War Guide in 2003 to 
assist VA clinicians in meeting the needs of veterans returning from 
Iraq and Afghanistan. It was modeled after a similar publication 
created at the time of the Persian Gulf War. In 2004 the Iraq War Guide 
was released in revised form with new chapters contributed by U.S. Army 
clinicians dealing with troops being treated for combat related limb 
amputations at Walter Reed Army Medical center. Issues of families of 
wounded veterans are also addressed.
     VHA collaborated with DoD in the Treating War Wounded 
satellite broadcast in April 2003. This program focused traditional 
combat injuries as well as chemical, bacteriological and radiological 
injuries and mental health issues. It has since been transformed into a 
Veteran Health Initiative hard copy, CD and web-based training tool.
    Follow-up Question: GAO issued a report in September 2004 
highlighting the problems of sharing data between DoD and VA which 
makes it harder for VA to plan to serve veterans with PTSD. Are you 
aware of this report and these issues? If so, what are you doing to 
remedy the problem? If not, will you follow up and let me know how VA 
will coordinate with DoD on this data and coordination?
    Response: GAO reviewed DoD's efforts to identify service members 
who have served in Iraq and Afghanistan and are at risk for PTSD, and 
VA's efforts to ensure that PTSD services are available for all 
veterans. GAO concluded that VA lacks the information it needs to 
determine whether it can meet an increase in demand for VA PTSD 
services. GAO recommended that VA determine the total number of 
veterans receiving PTSD services and provide facility-specific 
information to VA medical facilities and Vet Centers.
    VA concurred with this recommendation and in October 2004, 
consolidated the necessary data into a national report and distributed 
the report to all VISNs, medical centers, and Vet Centers to assist 
them in estimating potential PTSD workload expansion. VA updates and 
distributes this report on a quarterly basis.
    VA also identifies related demographic data requirements that 
assist in determining expanded workload demands. Fundamental to all of 
these efforts is DoD's timely provision of demographic, health and 
exposure information to VA. DoD has supplied demographic data for 
returning veterans. VA has analyzed and trended these data quarterly, 
and they are then provided to the network offices for follow-up 
outreach efforts.
    VA continues to work with DoD's provision of basic post-deployment 
health data which assists VA in providing health care to individual 
veterans. Those data assist us in better understanding and planning for 
the health problems for all OIF/OEF veterans. Although' DoD officials 
have provided VA with some useful demographics on separated veterans, 
we continue to strengthen our cooperative ties with DoD mental health 
officials. We are hopeful that information sharing will be expedited 
and are especially encouraged by recent deliberations of the VA/DoD 
Health Executive Council to highlight mental health issues as a primary 
focus.
    Follow-up Question: What is being done to support and enhance Vet 
Centers to fulfill the needs of returning veterans? What special 
outreach is being done for National Guard and Reserve units?
    Response: The Vet Center program's capacity to provide outreach to 
veterans returning from the Global War on Terrorism (GWOT) in the 
theatres of combat operations in Afghanistan and Iraq has been 
augmented by VA. Specifically, the Vet Centers have hired and trained 
up to 50 new outreach workers from among the ranks of recently 
separated GWOT veterans at targeted Vet Centers. Augmented Vet Center 
outreach is primarily for the purpose of providing information that 
will facilitate a seamless transition and the early provision of VA 
services to new returning veterans and their family members upon their 
separation from the military. These positions are being located on or 
near active military out-processing stations, as well as National Guard 
and Reserve facilities. New veteran hires are augmenting Vet Center 
services by providing briefing services to transitioning servicemen and 
women regarding militaryrelated readjustment needs, as well as the 
complete spectrum of VA services and benefits available to them and 
their family members. These Vet Center points of contact for OIF/OEF 
provide the link to other members of the VA team at VBA and VHA for 
additional services to meet the veteran/family needs. The new veteran 
hires are also organizing local community activities and ``town hall 
meetings'' to provide information and education about VA, DoD, and 
other community support services available to veterans and family 
members. During these community offerings new veterans are also able to 
view the video, ``We Are By Your Side,'' to increase their knowledge of 
other benefits that they might be eligible to receive.
    Extensive VA outreach briefings have been conducted for the senior 
leadership in the Army National Guard and Army Reserve. Letters from 
the Secretary of Veterans Affairs, information toolkits and a copy of 
the video,'' We Are By Your Side,'' have been sent to the Chiefs of 
Staff for all services and the Reserve Chiefs. VA has also sent letters 
to separating service members, which welcomes them as new veterans and 
instructs them on the enrollment process for VA care as well as 
applying for disability benefits. VBA outreach coordinators and Vet 
Center staff provide further information to service members at 
mobilization sites as part of the Transitional Assistance Program (TAP) 
for National Guard/Reserve personnel who are separating from active 
duty to reserve or civilian status. VA Outreach coordinators will also 
be allowed blocks of time on the unit training schedule and during 
family programs to brief on VA Benefits/Services and home station.
    Recently, VA authorized establishment of its newest Vet Center in 
Nashville, Tennessee. This initiative represents a collaborative effort 
between VA's Readjustment Counseling Service and the Veterans 
Integrated Service Network 9 for the purpose of augmenting VA's mental 
health and related services to local veterans.
    Follow-up Question: Since it can take time for PTSD to manifest, is 
action needed to lengthen the eligibility of National Guard and 
Reservists so that when they need care, they can get it? Can assure me 
that they will be covered when they need the care?
    Response: Under 38 U.S.C. Sec. 1710(e)(1)(D) and 
Sec. 1710(e)(3)(C), veterans who have served in combat may enroll in 
the VA health care system and, for a 2-year period following the date 
of their separation from active duty, receive VA health care without 
co-payment requirements for conditions that are or may be related to 
their combat service. If they do enroll in the VA health care system, 
they may continue their enrollment following the initial 2-year period, 
but may be subject to any applicable copayment requirements.
    For combat veterans who do not enroll with VA during the 2-year 
post-discharge period, eligibility for enrollment and subsequent health 
care is subject to such factors as a service connected disability 
rating, VA pension status, catastrophic disability determination, or 
financial circumstances. If PTSD appears in a non-enrolled combat 
veteran following the end of his or her 2-year period of eligibility, 
and is subsequently determined to be service-connected, that veteran 
would then become eligible for enrollment in Priority Group 1, 2, or 3, 
and thus they would be able to receive needed care.
    Question 4: Gulf War Veterans' Illnesses (GWVI): Last year, former 
Secretary Principi pledged $60 million in continuing research over 
several years for Gulf War Veterans' Illnesses. This is an issue that 
has concerned me for over a decade. This VA budget cuts $9 million from 
research. What does this tell this Committee and veterans about the 
VA's long-term commitment to research on Gulf War Veterans Illnesses 
(GWVI)? And how will it affect recruitment of physicians?
    Response: Funding for Gulf War Veterans' Illnesses: VA remains 
committed to continuing research into the causes of and potential 
treatments for GWVI and agrees that it essential to find answers to 
what is causing GWVI and to identify appropriate treatments.
    At a press conference on November 12, 2004, former Secretary 
Principi announced that VA would commit up to $15 million in additional 
Federal funding in fiscal year 2005 to support continued research into 
the causes of and potential treatments for GWVl. He noted that this 
represents VA's single largest set-aside of research funding for a 
specific area of investigation and almost 20 percent of all new 
research grant awards for fiscal year 2005. Although VA presently has 
no earmarks beyond fiscal year 2005, the Department is committed to 
fund scientifically, meritorious research approved through VA's merit 
review process in future years.
    As of February 2005, VA has approved 28 new projects for funding 
totaling $4.9 million. A specific program announcement to solicit 
proposals for research directed to understanding illnesses affecting 
Gulf War veterans was recently issued. To assure that the results of 
this research are credible to the scientific community, it is crucial 
that all of these studies undergo the same intensive peer review and be 
held to the same standards of scientific rigor as all projects 
sponsored by VA research. To manage this review process, VA is creating 
a new merit review panel and has received over 60 nominations for the 
peer review panel needed to evaluate solicitations received in response 
to the GWVI program announcement. In addition, recruitment for a 
portfolio manager for deployment health is underway. The deployment 
health portfolio will include research about GWVI.
    VA will also establish a center dedicated to the investigation of 
potentially effective treatments for GWVI. The center will utilize 
observational and epidemiologic methods to identify promising therapies 
and will conduct pilot studies that may serve as preludes for more 
definitive clinical trials. A meeting of the planning committee for the 
GWVI Treatment Center is being scheduled for spring 2005.
    Recruitment of Physicians: While VA's appropriated budget is 
relatively small compared to agencies such as the National Institutes 
of Health (NIH) and the National Science Foundation (NSF), VA research 
makes a significant contribution to the advancement of medical science. 
By devoting nearly 70 percent of the research budget to supporting over 
2,200 investigator-initiated research projects, VA maintains a climate 
of scientific inquiry and rigor that continues to attract physicians of 
the highest caliber.
    Within the broad range of research from the very basic as well as 
applied research, VA highly values research that specifically addresses 
medical issues that are most relevant to the veteran population. In 
many such areas, VA is widely regarded as an international leader, 
including research related to rehabilitation and health services 
delivery. VA also emphasizes research that capitalizes on its unique 
strengths, such as the integrated delivery system and the electronic 
medical record. The VA Cooperative Studies Program, for example, is 
internationally recognized for conducting the highest quality, multi-
center studies that address clinically important topics that are 
difficult, if not impossible, to perform in other settings.
    Question 5: Rehabilitation for Returning Veterans: Medicine and 
care in the combat zones has improved in extraordinary ways so that 
many of our soldiers come home, but some of those who make it have 
severe wounds, including loss of limbs or mobility. What new efforts 
are underway to provide rehabilitation for such veterans, including 
future employment opportunities? How is VA reaching out to non-profits 
and private sector groups who have experience in training and 
employment?
    Response: Senate report 108-353 directed VA to establish a new 
prosthetics and integrative health care initiative. Additionally, 
Public Law 108-422 (section 302) required VA to establish centers for 
research, education and clinical activities on complex multi-trauma 
associated with combat injuries. Both provisions focus on furnishing 
care to combat injured patients who have sustained amputations and 
other severe and lasting injuries.
    VA is committed to providing veterans of the Operation Iraqi 
Freedom/Operation Enduring Freedom (OIF/OEF) conflict with the best of 
both modern medicine and integrated holistic rehabilitative care and 
treatment. It is VA's goal to provide a seamless transition from the 
excellent care and rehabilitation provided by military treatment 
facilities, such as Walter Reed Army Medical Center (WRAMC), to VA 
facilities with high level expertise and training to meet ongoing 
specialty care needs. The Secretary of Veterans Affairs has designated 
four VA medical centers, based on their current level of expertise, as 
Polytrauma Centers. The Centers are located at Richmond, Virginia, 
Tampa, Florida, Minneapolis, Minnesota, and Palo Alto, California. 
These comprehensive medical centers will have a full spectrum of 
specialty and subspecialty services. The Centers will provide medical 
care and rehabilitation to service members sustaining multiple 
conditions such as amputation, traumatic brain injury, visual and 
auditory impairment, post-traumatic stress as well as other mental 
health conditions, complex orthopedic injuries, wounds, and spinal cord 
injury.
    Additionally, through the Veterans Benefits Administration's 
Vocational Rehabilitation and Employment Service (VR&E), VA continues 
to implement new strategies and partnerships to meet the changing 
rehabilitation and employment needs of all our disabled veterans, 
including those with severe wounds such as loss of limbs and loss of 
mobility. Veterans with the most severe wounds are integrating into all 
of our programs. The following are some of the more significant actions 
recently taken.
     VR&E has developed a pocket-sized guidebook (Quickbook), 
which provides detailed information about VR&E benefits. This Quickbook 
can be left at the bedside of injured service members who can then 
reference it as a resource for future benefits when they are ready.
     VR&E employees or vendors provide timely contact with 
wounded service members and veterans, including those with loss of 
limbs and mobility, at military treatment facilities and. VA Medical 
Centers. During this contact the injured service member or veteran is 
provided basic information about VR&E benefits, the above referenced 
Quickbook, and contact information for the Regional Office that will be 
able to process their claims for VR&E benefits. Depending on the length 
of stay in the treatment facility, some of these injured men and women 
participate in an assessment of interests, aptitudes, and abilities and 
are provided employment information for their local area as well as 
provided guidance on how to access employment community resources.
     In October 2004, VR&E Service initiated a pilot test of a 
new Five-Track Employment Process that provides five specialized 
program and service delivery options for veterans with disabilities. 
The Five-Track Employment Process uses triage techniques for timely 
assessment of veterans' needs to quickly direct them into specialized 
services and the appropriate track for obtaining suitable employment.
     VR&E works cooperatively with private sector, public, and 
non-profit employment resources to increase employment opportunities 
for all disabled veterans, including those with severe wounds, 
amputations, or loss of mobility. VR&E field station personnel continue 
to utilize organizations such as Jewish Vocational Services, Goodwill 
Industries, and Salvation Army to provide rehabilitative services, 
including vocational assessments and work adjustment training. 
Specifically these organizations provide an opportunity, in a non-
competitive environment, to test out and relearn employment skills. For 
example, a person with a recent amputation and new prosthetic device 
can practice employment skills using this equipment in this environment 
before re-entering the competitive marketplace.
    VR&E is currently developing a satellite broadcast training for 
VR&E field counselors on Blast Injuries to better equip them in 
providing services to veterans who have experienced such injuries, 
which often cause amputations, loss of mobility, or other similarly 
disabling conditions.
    VR&E recently established these new partnerships to improve the 
delivery of VR&E employment services to veterans with severe wounds, 
including amputations or loss of mobility:
     The Military Severely Injured Joint Support Operations 
Center in Arlington, Virginia provides severely injured service members 
with a central source for advocacy, medical care, education, 
retraining, rehabilitation, discharge, family support and employment. 
VR&E works with the Joint Support Operations Center to quickly identify 
veterans in need of our services and coordinate all necessary 
rehabilitation and employment services with VR&E's partner agencies 
(DOD, VHA, DOL), and private sector partners.
     VR&E has initiated a pilot project with Armed Services 
YMCAs to provide new opportunities for training and placing disabled 
veterans in administrative and non-profit facility management.
     VR&E has a memorandum, of understanding with Helmets to 
Hardhats. This organization's program will assist returning service 
members and VR&E participants in identifying opportunities for on-the-
job training, apprenticeships, and direct placement in the construction 
and building trades industry.
     Home Depot launched Operation Career Front in partnership 
with VR&E, Department of Labor (DOL), and the Department of Defense 
(DOD) to provide direct employment opportunities for disabled veterans 
and their family members. VR&E Employment Specialists are meeting with 
local Home Depot Human Resources staff to identify career options and 
refer job-ready veterans.
    Question 6: Acute Inpatient Psychiatric Unit at Clarksburg VA 
Medical Center: I understand there are ongoing discussions about the 
possible closing of the Acute Inpatient Psychiatric Unit at the 
Clarksburg VA Medical Center, and I am deeply concerned and highly 
opposed to this. I have been in touch with the network director and 
Under Secretary for Health to urge them to maintain and strengthen this 
unit. Given the high demand for this specialized care with current 
veterans and the guaranteed need for future veterans, what steps are 
being taken to ensure this vital, program remains at the Clarksburg VA 
Medical Center?
    Response: A concept Behavioral Health Care Model was submitted by 
the Clarksburg VA Medical Center to the Network Director, VISN 4, on 
February 7, 2005. Follow-up discussions were conducted between Network 
and VA Medical Center staff. The model was well received and accepted 
with the primary focus on the provision of behavioral health services 
through a continuum of care while enhancing quality, access and cost 
effectiveness. Clarksburg VA Medical Center is currently developing an 
implementation plan which details the transition from the existing 
model of care to the proposed model, which has been designed in support 
of the President's New Freedom Commission on Mental Health Goals. A 
small inpatient care unit would continue to provide acute psychiatric 
care for patients, but to complement this level of care, Clarksburg 
proposes the implementation of subacute beds, a partial hospital 
program and other new components of mental health care not currently 
available at Clarksburg.
    Question 7: West Virginia Nursing Home: I was relieved to learn 
that ongoing construction for the West Virginia State Veterans Nursing 
Home will not be affected by the 1-year pause in State nursing home 
construction. But I remain deeply concerned about potential cuts in per 
diem funding. State Veterans Nursing Homes are ongoing partnerships 
with our states. West Virginia was eager to work with VA on this 
facility, but now the support is changing. How much will my State and 
other states lose by such cuts? For the record, I think this is an 
unfair cost shift to states, and will be hard for states to absorb 
these new costs if the HHS Secretary is successful in cutting Federal 
funding and Federal matching rates for Medicaid.
    Response: In a time of constrained budgets, VA determined to focus 
its resources on our highest mission priority. With this shift in 
mission, reductions are proposed for all three VA nursing home care 
programs.
    VA recognizes the proposal on nursing home eligibility has 
challenged our relationship with State Homes. However, other portions 
of the State Veterans Home Program, the per diem for the domiciliary 
facilities, hospitals, and adult day healthcare, experience no 
reductions in the fiscal year 2006 President's Budget.
    VA will continue to fully support nursing home care for veterans in 
the following categories:
     Long-term care Nursing Home Care (NHC) for service 
disabled veterans and those with specialized care needs
     Short-term NHC for all priorities, including post-hospital 
care (rehabilitation for stroke patients, broken hip, etc.)
     Hospice and Respite Care
     Non-institutional Long-Term Care (LTC) alternatives such 
as Skilled Home Care, Adult-Day Health Care, and Homemaker/Home Health 
Aide.
    VA has prepared a preliminary estimate of the effects of the fiscal 
year 2006 budget proposal on State Veteran Homes. The estimate is found 
on the attached spreadsheet.
                               __________
  Department of Veterans Affairs Responses to Post-Hearing Questions 
                     From Senator James M. Jeffords
    Question 1: (Nursing Beds): Mr. Secretary, I am quite concerned by 
the budget proposals that would reduce the number of nursing home beds 
nationwide. I certainly share the VA's commitment to meeting the needs 
of more veterans with home-based health care, but this should not come 
at the expense of nursing home beds. As America ages, so does our 
veteran population. The GAO estimates that the VA still has a long way 
to go to meet adequate nursing care capacity.
    Response: VA will continue to fully support nursing home care for 
veterans in the following categories:
     Long-term care Nursing Home Care (NHC) for service 
disabled veterans and those with specialized care needs
     Short-term NHC for all priorities, including post-hospital 
care (rehabilitation for stroke patients, broken hip, etc.)
     Hospice and Respite Care
     Non-institutional Long-Term Care (LTC) alternatives such 
as Skilled Home Care, Adult-Day Health Care, and Homemaker/Home Health 
Aide
    To insure fairness and consistency, the VA proposes similar 
eligibility criteria across all institution long-term care venues: VA 
Nursing Home Care Units, Contract Community Nursing Homes and State 
Veteran Homes. The Department would continue to expand access to non-
institutional long-term care with an emphasis on community-based and 
in-home care. This approach allows veterans to receive needed services 
in the comfort of their own homes and is much more closely aligned with 
community standards.
    VA is projecting a substantial increase in both workload and 
funding for the non-institutional programs it supports. The average 
daily census in these home and community-based care (HCBC) programs is 
projected to rise from 30,118 in fiscal year 2005 to 35,540 in fiscal 
year 2006 (an 18 percent increase). Funding is projected to increase 
from $339 million in fiscal year 2005 to over $400 million in fiscal 
year 2006 (also an 18 percent increase). The projected increases in 
HCBC programs will serve to offset some of the reductions in nursing 
home care. HCBC is preferred by most patients and their families and is 
more cost effective than inpatient care. VA believes the proposals on 
long-term care in this budget provide an appropriate balance between 
congressionally mandated nursing home services and the national trend 
toward increased use of non-institutional home and community-based 
services in preference to nursing home care. .
    Question 2: (Payments to State Homes): I am concerned that the VA's 
new budget proposes to break with tradition and drop per diem 
reimbursement to State homes for veterans who are not service 
connected. Since most State nursing homes take veterans who need care 
without regard to their degree of service connection, this would leave 
the states without reimbursement for a significant share of State home 
nursing patients. As the Nation ages, the last thing the VA should be 
doing is cutting back on care for the elderly. As the states struggle 
with increasing health care burdens, the VA should not cut back on 
existing reimbursements to states. I would appreciate your thoughts on 
this proposal.
    Response: State Veterans Homes are owned, operated, and financed by 
the States. VA provides limited financial assistance to the States in 
the form of per diem grants for nursing home, hospital, domiciliary, 
and adult day healthcare. Only the nursing home per diem is affected by 
the fiscal year 2006 budget proposal. The cost of care in State 
Veterans Homes varies from State to State, as does the amount of 
assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. In addition, VA long-term 
care has shifted from inpatient to outpatient, similar to the private 
sector. This is more convenient to patients and their families and is 
more cost-effective.
    Question 3: (Boiler at Vermont State Home): It is my understanding 
that the VA has proposed a moratorium on grant funds to the States for 
renovating State nursing homes. The states are required to put up 40 
percent of these costs, and the VA is now proposing to drop its share 
of funding for a significant number of projects in the pipeline. If 
these renovations are to happen, this will mean an increased burden on 
the States. One of these projects is a boiler plant replacement at the 
Vermont Veterans Home in Bennington. I can only assume that this is a 
critically important project for this home! There are hundreds of other 
projects on this list that will also not be funded in fiscal year 2006. 
Do you have a plan to redress this shortfall?
    Response: Under the grant program, VA is responsible for 65 percent 
of all project construction costs. The project did not rank high enough 
to receive funds in fiscal year 2005. The State has revised the scope 
and phases of the project, and as a result it has been redesignated to 
the life safety category. This improves the chances of getting funding 
in the future. If the moratorium for fiscal year 2006 is approved, the 
project, along with all others will compete for fiscal year 2007 funds. 
The ranked projects will be committed to by VA as funds are authorized 
and appropriated. If any State completes a project with State funds, 
they may still be eligible for 65 percent reimbursement.
                              vet centers
    Mr. Secretary, I am very impressed with the work of the Vet 
Centers. I see these centers as vital links between the returning Iraq 
veteran, particularly the guard member or reservist who may need 
services, and the VA. Many veterans are reluctant to reach out, 
confused about what services are available to him or his family, or 
just plain overwhelmed by the volume of demands that await a returning 
service member. Vet centers can help. Vet centers are also playing a 
critical role in counseling the families of war casualties and helping 
there understand what resources are available to them. While the demand 
on vet centers has already increased exponentially, the budget seems to 
reflect only a small increase in personnel, far below the amount needed 
to meet the projected demand.
    How do you propose to meet this need?
    Response: Since the inception of the Vet Center program in 1979, 
the Vet Centers have served over 2 million veterans. Annually, the Vet 
Centers see, on the average, approximately 130,000 veterans and provide 
over 1,000,000 visits to veterans and family members.
    In fiscal year 2003, the Vet Centers saw 1,931 Operation Enduring 
Freedom/Operation Iraqi Freedom (OEF/OIF) veterans and 9,597 OEF/OIF 
veterans in fiscal year 2004. We are estimating that in fiscal year 
2005; Vet Centers will see 11,184 returnees from Afghanistan and Iraq. 
The Vet Centers provided 2,450 visits to OEF/OIF veterans and their 
family members in fiscal year 2003 and 18,819 visits in fiscal year 
2004. At current rates of utilization, we are projecting 29,000 visits 
for OEF/OIF veterans for fiscal year 2005.
    The Vet Center program's capacity to provide outreach to veterans 
returning from combat operations in OEF and OIF has been augmented at 
targeted Vet Centers by hiring and training a cadre of 50 new outreach 
workers from among the ranks of recently separated OEF and OIF 
veterans. VA has also authorized establishment of a new Vet Center in 
Nashville, Tennessee. This initiative represents a collaborative effort 
between VA's Readjustment Counseling Service and the Veterans 
Integrated Service Network 9 for the purpose of augmenting VA's mental 
health and related services to local veterans.
    Although we have seen a significant increase in OEF and OIF 
veterans since fiscal year 2003, we, nonetheless, believe that we have 
the resources to allow the Vet Centers to continue aggressive outreach 
to OEF/OIF veterans and to successfully meet the service needs of all 
veterans and their family members who choose to avail themselves of Vet 
Center services.
                            research funding
    Mr. Secretary, The VA has long been known for its high quality 
research program. Not only is cutting edge research being performed at 
the VA, but participation in VA research is one of the biggest 
incentives for high quality medical professionals to join the VA 
system. It is my understanding that the budget before us proposes a cut 
in VA direct research funding by $9 million. This cut would impair the 
ability of the VA to lead the Nation in research such as post-traumatic 
stress disorder, spinal cord injury, and cancer. I am proud to have the 
National Center for PTSD headquartered in Vermont. The VA has 
painstakingly assembled a state-of-the-art research program, and any 
decision to cut funding for this program would be a national loss. I, 
for one, do not believe that the choice must be made between treating 
Iraq combat veterans or funding a top-notch research program. The VA 
can, and should, do both. I would appreciate your comment on this 
funding dilemma.
    Response: VA Research continues to make significant contributions 
to the healthcare of veterans, and the program enjoys the full support 
of the Department. We fully agree that participation in VA research is 
a significant incentive for high quality medical professionals to join 
the VA system.
    VA research makes a significant contribution to the advancement of 
medical science. By devoting nearly 70 percent of the research budget 
to supporting over 2,200 investigator-initiated research projects, VA 
maintains a climate of scientific inquiry and rigor that continues to 
attract the highest caliber physicians. The other 30 percent . supports 
nearly 500 research projects involving career development awards, 
multi-site programs, rehabilitation centers, centers of excellence, 
health services research centers, service directed research, and 
special research initiatives. In addition, VA researchers receive 
funding from non-VA appropriations such as the National Institutes of 
Health, pharmaceutical firms, and the Department of Defense to conduct 
multi-site trials such as the recent study that confirmed a new vaccine 
can prevent or reduce the effects of shingles, to collaborate on joint 
projects involving OIF/OEF veterans, and many other aspects of VA 
research. The total funding received from these sources is estimated at 
$820 million in 2005, and expected to increase by nearly $50 million in 
fiscal year 2006.
    At present, 80 percent of the Office of Research and Development 
(ORD) budget is devoted to recurring and multi-year commitments--mainly 
research centers and studies. We are also carefully looking at ways to 
ensure that adequate funding is directed to research about innovative 
approaches to limb loss, prosthetics and tissue replacement, as well as 
mental health research (e.g., issues involving PTSD) for our newest 
veterans returning from Afghanistan, Iraq and other combat deployments. 
To meet newly identified veteran-centric needs, ORD is transitioning to 
shorter durations of awards and conducting competitive reviews of all 
centers to assure that a higher percentage of funding is available 
annually above the only 20 percent of the annual appropriation that is 
now available for new projects. The goal is to achieve a workable 
balance among the competing needs for research.
    Within the broad range of research from the very basic as well as 
applied research, VA highly values research that specifically addresses 
medical issues that are most relevant to the veteran population. In 
many such areas, VA is widely regarded as an international leader, 
including research related to rehabilitation, mental health and post-
traumatic stress disorder, and health services delivery. VA also 
emphasizes research that capitalizes on its unique strengths, such as 
the integrated delivery system and the electronic medical record. The 
VA Cooperative Studies Program, for example, is internationally 
recognized for conducting the highest quality, multi-center studies 
that address clinically important topics that are difficult, if not 
impossible, to perform in other settings.
                               __________
  Department of Veterans Affairs Responses to Post-Hearing Questions 
                        From Senator Ken Salazar
    Question 1: Priority 7 and 8 veterans. The budget request would 
continue the ban on new priority 8 enrollments that has turned away 
192,000 veterans since 2003. This year's budget would force an 
additional 1.1 million Priority 7 and 8 vets who are in the system now 
to drop out. You said that many of these veterans have other health 
care options including Medicare and private insurance. I wanted to 
break that down a little more, because I think it's important that we 
know how our budget decisions will affect real people.
    A. The VA has surveyed enrolled Priority 7 and 8 veterans to 
determine what other healthcare they have, is that not correct?
    B. What percent have private health care insurance?
    C. As you know, the VA is allowed to get reimbursement from private 
insurers. Why are we forcing out the very veterans who can contribute 
to their costs of care?
    D. What percent do not have any other options?
    E. So based on what you've said, how many veterans who currently 
have VA health care would have no health insurance by next year under 
your proposed budget?
    Response: A. Yes. The VHA Survey of Enrolled Veterans' Health and 
Reliance Upon VA is a recurring effort to survey enrolled veterans in 
all priority groups, including Priority 7 and 8 veterans. The survey, 
last conducted in 2003, includes inquiries on the non-VA health care 
use of VHA enrolled veterans.
    B. Among Priority 7 and 8 enrolled veterans, 33 percent have some 
private health coverage.
    C. We realize that many veterans will choose not to pay the 
proposed enrollment fee and elect not to remain enrolled in the VA 
health care system. Each veteran must make this decision after a close 
examination of his or her individual economic and health care 
circumstances. We expect that a significant portion of the enrollees 
who are not expected to pay the enrollment fee are non-users or low 
users of VA health care services.
    D. Based on the 2003 enrollee survey, approximately 12 percent of 
Priority 7 and 8 enrollees have no health insurance at all, either 
public or private.
    E. We believe that there will be minimal, if any, impact on current 
Priority 7 and 8 enrollees. Priority 7 and 8 enrollees who have no 
other health care options are expected to pay the enrollment fee in 
order to remain in VA's health care system.
    On the other hand, many Priority 7 and 8 enrollees who have other 
health care coverage (and who are generally non-users or low users of 
the VA health care system) are not expected to pay the enrollment fee 
and, thus, will no longer be enrolled.
    Question 2: Nursing Homes. The VA wants to cut the number of 
veterans in nursing home care.
    A. State-run nursing homes are one of the most cost-effective ways 
for the VA to care for elderly veterans. How will these cuts affect 
State facilities? Aren't we damaging one of the most successful 
partnerships in the VA's long history?
    Response: VA has prepared a preliminary estimate of the effects of 
the fiscal year 2006 budget proposal on State Veteran Homes. The 
estimate is found on the attached spreadsheet. The number of average 
daily census (ADC) in State Veterans Nursing Homes on whose behalf VA 
pays a per diem payment would decrease from 18,500 to 7,217 from 2005 
to 2006 with a total funding reduction across VA of $293.5 million. To 
ensure fairness and consistency, the VA proposes similar eligibility 
criteria across all institution long-term care venues: VA Nursing Home 
Care Units, Contract Community Nursing Homes, and State Veteran Homes.
    Over the same period, however, VA is projecting a substantial 
increase in both workload and funding for the non-institutional 
programs it supports. The ADC in these home and community-based care 
(HCBC) programs is projected to rise from 30,118 in fiscal year 2005 to 
35,540 in fiscal year 2006 (an 18 percent increase). Funding is 
projected to increase from $339 million in fiscal year 2005 to over 
$400 million in fiscal year 2006 (also an 18 percent increase). The 
projected increases in HCBC programs will serve to offset some of the 
reductions in nursing home care. HCBC is preferred by most patients and 
their families and is more cost effective than inpatient care. VA 
believes the proposals on long-term care in this budget provide an 
appropriate balance between congressionally mandated nursing home 
services and the national trend toward increased use of non-
institutional home and community-based services in preference to 
nursing home care.
    VA will continue to fully support nursing home care for veterans in 
the following categories:
     Long-term care Nursing Home Care (NHC) for service 
disabled veterans and those with specialized care needs
     Short-term NHC for all priorities, including post-hospital 
care (rehabilitation for stroke patients, broken hip, etc.)
     Hospice and Respite Care
     Non-institutional Long-Term Care (LTC) alternatives such 
as Skilled Home Care, Adult-Day Health Care, and Homemaker/Home Health 
Aide
    B. The VA has never come close to complying with the 1999 Mill Bill 
regarding minimum VA nursing home capacity or access to a spectrum of 
long-term care options. In your statements you discussed the 
alternatives to nursing home care, but we both know that the VA has a 
long way to go . to providing elderly patients with the full spectrum 
of care. How many in nursing homes will be turned out? And where will 
they go?
    Response: Under this budget proposal, VA remains committed to 
providing long-term care to veterans in our highest mission priority 
groups. 'VA will also continue to provide short-term nursing home care, 
hospice and respite care to all veteran priority groups. No veteran 
currently receiving services in VA nursing homes will be discharged 
(``turned out'') as long as the veteran continues to require nursing 
home care.
    Question 3: DoD to VA Transition. I want to commend the VA for 
working on the Benefits Delivery at Discharge program and for trying to 
create a seamless transition from Department of Defense duty to VA 
care. But my understanding is that there is still a great deal to be 
done. In particular guard and reserve troops returning from Iraq may be 
unaware of the benefits that they are entitled to. I've read reports of 
VA officials and VSO representatives not being allowed on military 
bases to counsel soon-to-bedischarged troops. Can you give a brief 
update on the challenges of making sure that all troops and guard and 
reserve troops in particular can get the VA benefits they deserve?
    Response: We are not aware that any VA personnel assigned to 
conduct briefings on military bases are having difficulty with base 
access. The Department of Defense (DoD) informs us that there are 
currently no known base access problems for veteran service 
organization representatives and that issues that existed in the past 
have been resolved. In point of fact., we are doing a tremendous amount 
of outreach for members of the Reserves and National Guard.
    From fiscal year 2003 through fiscal year 2005 to date, Veterans 
Benefits Administration (VBA) military services coordinators conducted 
the following transition briefings and related personal interviews in 
the United States. These briefings include pre and post-deployment 
briefings for Reserve and National Guard members.

                                                Overall Briefings
----------------------------------------------------------------------------------------------------------------
                           Fiscal Year                               Briefings     No. Attendees  No. Interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................           5,368         197,082          97,352
2004............................................................           7,210         261,391         115,576
2005*...........................................................           2,263          79,105          34,106
----------------------------------------------------------------------------------------------------------------
* Through Jan. 2005

    In addition to military services briefings in the United States, 
VBA representatives conduct briefings overseas under arrangement with 
DoD. The following data reflects our overseas activities since 2003.

                                               Overseas Briefings
----------------------------------------------------------------------------------------------------------------
                           Fiscal Year                               Briefings     No. Attendees  No. Interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................             472          12,943          12,947
2004............................................................             624          15,183           6,544
2005*...........................................................              36           1,278             464
----------------------------------------------------------------------------------------------------------------
* Through Jan. 2005--Please note, VBA does not conduct overseas briefings during the first quarter of the fiscal
  year because DoD does not provide funding for conducting these briefings until around January. Consequently,
  overseas transition briefings and interviews are a 9-month activity, running from January through September.

    Outreach to Reserve/National Guard members is part of the overall 
VBA outreach program. However, in peacetime this outreach is generally 
accomplished on an ``on call'' or ``as requested'' basis. With the 
activation and deployment of large numbers of Reserve/National Guard 
members following September 11, 2001, and the onset of military actions 
in Afghanistan and Iraq, VBA has greatly expanded its outreach to this 
group. We have made national and local contacts to Reserve/National 
Guard officials to schedule pre- and post-mobilization briefings for 
their members. Returning Reserve/ National Guard members can also elect 
to attend the formal 3-day Transition Assistance Program workshops. The 
following data is included in the above data for overall military 
services briefings.

                    Reserve/National Guard Briefings
------------------------------------------------------------------------
               Fiscal Year                   Briefings     No. Attendees
------------------------------------------------------------------------
2003....................................             821          46,675
2004....................................           1,399          88,366
2005*...................................             531          32,448
------------------------------------------------------------------------
* Through Jan. 2005.

    VA recently established a working group with the National Guard 
Bureau and representatives of the military reserve components to 
identify where improvements can be made in our working relationships to 
ensure that information and assistance are available to returning 
Reserve/National Guard members and their families. VA senior management 
officials and National Guard leadership are currently reviewing 
recommendations from the working group prior to implementation.
    On the Veterans Health Administration (VHA) side, all members of 
VHA's Vet Center teams provide the first step and introduction of VA 
services/benefits for National Guard and Reserve service members and 
families. Once interviewed and specific health or disability needs are 
identified, the veteran is referred to the local VA Medical Center 
(VAMC) or VA regional office (VARO) for further assistance. This 
reduces the challenges that may be encountered in navigating the 
complex VA system. At each VAMC and VARO, a Point of Contact Case 
Manager/Coordinator will be the veteran's guide and assist the veteran 
in further information about obtaining services/benefits. There is a 
true partnership among the Vet Centers, VAMCs, Community Based 
Outpatient Clinics, and VAROs to ensure that the veteran and family 
receive the needed services and benefits. While they are at the Vet 
Center, the veteran may have the opportunity to view the video, ``We 
are By Your Side,'' and receive additional tools and brochures to learn 
about other VA and DoD benefits that they may be eligible to receive. 
Vet Center staff will counsel them and then refer them to others on the 
VA team for additional assistance.
    In order to reach the large number of returning National Guard/
Reserve veterans, extensive outreach and information briefings have 
been presented to the senior leadership in the Army National Guard and 
Army Reserve. Town Hall meetings have been conducted in communities for 
family members to learn about VA Benefits/Services to include 
vocational rehabilitation and employment. The video ``We are By Your 
Side'' is being viewed by returning service members and mobilization 
and unit briefings. The brochure, ``Summary of VA Benefits for National 
Guard and Reserve Personnel,'' is available for distribution at the 
mobilization station and home unit for each returning National Guard/
Reserve member, as well as a wallet card with valuable information 
about VA benefits and services.

    Chairman Craig. Now, let me turn to Senator Murray, I 
believe, who came in second.
    Please proceed, Patty.

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

    Senator Murray. Thank you, Mr. Chairman, and Mr. Secretary, 
thank you so much for being here today. I know that you are new 
to this job, and this budget was formulated prior to your 
taking on the position, so I am very interested to hear your 
responses to the questions today. I will submit my entire 
statement for the record.
    But I will just say that I am deeply concerned about the 
impact of this budget proposal on the VA system. We have been 
down the road before of increasing costs to veterans. We know 
that we cannot do that today. It is an average increase of 
about $1,000 per veteran, the proposals that are on the table 
today, with a $250 enrollment fee and paying for their 
medication.
    And as Senator Akaka so rightly put it, many of these 
people simply cannot afford to do it, but I think the other 
point we need to remember is that these veterans have already 
paid the price. We should not be asking them to do it a second 
time. So this proposal has been dead on arrival before. I know 
Senator Craig said that he was open to this again. We want to 
hear the testimony. But for me, this is just a non-starter, and 
I believe our veterans deserve better than that.
    I am also very concerned about the proposal that is in this 
budget dealing with the state-run nursing home beds. The VA has 
always had a strong partnership with States. Dumping this on 
the lap of States today is not just going to cause a hardship. 
It is going to mean veterans who will not have State nursing 
homes today. In my State of Washington, 300 families are going 
to find out, if this proposal were to pass as is, that they now 
have to care for a family member that this country promised 
something to, and I think that is a deeply flawed approach.
    A number of other things that I will go through in my 
questioning, but let me just point out: Washington State has 
4,000 National Guard members who are going to be coming home 
shortly. We already have long waiting lines. People are being 
turned away. VISN 20 has already had a hiring freeze. VISN 20 
covers Washington, Oregon, Idaho, Alaska and Montana. There is 
a hiring freeze in place. I am looking in the eyes of these 
veterans today and people who work in the Veterans 
Administration in my area who are just panicked about the 
number of people coming home, the impacts of that, the hiring 
freeze that is in place, and this budget does nothing to deal 
with that.
    So I think it is a deeply flawed approach and one that this 
country has an obligation, especially in a time of war, to be 
telling our veterans that we will keep the promises that we 
made to them.
    Thank you, Mr. Chairman.
    Chairman Craig. Thank you much, Senator Murray.
    Now, let me turn to Senator Thune.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman, Senator Akaka, and 
Secretary Nicholson, thank you for being here, and I also 
appreciate the testimony that we are going to receive later 
from the veterans service organizations.
    This is an incredibly important discussion to have. The VA 
is now the Nation's largest integrated health care system and 
will treat over 5 million patients this year. Since 2001, the 
VA has enrolled an additional 2.5 million veterans in health 
care, increased outpatient visits from 44 million to 54 
million, increased the number of prescriptions filled from 98 
million to 116 million, and to date, has treated more than 
32,000 veterans who served in either Afghanistan or Iraq. So 
this is an organization that is doing a tremendous amount of 
work, and I, too, share many of the concerns that have been 
voiced already about having the resources that are necessary to 
serve that population.
    I am anxious to work with you and with our colleagues here 
on this Committee and in the Senate to make sure that the needs 
that our veteran community has are being addressed, realizing 
that much of that is a resource-driven debate and also 
realizing that the fiscal constraints that are imposed upon us 
force us to look at these things in new ways, but also welcome 
the opportunity to work with you toward steps that we can take 
that would bring greater efficiency and further streamline the 
agency, the Department, and make sure that many of the 
innovations that are already taking place at the VA, areas of 
telehealth and some of the things that you have already done 
with electronic medical records and things that I think need to 
be modeled in other aspects of health care in this country, 
that we continue to develop that and figure out ways, if we 
can, to make our resources go further and to find those 
efficiencies that can again make sure that we are dealing in an 
appropriate way with the responsibility and the obligation that 
we have to America's veterans, but using the most modern 
technology and everything else we can to accomplish that goal.
    So I appreciate your work, welcome you to the Department, 
and look forward, as I said earlier, to working with you and 
with the Members of this Committee and the Senate to make sure 
that we are doing the job that we need to do to take care of 
our veterans and also understanding, as was mentioned earlier, 
that this is the starting point, not the ending point, and we 
have got a lot of heavy lifting ahead of us in this budget to 
figure out what our priorities are going to be and how we 
address the important needs that face us in this country, none 
of which is more important than the way that we deal with 
America's veterans.
    So I, Mr. Chairman, will also have to not be here for all 
of this, but would like to submit a statement for the record, 
if that is OK.
    Chairman Craig. Without objection, your full statement will 
become a part of the record and be submitted to the Secretary.
    Senator Thune. Thank you, Mr. Chairman.
    Thank you, John.
              Prepared Statement of Honorable John Thune, 
                     U.S. Senator from South Dakota
    Good Morning Chairman Craig and Ranking Member Akaka:
    Last week President George W. Bush released his proposed fiscal 
year 2006 budget for the Department of Veteran's Affairs. The 
President's proposed budget is a record breaking $70.8 billion which 
will primarily fund veteran's health care and benefits. The President's 
budget is responsibly focused on the veterans who count on the VA the 
most: those with service connected injuries or illnesses and the 
indigent.
    The VA is Nation's largest integrated health care system. In 2006 
the VA will treat more than 5.2 million patients, eighty percent of 
which are expected to be high priority. Since 2001, President Bush's 
budget requests have allowed the VA to enroll 2.5 million more veterans 
in health care services, increased outpatient visits from 44 million to 
54 million, and increased the number of prescriptions filled from 98 
million to 116 million. All this has been done without the President or 
Congress overspending. However, what is even more impressive is fact 
that the VA is now considered a leader in the medical community with 
advances in laptop medicine, interactive healthcare websites, and the 
software program ``VistA'' that cuts down on unnecessary paperwork and 
streamlines efficiency. These developments have also increased health 
care to rural communities that have cut down on the amount of time and 
travel for veterans in my home state; however rural care still remains 
a long term goal to be fully reached. This year the VA was awarded the 
National Committee for Quality Assurance seal approval, a gold standard 
in the medical community. The VA ranked first in all seventeen 
performance measures and in every single category the VA outperformed 
the highest-rated non-VHA hospitals. All in all, I believe we are 
delivering on our promise.
    The fiscal year 2006 budget will also support important VA 
initiatives like the seamless transition of servicemembers between the 
Department of Defense and Department of Veteran's Affairs to ensure 
that those returning from Iraq and Afghanistan are provided the best 
possible care. To date, more than 32,000 veterans who served in 
Afghanistan and Iraq have been provided VA care. The budget will also 
provide $750 million for the Capital Asset Realignment for Enhanced 
Services program that is realigning the VA infrastructure in order to 
enhance access to health care services for our veterans.
    This is a bi-partisan Committee and I know that we can provide 
legislation that best serves America's veterans. As we enter the budget 
process, I remind my colleagues that the President's budget represents 
the beginning and not the end of our opportunity to fulfill our 
mandate. I look forward to working with the Committee on this critical 
issue. Thank you Mr. Chairman, I yield back my time.

    Chairman Craig. Now, let me turn to Senator Obama. Senator, 
welcome.

                STATEMENT OF HON. BARAK OBAMA, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Obama. Thank you very much, Mr. Chairman, Secretary 
Nicholson, members of the VA; I appreciate this opportunity.
    I will be very brief in the interests of time. Many of my 
concerns have already been voiced by Senators Rockefeller, 
Akaka, Murray, and I share Senator Thune's concerns about 
trying to be as efficient as possible at a time where we have 
fiscal constraints. It strikes me that not all of these 
constraints are inevitable. Some of them are artificially 
imposed as a consequence of choices made not by your 
Department, but by the Administration generally.
    I just want to reiterate a couple of things: under this 
proposal, for example, on the nursing home issue, Illinois, my 
understanding is, would stand to lose $16 million in receipts 
as a consequence of this shift. Just to give you one example, 
in the town of Quincy, in Illinois, the largest of four homes 
serving veterans in Illinois, it serves 500 to 550 residents. 
They expect that they would lose $5 million to $6 million in 
receipts if the proposed change in per diem proposed in the 
budget actually occurred.
    This would shut down nursing homes that are serving 
veterans in Illinois. It does not strike me that that is a 
tenable position to take, particularly because the States 
simply cannot pick up the slack. Illinois has a $2 billion 
budget deficit that they have got to close this year. And so, 
the assumption that somehow, we can shift these costs onto the 
State in any meaningful way is simply not realistic. What is 
realistic is that these veterans will be out on the streets, or 
their families are going to have to bear the burdens if we are 
not providing these services.
    So again, to reiterate what has already been stated before, 
I recognize, Mr. Secretary, that you did not craft this budget 
initially. This is the second time where I am asking tough 
questions, and you just got here, and so, you know, I hope you 
recognize the respect I have for you and the efforts that you 
and your staff are going to be making, but this just does not 
seem to reflect the kinds of priorities that I would think we 
would be trying to propose at a time of war, and I am deeply 
distressed by it.
    I have got a conflicting meeting as well, but I am going to 
try to stay at least for awhile so that I can hear some of the 
testimony. Thank you very much, Mr. Chairman.
    Chairman Craig. Senator, thank you very much.
    Senator Jeffords, Jim? Is your mike on, Jim?

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

    Senator Jeffords. I join you in congratulating the 
Secretary on his confirmation, and I look forward to working 
with you. In getting the job done for America's veterans, we 
have a lot to do, and I would refer also to the remarks made by 
Senators Rockefeller, Akaka and Obama.
    This budget is tough. It has been constructed against a 
backdrop of an overall Federal budget that claims to reduce the 
huge Federal deficit by cutting domestic spending programs in 
the name of deficit reduction. It does not reduce the expensive 
tax cuts given to the richest segment of American society. In 
this context, it is very difficult to construct a veterans 
budget that does justice to the men and women who have served 
this country.
    I know it is your desire to honor our commitment to our 
veterans, giving them the best health care and the quickest 
processing of benefit claims the system can provide with the 
least possible cost to them, but I do not see how this budget 
does that. This budget relies on increased collection of funds 
from the veteran in order to maintain current services. This 
does not seem right.
    I am interested to hear your testimony and pursue these 
matters in my further efforts as we go forward today.
    Chairman Craig. Jim, thank you very much.
    Senator Salazar, Ken.

                STATEMENT OF HON. KEN SALAZAR, 
                   U.S. SENATOR FROM COLORADO

    Senator Salazar. Thank you, Senator and Mr. Chairman Craig 
and Senator Akaka and Members of the Committee.
    Secretary Nicholson, let me just say that as one of our 
favorite sons from Colorado, I am delighted that you have been 
now confirmed, and it was not even controversial.
    [Laughter.]
    Senator Salazar. So congratulations to you, and I very much 
look forward to working with you in the 4 years ahead.
    Let me also say that I know these are very tough times for 
our Nation as we look at the sea of red ink that is piling up 
in our country. But I think as we look at that red ink, it is 
important for us to be fiscally responsible. And I look at the 
comments from Senator Jeffords, which I very much agree with: 
if we are going to have to get our fiscal house in order, we 
need to make sure that we are looking at the entire house, that 
we cannot deconstruct those parts of our house which are so 
important for the men and women who have served our country.
    For me, I see this first hand and foremost in the number of 
homeless veterans that we see in my own State and in our own 
City and County of Denver. There are thousands of veterans who 
sometimes do not even have a place to live. And so, when I look 
at the budget that was proposed by the Administration, a budget 
that was created before you became Secretary of Veterans 
Affairs, I very much agree with the characterization that has 
been given to that budget by organizations that have been 
fighting and standing up for veterans for decades after decades 
in our country.
    The VFW in their analysis of this budget, where they 
characterize it as a budget that fails to live up to our 
Nation's obligations to veterans is an accurate 
characterization. The American Legion called the budget a 
smokescreen to raise revenue at the expense of veterans.
    I have a much longer statement that I will just submit for 
the record that will go over some of the more specific points 
that I have in the interests of time, but I do want to say that 
there are measures that are set forth in this budget, including 
the co-payments for drugs and the $250 co-payment for veterans 
services, the cuts in nursing homes and others that I am going 
to oppose, because I think that those particular proposals in 
the budget do a dishonor to the commitment that we have to our 
Nation's veterans. And I think at a time when we see the men 
and women in our country who are sacrificing life and limb and 
family to serve in Iraq and Afghanistan and around the world, 
it is an even more important time for us to step up to what 
should be for all of us as a Nation one of our highest 
priorities.
    So I look forward to your testimony and look forward to 
working with you as we navigate this very difficult fiscal time 
in our history.
    Chairman Craig. Ken, thank you very much.
    Now, let me turn to you, Mr. Secretary, and welcome you 
once again before the Committee. You have brought along with 
you key Department heads, and I tell the Committee, last week, 
I took the time to go down to the headquarters office to visit 
with the Secretary and all of these fine people and walk 
through their offices. I would recommend you all do that to get 
to know better what they do and their responsibilities as we 
tackle this budget for our veterans.
    I must also say that I was given a variety of handouts and 
this weekend had time on an airplane, and I read some of them. 
One of those handouts most striking to me was an interesting 
independent observation of the quality of health care delivered 
by the Veterans Administration today. It was an absolutely 
glowing report by a critic, who had prior to that written in 
pretty loud ways about health care delivered by veterans, today 
rating it among the top in the Nation.
    The innovations that have occurred that many of you have 
been a part of are truly a compliment to veterans health care, 
but most importantly to veterans themselves, to be standing now 
at the top along with some of our finest private hospitals in 
the country delivering quality care through innovation and 
creativity is without question a testimony not only to the 
Veterans Administration, but to this Committee and to the 
Congress for providing the resources to do so.
    And I read that and obviously had to reflect on our task at 
hand and what we will be doing in the near future to not only 
sustain the qualities that we have been able to get to in 
providing health care, but also with the expanded needs of 
veterans coming in from Iraq and Afghanistan to make sure that 
they are well-served.
    So, Mr. Secretary, if you wish to, I would ask you to 
introduce those who have accompanied you, and please proceed at 
will.

  STATEMENT OF HON. JAMES NICHOLSON, SECRETARY, DEPARTMENT OF 
                        VETERANS AFFAIRS

    Secretary Nicholson. Thank you, Mr. Chairman and Members of 
the Committee. Good morning, and I want to at the outset thank 
you again for your consideration during my confirmation 
process.
    Today marks the second full week that I have been on this 
job, and I can report to you that I think it is a fantastic 
job. It is a great opportunity to serve my country, my fellow 
veterans, my President, his Administration. During this 2 
weeks, while I have spent a great deal of time on budget 
matters, as you would expect, I have also been able to get out 
and visit a medical center and a regional office for benefits, 
and I am very pleased by what I see in the dedication and the 
competency and the motivation of the people who are working for 
the Veterans Administration, and I have also had a chance to 
talk to many of the patients who seem so well taken care of and 
so grateful for what they are receiving.
    I am joined here today by a group of experts, a tremendous 
collection of people who are working for the Veterans 
Administration, and it is a pleasure for me to be able to join 
them and work with them, and I want to introduce them to you. 
On my far left is Mr. Tim McClain, who is the General Counsel 
of the Veterans Administration. And my immediate left is Dr. 
Jonathan Perlin, who is the Acting Under Secretary for Health 
Benefits. To my far right is Mr. Dick Wannemaker, who is the 
Acting Under Secretary for Memorial Affairs. Next, coming this 
way, is Admiral Dan Cooper, who is the Under Secretary for 
Benefits, and my immediate right is Rita Reed, who is the 
Deputy Assistant Secretary for Budget Affairs.
    I would ask, Mr. Chairman, that my written statement be 
submitted for the record and that I be allowed to offer some 
highlights of the President's proposal before I take your 
questions.
    Chairman Craig. Without objection. Please proceed.
    Secretary Nicholson. President Bush is requesting a total 
of $70.8 billion for the Department of Veterans Affairs in 
fiscal year 2006: $37.4 billion for entitlement programs and 
$33.4 billion for discretionary programs. This total represents 
a 2.2 percent increase over the fiscal 2005 enacted level. The 
discretionary funding level would represent an increase of $880 
million, or 2.7 percent over the enacted level for 2005. The 
proposed mandatory spending level represents a $639 million or 
1.7 percent increase over the 2005 level.
    When compared to the fiscal 2001 enacted budget, this 
budget represents a total increase of more than 47 percent in 
medical care funding, with a 44 percent increase in 
discretionary funding alone. It results also in a 49 percent 
increase in appropriations for veterans benefits.
    The President's 2006 proposal will allow us to meet the 
health care needs of all newly separated veterans of the 
conflicts in Iraq and Afghanistan; to maintain the high 
standards of health care quality for which VA is now nationally 
recognized, while treating over 5.2 million patients, about 1 
million more than were treated in 2001. It will allow us to 
follow through on a historic realignment of our health care 
infrastructure, reduce the backlog of disability compensation 
and pension claims, and continue the largest expansion of the 
national cemetery system since the Civil War.
    In the health care area, in recent years, the Department's 
successes in delivering top notch health care have been 
stunning. VA now exceeds the performance of private sector and 
Medicare providers for all key health care quality indicators 
for which comparable data are available. A recent Rand 
Corporation study also showed that patients in VA's health care 
system are significantly more likely to receive recommended 
care than are private care patients.
    This is all the more impressive when you consider the 
explosive growth in VA health care usage. VA expects to treat 
about 1 million more patients in 2006 than it did in 2001. The 
President's budget will ensure that there is no slippage in our 
high level of performance even at these elevated levels of 
demand. Ninety-four percent of the primary care appointments 
are scheduled within 30 days of the patient's desired date, and 
93 percent of the specialty care appointments are scheduled 
within that same timeframe.
    The President's 2006 budget asks that you enact two 
important provisions affecting only priority 7 and 8 veterans: 
an annual enrollment fee of $250 and an increase in pharmacy 
co-payments from $7 to $15 for a 30-day supply of drugs. The 
proposed enrollment fee is similar to the fee legally required 
of military retirees enrolled in the Tri-Care system, and some 
would argue even more justified. As you know, most Tri-Care 
enrollees have served on active duty for at least 20 years and 
are former enlisted, in most cases, with modest retirement 
incomes.
    The proposed enrollment fee would affect those veterans who 
may have served as few as 2 years and who have no service 
connected disability. In addition, some of these veterans, 
those in priority group 8, have incomes above the HUD 
geographic means test. This budget proposal also ensures the 
following highest priority veterans receive the long-term care 
they need: that would be those injured or disabled while on 
active duty, including veterans who served in Operations 
Enduring and Iraqi Freedom, those catastrophically disabled, 
patients requiring short-term care subsequent to a hospital 
stay and those needing hospice or respite care.
    These eligibility criteria would be applied to VA-sponsored 
long-term care services, including VA, community and State 
nursing homes. This would save approximately $496 million that 
would be redirected toward our high priority veterans. The 
Department would continue to expand access to non-institutional 
long-term care with an emphasis on community-based and in-home 
care. In many cases, this approach allows veterans to receive 
these services in the comfort and familiar settings of their 
homes, surrounded by their families.
    In order to be more prepared to care for our veterans 
returning from OIF and OEF, VA's 2006 medical care request 
includes $1.2 billion, which is $100 million over the fiscal 
year 2005 enacted level, to support the increasing work load 
associated with the purchase and repair of prosthetics and 
sensory aids to improve veterans will of life and includes $2.2 
billion, or $100 million over the 2005 level, to standardize 
and further improve access to mental health services across the 
system.
    We are also proposing a number of program enhancements, to 
include covering out-of-pocket costs for emergency care that 
insured veterans receive in non-VA facilities; exempt former 
POWs from co-payments for VA extended care services; and exempt 
veterans from co-payments for hospice care delivered in 
hospitals or at home. We have projected increased health care 
management efficiencies of 2 percent in 2006, which will yield 
about $600 million in savings.
    The $750 million requested for CARES in the fiscal 2006 is 
$172 million more than the 2005 enacted level and brings the 
total 3-year investment in this historic transformation of our 
health care system to $2.15 billion. At its core, CARES means 
greater access to higher quality care for more veterans closer 
to where they live. Its impact is already felt in Chicago, 
where the proceeds from an enhanced use lease of VA's Lake Side 
facility are being reinvested at VA's West Side facility. This 
will lead to a new modern bed tower for Chicago's veterans.
    Finally, the $786 million proposed in support of VA's 
medical and prosthetic research program would fund about 2,700 
high priority research projects to expand knowledge in areas 
critical to veterans health care needs. The combination of VA 
appropriations and funding from other sources would bring our 
2006 research budget to nearly $1.7 billion.
    Veterans benefits: the President's request includes $37.4 
billion for the entitlement costs mainly associated with all 
benefits. Our request also includes $1.26 billion for the 
management of the Department's benefits program, which is 6.6 
percent over the 2005 level.
    VA has made significant improvements to the claims 
decisionmaking process, but clearly, more must be done. VA 
takes seriously its obligation that every veteran's claim must 
be treated fairly and equitably, and we must be consistent. Our 
inspector general has been directed to conduct a review of our 
disability claims adjudication process. The results will 
identify areas of inconsistency and will help us formulate 
steps to remove to the maximum degree possible inconsistencies 
which obviously exist today in a difficult process.
    In addition to this independent systemwide review, the 
Veterans Disability Benefits Committee has been established to 
carry out a study of the statutory benefits that are provided 
to compensate and assist veterans and their survivors for 
disabilities and deaths attributable to military service. This 
commission is expected to examine and make recommendations 
concerning the appropriateness of these statutory benefits, the 
appropriateness of the level of the benefits and the 
appropriate standard or standards for determining whether a 
disability or death of a veteran should be compensated.
    The President's request would also permit us to continue 
the benefits delivery at discharge or BDD program. This program 
enables active duty servicemembers to file disability 
compensation claims with VA staff at military bases, complete 
their physical exams and have their claims evaluated before or 
closely following their military separations.
    Burial benefits: the President's 2006 budget includes $290 
million in discretionary funding for VA's burial program, which 
includes operating and maintenance expenses for the National 
Cemetery Administration, capital programs, the administration 
of mandatory burial benefits and the State cemetery grants 
program. This total is nearly $17 million, or 6.4 percent, over 
the 2005 enacted level. It includes $90 million for cemetery 
construction projects.
    Consistent with the provisions of the National Cemetery 
Expansion Act of 2003, we are requesting $41 million in major 
construction funding for land acquisition for six new national 
cemeteries and $32 million for the State Cemeteries Grants 
Program. We believe that every veteran should have the option 
to be buried in a veterans cemetery within 75 miles of their 
home. More than 80 percent will have that option under this 
budget proposal.
    Mr. Chairman, despite the many competing demands for 
Federal funding, the President continues to make veterans 
benefits and services a top priority of his Administration. And 
Mr. Chairman and Members of the Committee, our veterans deserve 
no less. We are now prepared to take your questions.
    [The prepared statement of Secretary Nicholson follows:]
        Prepared Statement of Hon. James Nicholson, Secretary, 
                     Department of Veterans Affairs
    Mr. Chairman and Members of the Committee, good morning. I am 
deeply honored that the President has given me the opportunity to serve 
as Secretary of Veterans Affairs. My service in the United States Army 
was the defining experience of my life and instilled me with a strong 
sense of duty, honor, and country. I look forward to working with you 
and the thousands of dedicated employees who are carrying out the 
compelling mission of the Department of Veterans Affairs (VA) by 
ensuring the delivery of timely, high-quality benefits and services 
earned by our servicemen and women who have sacrificed so much in 
defense of freedom.
    I am pleased to be here today to present the President's 2006 
budget proposal for VA. The request totals $70.8 billion-$37.4 billion 
for entitlement programs and $33.4 billion for discretionary programs. 
Our budget request for discretionary funds represents an increase of 
$880 million, or 2.7 percent, over the enacted level for 2005.
    With the resources requested for VA in the 2006 budget, we aim to 
buildupon many of the Department's achievements that have dramatically 
improved benefits and services to veterans and their families since the 
President came to office. The most noteworthy accomplishments are that 
VA:
     Provided health care to about 1 million more patients
     Improved the quality of patient care that sets the 
national standard of excellence for the health care industry
     Dramatically lowered the backlog of rating claims for 
disability compensation and pension from a high of 432,000 to 321,000 
(for all claims the backlog peaked at over 600,000)
     Reduced the average length of time to process compensation 
and pension claims from a high of 230 days to approximately 160 days
     Continued the largest expansion of the national cemetery 
system since the Civil War to honor veterans with a final resting place 
and lasting memorial that commemorates their service to our country.
    With strong support from the President, VA has made excellent 
progress in sharpening its focus on more effectively meeting the needs 
of those veterans who count on us the most-veterans with service-
connected disabilities, those with lower incomes, and veterans with 
special health care needs. I fully support this strategy and am 
committed to ensuring that our health care resources continue to be 
concentrated on care for veterans most in need of the Department's 
services. As an integral part of this focused strategy, we will make it 
a top priority to provide ongoing benefits and services to the 
servicemen and women who served in Operations Enduring and Iraqi 
Freedom. VA's goal is to ensure that every seriously injured or ill 
serviceman or woman returning from combat receives priority treatment 
and consideration. We will continue to work closely with the Department 
of Defense (DoD) to develop ways by which to move records more 
efficiently between the two agencies, share critical medical 
information electronically, protect the health of troops stationed in 
areas where environmental hazards pose threats, process benefit claims 
as one shared system, and in every way possible, ease their transition 
from active duty to civilian life.
                              medical care
    The President's 2006 request includes total budgetary resources of 
$30.7 billion (including $750 million for construction and $2.6 billion 
in collections) for the medical care program, an increase of 2.5 
percent over the enacted level for 2005, and more than 47 percent above 
the 2001 level. The $750 million in construction will be devoted to the 
Capital Asset Realignment for Enhanced Services (CARES) program, 
bringing the total Department investment to $2.15 billion over 3 years.
    Given the current fiscal environment, it is more important than 
ever that VA concentrate its resources, policies, and strategies on 
those veterans identified by Congress as high priority. The President's 
2006 budget request includes policies and strategies used successfully 
during the last few years to focus VA health care resources on veterans 
with service-connected disabilities, those with lower incomes, and 
veterans needing our specialized services. In particular, this budget 
assumes continued suspension of enrollment of new Priority 8 veterans, 
as this has proven to be the most effective vehicle through which to 
focus our health care resources on our highest priority patients.
    But maintaining the current enrollment policy will not in itself 
ensure us sufficient resources for the care of those who need us the 
most. The President's 2006 budget asks that you enact two important 
legislative proposals-an annual enrollment fee of $250 and an increase 
in pharmacy co-payments from $7 to $15 for a 30-day supply of drugs, 
both pertaining to only Priority 7 and 8 veterans. This fee and the 
increase in co-payments pertain to only veterans who have no 
compensable service-connected disabilities and do have the means to 
contribute to the cost of their care. This budget asks these veterans 
to shoulder a small share of the cost so that we may adequately care 
for our high-priority veterans.
    The proposed enrollment fee is very similar to the fee the law 
requires retired servicemembers to pay in order to participate in 
TRICARE, and is arguably even more justified. As you know, TRICARE 
enrollees generally must have served on active duty for at least 20 
years, and many of them are former enlisted personnel with modest 
retirement incomes. Many of the veterans who would be asked to pay our 
proposed fee would have served only 2 to 4 years. In addition, all 
Priority 7 and 8 veterans affected by this proposal would have incomes 
above $25,842 if they are single and above $30,013 if married.
    I recognize that Congress has not supported either of these 
proposals during the past 2 years. However, these two legislative 
proposals are consistent with the priority health care structure 
Congress enacted several years ago and will help us meet the needs of 
our highest priority veterans. In addition, past utilization of VA's 
health care services has demonstrated that veterans with higher incomes 
(Priority 7 and 8 veterans) rely less on VA for delivering their health 
care and usually have other health care options, including third party 
insurance coverage and Medicare. An annual enrollment fee of $250 and 
an increase in co-payments for pharmacy benefits from $7 to $15 would 
give higher income, non-disabled Priority 7 and 8 veterans the option 
of sharing a small portion of the cost of their care or utilizing other 
health care options. Our high-priority patients typically do not have 
other health care options, so we must act decisively to protect their 
interests by making sure that sufficient resources are available to 
handle their health care needs.
    With medical care resources of $30.7 billion, we project that we 
will treat more than 5.2 million patients. Those in Priorities 1 to 6 
will comprise 78 percent of the total number of veteran patients in 
2006. This will represent the third consecutive year during which our 
high-priority veterans will increase as a percentage of all veterans 
treated. In addition, about 9 of every 10 medical care dollars in 2006 
will be devoted to meeting the health care needs of those veterans who 
count on us the most.
    Even with an increasing patient workload among our highest priority 
veterans, we will continue our steadfast commitment to providing high-
quality and accessible health care that sets the national standard of 
excellence for the health care industry. Our two primary measures of 
health care quality-clinical practice guidelines index and prevention 
index-focus on the degree to which VA follows nationally recognized 
guidelines and standards of care that the medical literature has proven 
to be directly linked with improved health outcomes for patients and 
more efficient care. Our performance on the clinical practice 
guidelines index, which focuses on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to hold steady at the current high performance 
level of 77 percent. As an indicator aimed at primary prevention and 
early detection recommendations dealing with immunizations and 
screenings, the prevention index is projected to remain at its existing 
high rate of performance of 88 percent. VA continues to exceed the 
performance of private sector and Medicare providers for all 15 key 
health care quality indicators for which comparable data are available. 
These indicators include cancer screening for early detection, and 
immunization for influenza and pneumonia. In addition, they cover 
disease management measures such as compliance with accepted clinical 
guidelines in managing diabetes, heart disease, hypertensive disease, 
and mental health.
    The Department has greatly improved access to our health care 
services during the last few years by opening additional outpatient 
clinics, applying information technology strategies to streamline 
administrative, business, and care delivery processes, and implementing 
pay policies and human resource management practices to facilitate 
hiring and retain sufficient health care workers to meet capacity 
demands across the full continuum of care. These initiatives have 
helped VA raise the percent of primary care appointments scheduled 
within 30 days of the patient's desired date to 94 percent and the 
percent of specialty care appointments scheduled within 30 days of the 
patient's desired date to 93 percent. By continuing these types of 
strategies, improving clinical efficiencies, and effectively utilizing 
the resources requested in our 2006 budget, VA will maintain these high 
performance levels.
    The Department's record of success in health care delivery is 
substantiated by the results of the 2004 American Customer Satisfaction 
Index (ACSI). Conducted by the National Quality Research Center at the 
University of Michigan Business School, the most recent ACSI survey 
found that customer satisfaction with VA's health care system was 
markedly above the satisfaction level for Federal Government services 
as a whole. Results released in December 2004 revealed that inpatients 
at VA medical centers recorded a satisfaction level of 84 out of a 
possible 100 points, while outpatients at VA clinics registered a 
satisfaction score of 83. Both of these are well above the government 
average of 72.
    In addition, the results of a recent study conducted by the RAND 
Corporation revealed that patients in VA's health care system were more 
likely to receive recommended care than private-sector patients. 
Quality of care was better for VA patients on all measures except acute 
care, for which care was similar for both patient groups. RAND 
researchers examined the medical records of nearly 600 VA patients and 
about 1,000 non-VA patients with similar health problems. They compared 
the treatment received by both groups to well-established standards for 
medical care for 26 conditions. They found that 67 percent of VA 
patients received care that met the latest standards of the health care 
profession compared with 51 percent of non-VA patients. For preventive 
care, such as vaccination, cancer screening, and early disease 
detection and treatment, 64 percent of VA patients received the 
appropriate care compared to only 44 percent in the private sector. The 
RAND researchers attributed the difference in patient care to 
technological innovations, such as VA's computerized patient records, 
and to performance measurement policies holding top managers 
accountable for standards in preventive care and the treatment of long-
term conditions.
    As another means by which to ensure sufficient resources are 
available to address the health care needs of those veterans who count 
on us the most, VA is proposing to revise the eligibility criteria for 
long-term care services to focus on the following groups of veterans:
     Those injured or disabled while on active duty, including 
veterans who served in Operations Enduring and Iraqi Freedom
     Those catastrophically disabled
     Patients requiring short-term care subsequent to a 
hospital stay
     Those needing hospice or respite care.
    These eligibility criteria would be applied to VA-sponsored long-
term care services, including VA, community, and State nursing homes. 
This long-term care strategy will save approximately $496 million that 
will be redirected toward meeting the health care needs of veterans 
with service-connected disabilities, those with lower incomes, and 
veterans with special health care needs.
    In 2006 the Department will continue to expand access to non-
institutional long-term care services to all enrolled veterans with an 
emphasis on community-based and in-home care. In many cases this 
approach allows VA to provide these services to veterans where they 
live and to care for them in the comfort and familiar setting of their 
home surrounded by their family. During 2006 VA will increase the 
number of patients receiving non-institutional long-term care, as 
measured by the average daily census, to about 35,500. This total is 
over 50 percent above the number of patients receiving this type of 
care in 2001. Funding for non-institutional long-term care in 2006 will 
be about 67 percent higher than the resource level devoted to this type 
of health care service in 2001.
    VA's 2006 medical care request includes $1.2 billion (an additional 
$100 million over the 2005 enacted level) to support the increasing 
workload associated with the purchase and repair of prosthetics and 
sensory aids to improve veterans' quality of life. VA is already 
providing prosthetics and sensory aids to many military personnel who 
served in Operations Enduring and Iraqi Freedom and will continue to 
provide them as needed.
    The President's 2006 budget includes $2.2 billion (an additional 
$100 million over the 2005 level) to continue our effort to improve 
access to mental health services across the country. These funds will 
help ensure VA provides standardized and equitable access throughout 
the Nation to a full continuum of care for veterans with mental health 
disorders.
    We have included a management efficiency rate of 2 percent which 
will yield about $600 million in 2006. We continue to monitor and 
emphasize the need for performance that results in minimizing unit 
costs where possible, and eliminating inefficiency in the provision of 
quality health care. To that end, we have included within this savings 
target, $150 million that will be achieved through implementation of 
improved contracting practices with medical schools and other VA 
affiliates for scarce medical specialties. This is a long-standing 
issue for which the Department is aggressively implementing management 
changes to ensure fair pricing for the services provided by our 
affiliates.
    As a result of continual improvements in our medical collections 
processes and the policy changes presented in this budget request, we 
expect to collect about $2.6 billion in 2006 that will substantially 
supplement the resources available from appropriated sources. This 
figure is $635 million (or 32.5 percent) above the 2005 estimate, with 
two-thirds of the increase due to the two important legislative 
proposals, and is more than 48 percent higher than the 2004 collections 
total. VA has an expanded revenue improvement strategy that focuses on 
modeling industry best performance by establishing industry-based 
performance and operational metrics, developing technological 
enhancements, and integrating industry-proven businesses approaches, 
including the establishment of centralized revenue operation centers. 
There are two electronic data initiatives underway that will add 
efficiencies to the billing and collections processes. The electronic 
and insurance identification and verification project is providing VA 
medical centers with an automated mechanism to obtain veterans' 
insurance information from health plans that participate in this 
electronic data exchange. We are pursuing enhancements which will 
provide additional insurance information stored by other government 
agencies. Our second initiative will result in electronic outpatient 
pharmacy claims processing to provide real-time claims adjudication.
        capital asset realignment for enhanced services (cares)
    The President's budget request includes $750 million in 2006 to 
continue the CARES program that will renovate and modernize VA's health 
care infrastructure and provide greater access to higher quality care 
for more veterans, closer to where they live. About $50 million of this 
total relates to the sale of assets and enhanced use proceeds of the 
Lakeside hospital in Chicago. The budget request provides a 3-year 
(2004-2006) investment total of $2.15 billion committed to this 
historic transformation of our health care system. These resources will 
be used to address our prioritized list of major capital investments. 
The proposed projects for 2006 will advance the CARES program by 
providing construction funding for five projects for which design work 
has already started, as well as two additional projects to be initiated 
in 2006. All of these capital projects support the recommendations 
included in the CARES Decision report. About half of the CARES funding 
requested for 2006 will be devoted to three major construction 
projects:
     Las Vegas, Nevada, New Medical Facility--$199 million to 
complete phase two construction, providing up to 90 inpatient beds, a 
120-bed nursing home care unit, ambulatory care center, and 
administrative and support functions, all of which will expand capacity 
and increase the scope of health care services available; VA is working 
with DoD to ensure mutual needs are met
     Cleveland, Ohio, Cleveland-Brecksville Consolidation--
$87.3 million to complete phase two construction; this project will 
consolidate and co-locate all clinical and administrative functions of 
a two-division medical center at the Wade Park VA Medical Center, 
leading to annual cost savings of more than $23 million and enhancing 
the quality of care
     Pittsburgh, Pennsylvania, Consolidation of Campuses--$82.5 
million to complete phase two construction; this project will 
consolidate a three-division health care delivery system into two 
divisions which will improve patient care by providing a state-of-the-
art health care environment and reducing operating expenses.
    Our capital investment planning process and methodology involve a 
Department-wide approach for the use of capital funds and ensure all 
major investments are based upon sound economic principles and are 
fully linked to strategic planning, budget, and performance measures 
and targets. All CARES projects have been reviewed using a consistent 
set of evaluation criteria that address service delivery enhancements, 
safeguarding assets, support of special emphasis programs and services, 
capital portfolio goals, alignment with the President's Management 
Agenda, and financial priorities.
                    medical and prosthetic research
    The President's 2006 budget includes $786 million to support VA's 
medical and prosthetic research program. This resource level will fund 
nearly 2,700 high-priority research projects to expand knowledge in 
areas critical to veterans' health care needs, most notably research in 
the areas of aging, acute and traumatic injury, the effects of military 
and environmental exposures, mental illness, substance abuse, cancer, 
and heart disease.
    The requested level of funding for the medical and prosthetic 
research program will position the Department to buildupon its long 
track record of success in conducting research projects that lead to 
clinically useful interventions that improve veterans' health and 
quality of life. Examples of some of the recent contributions made by 
VA research to the advancement of medicine are:
     Development of an artificial nerve system that enables a 
patient with upper-limb paralysis to grasp objects
     Creation of a new collaborative model for treating 
depression in older adults, the application of which potentially saves 
lives, reduces patients' level of pain, and improves their overall 
functioning
     The finding that proper intake of cereal fiber and vitamin 
D are among the best ways to prevent serious colon polyps that may lead 
to colorectal cancer
     Development of an oral drug that halts the deadly action 
of the smallpox virus.
    In addition to VA appropriations, VA researchers compete and 
receive funds from other Federal and non-Federal sources. Funding from 
external sources is expected to continue to increase in 2006. Through a 
combination of VA resources and funds from outside sources, the total 
research budget in 2006 will be nearly $1.7 billion.
                           veterans' benefits
    The Department's 2006 budget request includes $37.4 billion for the 
entitlement costs associated with all benefits administered by the 
Veterans Benefits Administration (VBA). This total includes an 
additional $812 million for disability compensation payments to 
veterans and their survivors for disabilities or diseases incurred or 
aggravated while on active duty. Recipients of these compensation 
benefits are projected to increase to 3 million in 2006 (2.7 million 
veterans and 0.3 million survivors, or 400,000 more than when the 
President came to office).
    The President's budget request includes $1.26 billion for the 
management of the following benefits programs-disability compensation; 
pension; education; vocational rehabilitation and employment; housing; 
and life insurance. This total is $77 million, or 6.6 percent, over the 
2005 level. As a result of the enactment of the Consolidated 
Appropriations Act, 2005 (Public Law 108-447), an additional $125 
million will be made available to VBA (through a transfer of funds from 
medical care) for disability benefits claims processing. Of this total, 
$75 million will be used during 2005 and the remaining $50 million will 
be used in 2006. The overwhelming majority of these funds will be used 
to address the increased volume of compensation claims from both 
separating servicemembers and older veterans who had not previously 
submitted claims.
    As a Presidential initiative, improving the timeliness and accuracy 
of claims processing remains the Department's top priority associated 
with our benefits programs. Last year the timeliness of our 
compensation and pension claims processing improved by 9 percent (from 
182 days in 2003 to 166 days in 2004). While we were successful in 
reducing the time it takes to process claims for compensation and 
pension benefits, we were not able to improve timeliness as much as we 
had projected at the beginning of the year. Entering 2004, VA was well 
positioned to meet our performance goals pertaining to the timeliness 
of processing claims. However, a September 2003 decision by the Federal 
Circuit Court in the case of the Paralyzed Veterans of America et. al. 
v. The Secretary of Veterans Affairs required VA to keep veterans' 
claims open for 1 year before making a decision to deny a claim. As a 
result, decisions on over 62,000 claims were deferred, many for as much 
as 90 days. While the President signed correcting legislation in 
December 2003, the impact of the court decision in the early portion of 
2004 was substantial, as the number of pending claims had grown 
dramatically. VA made significant progress during the last half of the 
year, but we were not able to fully overcome the negative effects from 
this court decision on our claims processing timeliness.
    We have had to revise our claims processing timeliness goals for 
the next 2 years due, in part, to the lingering effect of the Federal 
Circuit Court decision. Also having an impact on the timeliness of 
processing is the increasing volume of disability claims. In addition, 
VA will continue to face the retirement of staff members highly 
experienced in processing claims. While we have established a sound 
succession plan, the new employees we are hiring will require both 
extensive training and substantial claims processing experience in 
order for them to reach the productivity level of those leaving the 
Department.
    During 2005 we expect to reduce the average number of days to 
process compensation and pension claims to 145 days, an improvement of 
12.7 percent from the 2004 performance level. With the resources 
requested in the 2006 budget, we will be able to maintain this improved 
timeliness in support of this Presidential initiative. In addition, we 
will reduce the number of pending claims for compensation and pension 
benefits to 283,000 by the end of 2006, a reduction of 12 percent from 
the total at the close of 2004.
    We will increase our efforts to ensure the consistency of our 
disability evaluations from one regional office to another. VA has made 
significant improvements in both the accuracy and consistency of its 
benefit entitlement decisions due to increased quality assurance 
efforts and more focused training of claims adjudicators. However, more 
must be done to ensure the Department meets its commitment to treating 
every veteran's claim fairly and equitably. A system-wide review of the 
rating program for disability compensation is underway. In addition, 
our efforts are supported in the 2006 budget by a request for $1.2 
million for skills certification testing and $2.6 million for continued 
development of computer-based training tools. These initiatives will 
complement other ongoing efforts supported by our budget that address 
the issue of consistency and accuracy. Among these are:
     Revision of all of the regulations that govern the 
compensation and pension programs in plain language to ensure that the 
rules can be applied consistently and fairly
     In-depth data analysis of benefit decisions to identify 
potential areas of inconsistency, increasingly possible with our new 
information technology applications and tools
     Centralized processing of appeals remanded by the Board of 
Veterans' Appeals, and ongoing quality reviews of appealed claims 
decisions.
    An important and successful component of VA's vision for providing 
a seamless transition for servicemembers separating from active duty is 
the Benefits Delivery at Discharge (BDD) program. The BDD program 
enables active duty servicemembers to file disability compensation 
claims with VA staff at military bases, complete physical exams, and 
have their claims evaluated before, or closely following, their 
military separation dates. Transitioning servicemembers benefit greatly 
from the BDD program, which has been a vital part of the Department's 
strategy for improving timeliness and accuracy of disability 
compensation claims processing.
    We believe the BDD program provides opportunities to not only 
benefit transitioning servicemembers through timely and accurate claims 
processing, but also to bring new processing improvements and 
efficiencies to the system through consolidation of claims evaluation 
activities. An initiative is currently underway to consolidate 
disability compensation rating and authorization actions on all BDD 
claims to two sites nationwide. VA staff will continue work with 
transitioning servicemembers at military bases to establish claims and 
arrange for timely medical exams, thereby retaining these successful 
aspects of the BDD program.
    In support of the education program, the 2006 budget proposes $7.8 
million for continued development and implementation of the Education 
Expert System. The requested funds will be used to first transition 
education processing to VBA's corporate environment, followed by the 
development and deployment of a processing system that receives 
application and enrollment information electronically and processes 
that information in the new corporate environment without human 
intervention. While it will be a number of years before this system is 
fully deployed, it will ultimately lead to substantial improvements in 
education claims processing timeliness.
    In April 2004 the Department's Vocational Rehabilitation and 
Employment Task Force released its report containing more than 100 
recommendations on how to improve service to disabled veterans. The 
focus of the report was on development and implementation of a new, 
integrated service delivery system based on an employment-driven 
process. In response to the task force's recommendations, VA is 
including $4.4 million in the 2006 resource request to be used for 
establishing a job resource lab in each regional office. These labs 
will include all of the necessary equipment, supplies, and resource 
materials to aid VA staff and veterans in conducting comprehensive 
analyses of local and national job outlooks, developing job search 
plans, preparing for interviews, developing resumes, and conducting 
thorough job searches. These self-service job resource labs will assist 
veterans in acquiring suitable employment through the use of a 
comprehensive on-line employment preparation and job-seeking tool.
    In order to make the delivery of VA benefits and services more 
convenient for veterans and more efficient for the Department, we are 
requesting $4.4 million for the collocation and relocation of some 
regional offices. This effort may involve collocations using enhanced-
use authority, which entails an agreement with a private developer to 
construct a facility on Department-owned grounds and then leasing all 
or part of it back to VA. At the end of these long-term lease 
agreements, the land and all improvements revert to VA ownership.
                                 burial
    The President's 2006 budget includes $290 million in discretionary 
funding for VA's burial program, which includes operating and 
maintenance expenses for the National Cemetery Administration, capital 
programs, the administration of mandatory burial benefits, and the 
State Cemetery Grants program. This total is nearly $17 million, or 6.4 
percent, over the 2005 enacted level.
    The 2006 request includes $167 million in administrative funding 
for VA's burial program, an increase of $7.3 million (or 4.6 percent) 
from the 2005 enacted level. Within this total, $156 million is for the 
operations and maintenance of VA's national cemeteries and $11 million 
is for the administrative processing of claims for burial benefits. The 
additional funding will be used to meet the growing workload at 
existing cemeteries, primarily by increasing staffing and contract 
maintenance.
    Our budget request for the burial program includes $90 million for 
construction projects. Of this total, $65 million is for major projects 
and $25 million is for minor projects. Consistent with the provisions 
of the National Cemetery Expansion Act of 2003, we are requesting $41 
million in major construction funding for land acquisition for six new 
national cemeteries in the areas of Bakersfield, California; 
Birmingham, Alabama; Columbia-Greenville, South Carolina; Jacksonville, 
Florida; Sarasota, Florida; and southeastern Pennsylvania. The 2006 
request also includes funding to develop an annex for the expansion of 
Fort Rosecrans National Cemetery in Miramar, California. In addition, 
this budget provides $32 million for the State Cemetery Grants program.
    Our resource investments in the burial program produce positive 
results in service delivery to veterans and their families. We will 
expand access by increasing the percent of veterans served by a burial 
option within 75 miles of their residence to 82.2 percent in 2006, 
which is 6.9 percentage points above the 2004 figure. While our 2004 
performance was extremely high in several key areas, we will continue 
to improve our performance in 2006 by increasing the percent of:
     Survey respondents who rate the quality of service 
provided by the national cemeteries as excellent from 94 percent to 96 
percent
     Survey respondents who rate national cemetery appearance 
as excellent from 98 percent to 99 percent
     Graves in national cemeteries marked within 60 days of 
interment from 87 percent to 89 percent.
    These performance improvements will further enhance the outstanding 
reputation of VA's National Cemetery Administration which, in 2004, 
earned the highest rating ever achieved by a public or private 
organization in the American Customer Satisfaction Index (ACSI). These 
results showed that the Department's national cemeteries produced a 
customer satisfaction rating of 95 out of a possible 100 points. This 
is two points higher than the last survey conducted in 2001 when VA's 
national cemeteries also ranked No. 1 among Federal agencies in 
customer satisfaction.
                        management improvements
    VA continues to aggressively pursue a variety of initiatives aimed 
at ensuring we apply sound business principles to all of the 
Department's operations. Two of our most successful management 
improvement efforts during the last year focus on the strategic 
management of human capital and capital asset management.
    As an integral component of our succession planning activities, we 
released a state-of-the-art ``VA Recruitment'' CD-ROM in September 2004 
promoting the Department as an employer of choice. We distributed this 
to colleges and universities, military transition centers, veterans 
organizations, and VA vocational rehabilitation centers, offices, and 
medical centers. This initiative creates a corporate recruitment 
marketing approach that will give VA a competitive edge in attracting 
highly qualified career applicants. The CD-ROM uses graphics and video 
streaming to present a wide spectrum of career opportunities and 
describes VA's goals and services, occupations, and the benefits of 
working for the Department. We will continue to focus on creative 
marketing initiatives and outreach to prospective applicants.
    VA has also launched a Capital Asset Management System (CAMS) which 
is an integrated, Department-wide system that enables us to establish, 
analyze, monitor, and manage our portfolio of diverse capital assets 
through their entire lifecycle from formulation through disposal. CAMS 
provides a strategic view of existing, in-process, and proposed asset 
investments across all VA program offices and capital asset types. All 
offices now use this shared system to collect and monitor real property 
and capital asset information. In addition, VA has been approached by 
numerous agencies, including the Departments of Defense, Homeland 
Security, Commerce, and Interior to explore the replication of CAMS in 
their organizations.
    VA's progress in this area places it in the forefront of other 
Federal agencies in terms of its ability to meet the real property 
performance measures and guidelines that were recently finalized by the 
newly created Federal Real Property Council.
    We are currently in the process of fully evaluating all of the 
information gathered during the operational tests of the Core Financial 
and Logistics System (CoreFLS) conducted last year. This year we will 
complete a comprehensive analysis of the product and any existing 
configuration gaps, examine lessons learned from the pilot tests, and 
reevaluate our business processes. This will provide us with the 
information needed to refine the system as well as develop improved 
change management, training, and implementation procedures that are 
critical to successful deployment. In anticipation of an enhanced 
financial management system moving forward to full deployment at VA 
facilities nationwide, the Department's 2006 budget includes $70.1 
million for this project.
    In support of one of the primary electronic government initiatives 
for improving internal efficiencies and effectiveness, the Department's 
2006 budget provides $8 million to continue the migration of VA's 
payroll services to the Defense Finance and Accounting Service (DFAS). 
This initiative will consolidate 26 Federal payroll systems down to 2 
Federal payroll provider partnerships. VA is working with DFAS on all 
required tasks to ensure successful migration.
                                closing
    Mr. Chairman, our 2006 budget request of $70.8 billion will provide 
the resources necessary for VA to:
     Provide timely, high-quality health care to more than 5.2 
million patients; 78 percent of all veteran patients will be veterans 
with service-connected disabilities, those with lower incomes, or 
veterans with special health care needs
     Maintain the 2005 performance level of 145 days, on 
average, to process compensation and pension claims
     Increase access to our burial program by ensuring that 
more than 82 percent of veterans will be served by a burial option 
within 75 miles of their residence.
    I look forward to working with the Members of this Committee to 
continue the Department's tradition of providing timely, high-quality 
benefits and services to those who have helped defend and preserve 
freedom around the world.
    That concludes my formal remarks. My staff and I would be pleased 
to answer any questions.

    Chairman Craig. Thank you very much, Mr. Secretary. I would 
ask our colleagues to adhere to 5-minute rounds, and we will go 
as long as you wish in relation to the questions to be asked.
    Let me start with that, Mr. Secretary. And let me start 
with the basics: is the analysis of the VA's budget proposal 
that I summarized in my opening statement, in your opinion, an 
accurate one?
    Secretary Nicholson. Yes, it is.
    Chairman Craig. Is it true that the Administration asked 
for an increase in appropriated funding of less than one half 
of 1 percent for VA medical care?
    Secretary Nicholson. Well, yes, it is.
    Chairman Craig. Would such a minimal increase leave VA 
approximately $1.8 billion short of its funding needs?
    Secretary Nicholson. No, it will not in the totality of our 
budget request, no, sir.
    Chairman Craig. Would you broaden on that for me, please?
    Secretary Nicholson. Well, it will not if the other 
measures that we have for increased revenue sources, 
collections----
    Chairman Craig. Put in that context.
    Secretary Nicholson. Yes.
    Chairman Craig. OK; as for now, VA would bridge the gap 
between the needs and its request, as I understand, the VA 
proposes a four-pronged strategy: to boost the efficiencies, to 
boost collection under current legal authorities, to generate 
new collections if Congress authorizes new fees and co-payments 
and to redefine eligibility for institutional long-term care 
services. First, is that an appropriate observation?
    Secretary Nicholson. Yes, sir, I think that is appropriate.
    Chairman Craig. Further, am I correct that VA can and will 
implement the first two prongs of this strategy with no 
Congressional action?
    Secretary Nicholson. Yes, Mr. Chairman.
    Chairman Craig. The efficiency side and then, of course, 
the collections under current authority, legal authority.
    Secretary Nicholson. Yes, we will effect those efficiencies 
regardless, and we will continue to improve on our collections, 
primarily third-party co-pays.
    Chairman Craig. That in itself, other than the co-pays, is 
really no different from where we have been and what we have 
pushed over the last good number of years, is it not, as it 
relates to health care modernization, outpatient care, all of 
those kinds of things in part? I mean, in part, what we have 
been pushing for some time is to generate those kinds of 
efficiencies in service and operation, is that not----
    Secretary Nicholson. That is correct, and progress has been 
made, particularly in the collection of these third-party payer 
insurance provisions. They have done, I think, a spectacular 
job in recent years in increasing those collections.
    Chairman Craig. And in going the direction I am going in, I 
guess the next follow-up question, Mr. Secretary, there are 
always efficiencies to be had to a point at which you then 
begin to impair delivery as you accomplish that, and we 
squeezed hard in the last few years. We have also modernized, 
and those who observe us have recognized that.
    What are some of the proposals that VA will look at as it 
relates to generating greater efficiencies now, and will it 
improve, and how will it improve the management practices that 
are currently in place?
    Secretary Nicholson. Mr. Chairman, I will answer that in a 
general way and refer to Dr. Perlin to give some more of the 
specifics as the head of our medical care operation and the 
discretionary part of it, but I know that we will continue in 
this move that we are on for more standardization.
    We have 170-some medical centers or hospitals spread 
throughout the Nation, including one in the Philippines. We are 
on a path for more standardization, both in back office 
management, reporting, and purchasing, and I think considerable 
progress has been made particularly in the area of purchasing. 
There are, as you know, up in the neighborhood of 800 community 
outpatient clinics, which are also benefiting from some of the 
standardization practices that are being prescribed, and more 
is needed, and there are more opportunities for savings there.
    I might, if I may, call on Dr. Perlin to be more specific 
about some of the medical practices.
    Chairman Craig. Please.

        STATEMENT OF DR. JONATHAN PERLIN, ACTING UNDER 
         SECRETARY FOR HEALTH BENEFITS, DEPARTMENT OF 
                        VETERANS AFFAIRS

    Dr. Perlin. Good morning, Mr. Chairman, and thank you very 
much for the recognition that we have squeezed hard. We are 
operating very efficiently in areas such as our pharmacy 
benefit. Our pharmacy purchasing has really been recognized as 
a model.
    But we can never take efficiency off the table. We believe 
there are greater efficiencies to be had and standardizations 
of the types of drugs that we do purchase. In fact, we believe 
that there may be another $100 million to $200 million in 
standardizing what we call our formulary or the menu of 
medications that we purchase.
    The same thing holds true in medical-surgical supplies. For 
example, we purchase a number of different varieties of cotton 
gauze. Nobody really cares what brand it is as long as it is 
good quality, and as long as it is there. We can standardize in 
that regard, and with some of our capital equipment, 
standardize the maintenance that goes on behind our capital 
equipment, as well. Consolidation of our business office 
functions, where we have, for instance, billing activities in 
each and every hospital; perhaps it is more efficient to 
actually roll those up into one really highly trained, 
efficient, effective organization, consolidating some of the 
business functions there, too.
    Our partnership with the Department of Defense, also, is an 
example of sharing, where we can leverage our scale and 
purchase more efficiently. The same holds true in our service 
contracting; again, consolidating our service contracting 
instead of one here, one there. And finally, we would never 
take productivity off of the table: our advanced clinic access 
and the community-based outpatient clinics that the Secretary 
just mentioned, our ability to see more patients more 
effectively is really increased by a national initiative known 
as Advanced Clinic Access.
    Chairman Craig. Well, there is more in this area that I 
want to pursue. Thank you for those comments. Let me turn to my 
colleague, Senator Akaka.
    Danny.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Secretary, Senator Craig addressed this by using 
percentages, and let me try to understand what the President is 
offering as an increase for VA health care. Set aside the 
possible increased revenue from insurance companies and the 
spending associated with new veterans fees. What is the amount 
the President is requesting that Congress appropriate for VA 
hospitals and clinics?
    Secretary Nicholson. Well, I will ask Dr. Perlin to answer 
that question, Senator.
    Dr. Perlin. Senator, the overall appropriation this year 
will take us to $30.705 billion.
    Senator Akaka. And that is for hospitals and for clinics?
    Dr. Perlin. That is for the entire medical system, sir.
    Senator Akaka. I understand, as the Secretary mentioned, 
that the $70.8 billion of the President's budget includes an 
$880 million increase over last year's discretionary funding, 
but I am looking at specifics here of VA hospitals and clinics; 
also, another question in that area: what is the amount 
associated with payroll increases and inflation?
    Secretary Nicholson. Go ahead and answer that.
    Dr. Perlin. Sir, the 3.5 percent national pay raise 
resulted in a cost increase of $374 million.
    Senator Akaka. The President's co-pay, Mr. Secretary, the 
President's co-pay increase and new enrollment fee are designed 
to literally drive veterans out of the system, and I say that 
because I have read that about 192,200-plus veterans have not 
been helped, and in Hawaii, there is a number of more than 500 
who have not been given service. Two years ago, the President 
had no qualms about prohibiting enrollment for new middle-
income veterans.
    That policy continues today, and in fact, the testimony 
says that the President's enrollment decision was the most 
effective vehicle to manage health care resources. This budget 
takes a little different route, however. The goal is to make 
the cost of coming to VA prohibitively expensive. Either way, I 
have to question the priorities of this Administration. Why not 
provide sufficient resources to care for all veterans? Is this 
care not part of the cost of past wars and current conflicts in 
which we are engaged?
    Secretary Nicholson. Senator Akaka, I think that probably 
everybody involved with veterans in a perfect world holds them 
in the esteem that you do and that I do and that would like to 
make all this available. The whole panoply of services that the 
Veterans Administration provides to many people, as we said, to 
5.2 million people getting our medical services as well as the 
millions getting benefits.
    But it is not possible, and we have to make tough 
decisions, and we have to prioritize. And the priority is to 
those people who count on us, who need us the most, who are 
those people who are disabled as a result of their service to 
our country, those who are down on their luck, and they are 
poor, and to those who have chronic illnesses and special 
conditions, such as spinal cord injuries.
    And that is a large population of veterans, and it takes a 
great deal to tend to those people in the outstanding way that 
the VA is doing it. And in a context of a finite amount of 
resources, it is just compelling that we have to make those 
tough decisions.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Chairman Craig. Senator Akaka, thank you.
    Now, let me turn to Senator Murray.
    Senator Murray. Thank you very much, Mr. Chairman.
    Mr. Secretary, I know you are new to this process and have 
just been on the job a couple of weeks, and I want to just give 
you an opportunity to put your stamp on this budget request. 
Last year, you might know that Secretary Principi actually 
acknowledged that the President's request was about $1.2 
billion short of what was really needed. That was really 
helpful to us as we put our budget together, and Congress was 
able to react and do what we needed to do to help the VA when 
it was really in some desperate straits.
    We know that The Independent Budget has called for a $3.5 
billion increase for fiscal year 2006. Tell me what you really 
think in terms of this budget: does it meet our needs, or is 
The Independent Budget closer to what we really need?
    Secretary Nicholson. No, Senator, we spent a lot of time 
going over this and, of course, asking these experts a lot of 
questions. I have many of the same concerns, and I end up being 
satisfied that we can get the job done with this budget.
    Senator Murray. Do you think there are any deficiencies 
within the request?
    Secretary Nicholson. Are there any deficiencies?
    Senator Murray. Deficiencies within the request?
    Secretary Nicholson. Any efficiencies?
    Senator Murray. Do you think there are any deficiencies 
within the President's budget request?
    Secretary Nicholson. Well, you know, it is a matrix. When 
you are dealing with these millions of people that we are 
serving and the billions of dollars, it is a matrix, and you 
could probably disagree about a priority here or there which 
would affect the allocation or the request for that priority, 
but I think that this is a very fair, thorough, and doable 
budget that reflects the priority of this Administration to 
veterans.
    As I have said in my opening testimony, there has been a 
very sharp incline since the Bush Administration came to 
government, and this budget does reflect, if you will, a pause 
in the stunning increases, because we are in a----
    Senator Murray. Have you had a chance to look at The 
Independent Budget?
    Secretary Nicholson. I have. I looked at it, I perused it, 
yes, Senator.
    Senator Murray. Maybe you might not be able to right now, 
but perhaps you could get to us whether you agree or disagree 
with some of what they are requesting and the differences 
between what you have. But let me ask the question a little 
better. Senator Craig's staff gave us a chart which is really 
helpful in trying to understand what the real increase is. And 
when I look at it, what I see is actually a requested increase 
of less than $80 million, when you look at how this is put 
together, and that has to cover 7 million veterans, 170 
hospitals, hundreds of outpatient clinics, medical inflation, 
payroll increases that you were asked about a few minutes ago.
    Is there anything within this budget that gives you pause 
to say to us we are going to have a problem if we enact this as 
the President has requested?
    Secretary Nicholson. Well, it is a tight budget, and people 
are going to have to operate that way. It is going to be 
challenging in the extended care area to make that transition 
and do that with, you know, the compassion and sensitivity that 
will be needed there. But that is doable. We have discussed 
that, and I think that we can operate this Administration on 
this budget and maintain the quality of care and the demands 
that will be on us, including those returnees who are a 
priority of ours coming back from Iraq and Afghanistan.
    Senator Murray. Well, one of the efficiencies that you plan 
to put in place is the reduction of 3,700 medical staff 
employees; is that correct?
    Secretary Nicholson. I am going to ask Dr. Perlin to 
address that specifically.
    Dr. Perlin. This budget will reduce the total number of 
medical staff employees by about 3,700. There is also a $627 
million increase in the area of mental health, another $26 
million associated with DoD sharing. So in some areas, there 
will be extensive growth.
    Senator Murray. Well, we know that we have many soldiers 
who are coming home who will become part of the veterans 
system. By some estimates, as much as 20 percent of them will 
need post-traumatic stress syndrome care. We know we have 
thousands of injuries today who will go out of service and into 
the veterans service, and you said yourself that we are going 
to be serving a million more than last year. How do you reduce 
medical staff employees by 3,700 people and serve a million 
more people?
    Secretary Nicholson. Senator Murray, what I said was that 
we were going to be serving a million more than we did in 
fiscal 2001. There has been about a 50 percent increase in 
appropriations for a million increase in patients.
    Senator Murray. Well, I would just say, Mr. Chairman, that 
I do not know how we are going to serve the people who are 
already in the system who are in a backlog by reducing medical 
staff by 3,700, but I know my time is running out. I did want 
to ask one more question, and that is we have a supplemental 
coming, $82 billion, I believe. We are just beginning to look 
at it, but from my read of it, it has no mention in it of 
covering any VA services. Would you consider veterans services 
for those soldiers who served us and are coming home to be part 
of the cost of war?
    Secretary Nicholson. Well, I think that in our system, and 
because of the value that--I mean, we have values in this 
country, and I think veterans are one of them, that we hold 
them in a very high position of esteem and really care about 
them. You know, there are a lot of people who have been 
veterans who put on the uniform and were ready to be deployed 
that may not have gone into a war zone, but that were back in 
the zone of the interior who were providing very important 
services overall.
    Senator Murray. And I appreciate that. When you and I met, 
you expressed the same concern and value for those who serve is 
that serving them when they come home is part of the cost of 
war. There is not one dime in the supplemental request for 
veterans. We are seeing backlogs; we know that we do not have 
enough services. Do you personally think that part of the 
supplemental should be to pay for the cost of war, which is 
veterans services?
    Secretary Nicholson. Well, I have not looked at that 
supplemental. What I have been looking at is what we are asking 
for versus what we have to do, and I think they match up. I 
think we can get the job done with this budget request.
    Senator Murray. Mr. Chairman, I think we have a 
disagreement, but I will look forward to hearing more from you 
in the future.
    Chairman Craig. I appreciate that. Thank you for 
recognizing the time limit.
    Senator Thune.
    Senator Thune. Mr. Chairman, thank you and thank you for 
your testimony, Secretary Nicholson.
    As I said earlier, when I first came to Congress in 1997 as 
a Member of the House, the VA health care budget, I think, was 
$17 billion, and there were a couple of years, successive years 
there, in President Clinton's budget actually flatlined or 
froze that budget 2 years in a row at $17 billion. Today, we 
are talking about a $30 billion VA health care budget which 
was, when I came to Congress 8 years ago, to the House, a $13 
billion increase, which, if my arithmetic is correct, that is 
about a 76 percent increase over an 8-year period or about 9.5 
percent per year.
    So I think in fairness, we have to say that Congress and 
the Administration have stepped up and realized that we have 
got to do more; we have got to put the resources behind this. 
And as has been noted earlier by Senator Murray, obviously, we 
have got a lot bigger universe of people that we are serving, 
and that is something that imposes some severe constraints on 
even the ramped up funding that we have had.
    But this year's budget is clearly a slowdown from what we 
have seen in the past few years, and I guess I have a concern 
as to how that is going to affect rural health care. There are 
areas in my part of the world that are very remote 
geographically; present great obstacles to people who want to 
have access to facilities, and the community-based outpatient 
clinics have done a lot of good in terms of giving people that 
access. But I guess I am wondering what programs and 
technological advances will the VA continue to develop to bring 
care to veterans in Service Area 23 and other areas like it 
across the country that present those types of geographic 
challenges?
    Secretary Nicholson. Senator, that remains a priority of 
the VA, and that is consistent with the--I hate to use a Navy 
metaphor, but the sea change that has gone on at the VA, for 
which I get no credit, but my predecessor should, because it 
has really been transforming to a hospital-based medical care 
delivery system to a community-based, and the outreach of that 
has just been phenomenal: the hundreds and hundreds of new 
community-based outpatient clinics that are out there where 
veterans are living and the convenience that it affords them 
and then, if needed, they are referred to specialty care from 
the primary care they are given at the clinics.
    And we are now adding to that the capabilities that are 
available because of technology, and we talked about this some 
at my confirmation hearings, but there are these telemedicine 
devices that now make it possible to really--distance is not a 
constraint, because of the speed of the transmission, but a 
person can sit at a monitor and measure the blood sugar and the 
heart rate, the blood pressure, look at the pupil dilation, if 
that is relevant, of a veteran that might be in western South 
Dakota, and they would be doing it in Sioux Falls, and they can 
do that on a daily basis, and the data is transmitted 
automatically and then logged in their electronic medical 
record, so that that caregiver who is looking after that 
veteran knows the trend and can then take steps accordingly.
    This has really enhanced our ability to treat more people 
and to do it more efficiently and more cost-effectively as 
well.
    Senator Thune. I appreciate the steps that have already 
been taken, and we worked on some telemedicine, telehealth 
issues while I was a Member of the House, and I see great 
opportunity, great benefit in one of the new frontiers of 
medicine not only in VA health care, but in health care 
generally in rural areas and being able to treat and diagnose 
with the benefit of technology. So I look forward to working 
with you on that, and as I said earlier, will want to, as the 
budget process moves forward, give careful consideration to how 
this proposed budget will impact specifically rural areas. That 
is a particular concern of mine, and I know you are fully aware 
of that.
    So, Mr. Chairman, I yield back.
    Chairman Craig. Senator Obama.
    Senator Obama. Thank you, Mr. Chairman. Mr. Secretary, 
thank you for your testimony.
    I would like to pursue the issue of long-term care just for 
a moment, and my understanding, at least, and I may not have 
absorbed this correctly, is that under this budget, we are 
intending to eliminate the current per diem rate that is 
provided to States for long-term care or reduce it--pardon me, 
reduce it sufficiently that we are looking at significant 
losses to the State in terms of Federal funding, and I am 
wondering, Doctor, maybe you can elaborate on what the 
rationale for that is and how you would anticipate the States 
dealing with this or absorbing this.
    Dr. Perlin. Thank you, Senator Obama. I appreciate the 
question.
    First, let me start that the VA's overall approach to long-
term care, to needs of older veterans or veterans with 
frailties is really to provide care in the least restrictive 
environment, care that helps them maintain social, community 
and even, for some of the older veterans, 50, 60-year spousal 
relationships. Some of the technologies that the Secretary just 
mentioned support veterans in their homes, and so, there is an 
absolute focus on meeting the needs in the best possible place.
    What we are seeking to do is to make sure we have parity 
among the three different settings of institutional care, VA 
nursing homes, community nursing homes, and State veteran 
homes. This policy would create parity among these three 
environments. Just to be sure, it provides care for those 
veterans 70 percent service connected or greater. It provides 
care for those veterans with special needs, such as those who 
require ventilators. It provides care for those veterans who 
need hospice care or for families who need a respite in caring 
for a critically ill veteran. It provides care for veterans who 
need care after hospitalization, and it provides care for 
veterans who need a brief rehabilitation period as well. It 
takes care of all of those veterans.
    Senator Obama. No, I understand that the veterans with 
significant disabilities and who need significant assistance of 
the sort that you described are still going to be receiving 
care, but what is also true is that currently, we have a system 
in which there are a range of veterans who might not fall into 
some of the categories that you outlined, but are part of the 
veterans long-term care system, and States have been getting 
reimbursement for their care. Is that accurate?
    Dr. Perlin. It is.
    Senator Obama. OK; and under this proposed budget, some of 
that Federal support to the States for that long-term care 
would be eliminated; is that accurate?
    Dr. Perlin. That is correct.
    Senator Obama. OK; so, do you have an estimate in terms of 
the amount of money that is being reduced in your budget that 
is currently going to States, or, Secretary, if you have it, 
whoever wants to answer the question, what kind of shortfall 
are we essentially shifting over to the States?
    Secretary Nicholson. Dr. Perlin will answer that.
    Senator Obama. OK.
    Dr. Perlin. I believe it will be about a $293 million 
expenditure associated with those veterans.
    Senator Obama. OK; so right off the bat, it is fair to say, 
then, that close to $300 million of funding that is currently 
going to States to provide for veterans is going to be 
eliminated, and the States are basically going to have one of 
two options: either they simply stop providing the service to 
veterans and figure out how those veterans are to fend for 
themselves, or the States have to come up with this additional 
money. Or is there an alternative?
    And let me say this, because I think this is a point that 
you were making at the outset: I am a big believer in assisted 
living. To the extent that we can reduce institutionalized 
care, oftentimes, that can be a positive thing. But that also 
costs money. It is not free. You do not suddenly send folks 
into a community-based setting with no resources. Typically, 
you are going to have to provide some kind of in-home care; 
there are a range of other things that have to be done.
    So I, at least, was not clear that there were a set of 
provisions whereby we were going to ensure that the States were 
going to be able to do that. Maybe I am missing something.
    Dr. Perlin. No, thank you, Senator, and thank you for your 
endorsement of the non-institutional care. It really is the 
wave of the future.
    This budget does allow for an increase of in excess of 18 
percent, from $339 million just over $400 million for increased 
non-institutional care in support of veterans. That occurs, in 
addition to another program, our Care Coordination Program, 
which increases in the year ahead from 4,500 to in excess of 
21,000 veterans supported using technology such as Senator 
Thune mentioned earlier. But for every veteran who might not 
use State-supported care or might not use a State veterans home 
for care, we will work with that veteran, using social workers, 
working with the State, working with other Federal programs, 
both Medicare and Medicaid, to make sure that those veterans 
who do require institutional care have the support that is 
necessary.
    Senator Obama.  Mr. Chairman, I am out of time. I would 
just note that--and I appreciate some of the changes that we 
may want to consider to be more creative in how long-term care 
is provided. This budget, as I see it, and I do not think it 
has been contradicted in this: this is going to eliminate $300 
million worth of funding that is currently going to States, 
approximately $16 million in receipts going to the State of 
Illinois.
    And I suspect that every Member here who has these long-
term facilities or is getting some sort of reimbursement is 
going to see those same reductions. I think that is something 
that should be a source of concern at a time when States are at 
least as cash-strapped as the Federal Government is. We are 
passing the buck.
    Thank you, Mr. Chairman.
    Chairman Craig. Senator, thank you.
    Senator Jeffords. Jim, questions?
    Senator Jeffords. Thank you, Mr. Chairman.
    I want to talk about the mental health needs of the 
veterans returning from Iraq. Commencing this war was the most 
controversial, I think, in this history. It is reasonable to 
assume that as many of 30 percent of Iraq veterans will have 
mental health needs. As you point out, the Veterans 
Administration is working hard to meet these needs to head off 
serious mental health conditions, but a great deal will still 
fall on the VA, particularly assistance for Guard members and 
Reservists who are not near military bases or existing mental 
health facilities.
    As you can tell, the budget only provides a small increase 
for mental health services of $100,000. But this just does not 
seem adequate to meet the needs of nearly one-third of Iraq 
veterans. I also do not see a corresponding increase on 
research on post-traumatic stress disorder, research that is 
critical to both the DoD and the VA and knowing how to treat 
the soldiers that are being exposed to such stress and trauma.
    I am from Vermont, and Vermont, as is traditional, has had 
the highest number of deaths per capita of any State. And I am 
concerned about those who have lost their legs and arms and 
have visited the hospitals and just knowing the great stress 
that is going to be--I wonder, is there a corresponding 
increase in research for such post-traumatic stress disorders 
and how to handle these veterans who are going to go home with 
missing limbs?
    Secretary Nicholson. Yes, Senator Jeffords, there is an 
increase in research. This is a real priority of the VA's. We 
share the concern about PTSD in our returning servicemembers 
from OIF and OEF. You are well aware of the excellent research 
being done right in your State at White River Junction. We have 
other centers conducting research in both the behavioral side 
and the biological side and clinical across the country. There 
are several.
    And this budget does have an increase of $100 million in it 
to deal just with this, with the mental health aspects of our 
care and what will be needed specialty-wise for these sufferers 
of PTSD.
    Senator Jeffords. Thank you for that information. I have 
been a veteran and alive during all the wars, I think, we have 
had, but this is the first time I have seen so many coming back 
who have lost limbs, and of course, Vermont has the highest 
deaths per capita of any State, and I think that probably 
extends to the blown-off limbs as well from my trips to the 
hospital. So I am glad you are aware of that, because I think 
it is an area that needs considerable care.
    Chairman Craig. Jim, thank you very much.
    Senator Salazar, questions.
    Senator Salazar. Thank you, Senator Craig.
    Secretary Nicholson, as you know, we have been working on 
the possible new hospital in Colorado, Fitzsimmons. From my 
point of view, I see that as the crown jewel of medical service 
for our veterans as well as research on how we can best serve 
our veterans and our country, and I think it is the kind of 
facility that will have a benefit way beyond the borders of 
Colorado and become the crown jewel, if you will, of the West 
and what we can do with respect to helping our veterans, and I 
would appreciate if you could just give me and other Members a 
quick update on the status of that new hospital.
    Secretary Nicholson. I share your concern for that new 
hospital also in my own home State, but the wheels were already 
turning on that before I took over this Department 2 weeks ago, 
as you know, Senator. And I share the hope that we can 
collocate that hospital on the old Fitzsimmons Army Hospital 
campus and thus with the University of Colorado Health Science 
and Medical School.
    As we speak here this morning, I have the senior 
subordinate in Denver conducting meetings on that. I talked to 
him last night. I feel quite positive that we will be able to 
put that together, but I cannot tell you for certain. There are 
some major issues there, principal among which are that there 
is enough land to put a hospital of this size, which is 
contemplated at being 1.5 million square feet, with the 
sharing, I think, of 100,000 square feet with DoD.
    We want that hospital to have a spinal cord injury clinic, 
which means that it has to have certain grade level 
capabilities, which means that people have to enter at grade 
level; have to have parking at grade level. That requires more 
land than what would be required with structural parking, you 
know, or underground parking, and we also need some more 
campus-like environment outside for our patients to be able to 
go outside and enjoy that.
    So land and the amount of land is an issue. But I am 
feeling quite optimistic that we are making progress, and I 
would like it probably no more than you if we could put that 
together and then get underway with the architectural land 
planning and get that hospital built.
    Senator Salazar. Let me just say that I will do everything 
I can to get that accomplished.
    Secretary Nicholson. Thank you.
    Senator Salazar. And I appreciate Andy Love's work on it, 
and we look forward to moving forward with it.
    But I think in general, there are issues that the Committee 
would have with the budget, whether it is funding or covering 
priority 7 and 8 veterans or some of the cutbacks on veterans 
nursing homes or other things. It is not a perfect budget, and 
I would imagine that if I was sitting as Secretary of the VA or 
had my staff putting together a budget, it might include things 
that actually were not included in the final budget. And so, if 
this thing went forward to the White House for review that 
there might have been some priorities that you included from 
the VA perspective that actually were not funded.
    Jim, because this preceded your time; you are defending a 
budget that was prepared by your predecessor. What would have 
been some of those priority items that would have been included 
in that budget submission to the White House that really are 
not now included within the budget that you are defending 
before the Committee? Let us just take the top three.
    Secretary Nicholson. Well, I think that, you know, a budget 
like this, and all of the Cabinet Departments, I think are 
collaborative efforts, as you know, Senator, between that 
agency and the Administration and the Office of Management and 
Budget, and I have had discussions with my senior staff, my 
teammates, and, you know, there are variables, but I think what 
was always in mind is what is it going to take to get the job 
done for those people that Congress has called upon us to 
provide the services that they absolutely need and are 
depending on, and that, again, is those people who have been 
injured or become ill as a result of their service to our 
country and those that served and are poor, chronically poor or 
have some chronic special health needs.
    That is the core priority group, and that is what has 
driven this budget. That does not mean that all of the other 
things and people are not important, but as we have said 
before, there is a finite amount of resources.
    Senator Salazar. And that, Jim, led to the conclusion that 
this budget will be an adequate budget to do what needs to be 
done. But if you had, you, as the Secretary today and the staff 
that put this together, I imagine that there are other things 
that you would have wanted in this budget to serve our veterans 
if, in fact, you had that leeway. And I am wondering if you 
might give us some help in understanding what some of those 
priorities would have been.
    Secretary Nicholson. Well, what I could do is we could 
confer and have some discussions and possibly get back to you 
with some of that, but I think essentially, what you see in 
this budget is the end product of people who very seriously, 
conscientiously put down what is the bottom line in this 
resource-constrained environment that we are in that we need to 
do our mission, and that is what we have submitted.
    Senator Salazar. I know my time is up, but if I could just 
make this statement, I think there are additional things that 
we can be doing for our veterans and should be doing for our 
veterans, and obviously, as the budget process takes place 
through Congress, we will be seeing some of that. But it 
strikes me that in these fiscally constrained times of our 
Nation that the one thing that is appropriate for us to ask is 
for our Nation to make sure that we are doing everything we can 
for our veterans, whether it is in medical research or the 
provision of medical services and so on.
    And I do not see that, in the President's budget, what he 
has done is to ask the American people to sacrifice, that we 
are doing everything that we can for the veterans who have 
served our Nation. It may be that this budget will get us 
through for this next year, but this budget may not do all of 
those things that we need and should be doing to honor our 
Nation's veterans. And so, one of the things that I hope to do 
is to figure out ways of working with you and working with 
those who are concerned to see how we can better serve the 
needs of all of our veterans.
    Secretary Nicholson. I would agree with that, sir.
    Chairman Craig. Ken, thank you. Now, let us turn to Senator 
Burr.
    Richard, you were not here for opening comments. Do you 
want to incorporate those with any questions you might have? 
Please proceed.
    Senator Burr. Thank you, and thank you, Mr. Chairman, and I 
appreciate that offer. I would like to keep it on questions, if 
I could, and I would like to start with a congratulatory note, 
and that is the fact that Jim Lehrer and the News Hour 
highlighted the VA's ability to institute a sterilization 
program systemwide that in many cases, the private sector has 
been unable to do. And I think it tells us that there is 
innovation, and there is a real commitment within the VA to 
provide a higher level of care.
    Now, having said that, let me say, personally, I would like 
to see more money in veterans health. I would have liked to see 
it in this budget. But I understand that we on this Committee 
look at one piece; the Administration must look at an entire 
budget. So I have got some very specific questions I would like 
to ask you, Mr. Secretary. Do you believe that the VA has asked 
and the Administration has provided sufficient funds to, one, 
reduce the waiting times for individuals to see physicians?
    Secretary Nicholson. Yes, we have. This budget contemplates 
a reduction in the waiting times and, if approved, we will have 
the resources in there for us to do the training and the 
sessions that we need for some more people to do that.
    Senator Burr. Do you believe it provides sufficient funds 
to reduce the waiting times for the appeals process?
    Secretary Nicholson. Yes, it does, yes, Senator.
    Senator Burr. Do you believe that it provides sufficient 
funds to address the return of servicemen and servicewomen 
currently serving in Iraq and Afghanistan?
    Secretary Nicholson. Absolutely. That is one of our 
priorities, and that is contemplated in this budget.
    Senator Burr. OK; I am not as concerned with the reduction 
of 3,700 medical professionals. I think every facility across 
this country went through a period of new efficiencies, and 
those new efficiencies meant that the personnel makeup's 
changed. I do not think that necessarily a cut suggests a lower 
level of care or less of a priority to certain ones. Dr. 
Perlin, let me ask specifically: you talked about new 
efficiencies and the savings through consolidation of 
specifically the purchasing functions at the VA.
    I may have missed it, and you may have said here is what 
you project those savings to be. If you have a number, I would 
like to hear it. I would also like to ask if we do not achieve 
that level of savings, where do you plan to get the money from?
    Dr. Perlin. Senator, first, thank you very much for your 
acknowledgement of the advances in quality and safety. That has 
been a mission of VA to provide the highest quality care. The 
efficiencies, we believe, are realistic. They continue on our 
trend of establishing new efficiencies. $150 million of the 
$590 million that are listed in that budget come through 
improvements in contracting. The remainder come from 
approximately $200 million in pharmaceutical standardization, 
and another $50 million to $60 million, particular in the area 
of commodity standardization. Billings and collections 
improvements will provide additional savings.
    You have indicated that there will be some lower numbers. I 
need, for the record, to state that this will not be the 
physicians and nurses who do things like reduce waiting times. 
In fact, sometimes, to be more efficient, we need to add those 
sorts of personnel. So we believe that our track record is one 
of really being at the forefront, of using electronic 
technologies to produce efficiencies, so we believe these 
efficiencies will be achieved.
    Senator Burr. I hope that the budget--I know you 
highlighted the savings from drug purchases. I do not think 
there is any area of health care we look at today where even 
with savings, we do not look at prescription drugs as a net 
increase in the overall expenditures that any facility is going 
to use. I hope, in fact, you have taken that into account, 
especially as we talk about absorption of the men and women in 
Afghanistan and in Iraq.
    Let me state for the record that North Carolina is the 
largest, the fastest or largest growing veterans population in 
the country, so we are certainly very interested in seeing 
successful initiatives come out of the VA. Let me end in 
commending you once again for incorporating telemedicine. Mr. 
Secretary, I believe that what you have done there really will 
enable us to provide health care where we currently struggle to 
and as transportation continues to be a challenge, especially 
as it relates to the veterans population.
    I would also say we can learn on the other side of the 
Federal health care in Medicare and in Medicaid, where we do 
not reimburse currently for telemedicine, and I think it has 
stymied the development of potentially what we could reach, and 
clearly, it has limited us as to the outlets that we have 
additional telemedicine popping up.
    Mr. Chairman, I thank you.
    Chairman Craig. Richard, thank you very much.
    The Ranking Member and I have concurred. We want to get on 
to our next panel. There are those who have additional 
questions, Mr. Secretary, and they will be submitted to you in 
writing, and we would ask for your response to them.
    Let me recognize my Ranking Member, but let me say in 
closing, thank you for your openness, your frankness. I think 
you heard almost if not unanimously, I read it to be a 
unanimous concern on the part of this Committee that this 
budget has some inadequacies as it relates to sustaining our 
level of care and increasing it in targeted areas for new 
veterans coming in.
    Both you and I have agreed, and I had the commander of our 
Marine Corps in yesterday. We see a level of health care out in 
the field today that are bringing young men and women home to 
us who would not have survived to come home in a war in Vietnam 
or elsewhere. This is modern medicine at the front line today 
that is bringing these young people home to us in situations 
and under conditions that are going to demand a great deal of 
us, of you, of the service, and of the Veterans Administration 
in providing for them. So we will work closely with you in the 
coming days as we finalize our efforts with this budget and 
with your efforts.
    Thank you.
    Senator Akaka.
    Senator Akaka. I, too, want to say thank you, Mr. 
Secretary, for your responses. I thank your staff as well.
    And Dr. Perlin, may I with regard to my first question on 
the amount of the new VA health care money from fiscal year 
2006, I would like you to review the transcript, as, again, I 
asked for the amount of the health care money only in my first 
question. So again, I want to say thank you.
    Mr. Chairman, I have questions that I will submit for the 
record on VA nursing homes, health care providers as well as 
State veterans homes, VA research, mental health, national 
cemeteries, life insurance that I will submit.
    Thank you.
    Chairman Craig. Thank you.
    Again, to all of you, thank you very much for being with 
us, and we will work closely with you in the coming days.
    Secretary Nicholson. Thank you very much, Mr. Chairman.
    Chairman Craig. We will excuse you and ask our second panel 
to come forward, please.
    Jeff, could we get that door closed, please?
    Well, welcome before the Committee. I am pleased that you 
gentlemen are with us today. I say without reservation that the 
service organizations of this country are the guardians of our 
veterans and our veterans needs. Your record is long and 
complete in your advocacy, and I appreciate it greatly, as I 
know that the Ranking Member does and the work that your 
organizations have done over the years in defense of and in 
protection of our veterans needs.
    So let me welcome all of you to the Committee, and I 
understand that we have a priority of presentations so that the 
presentations are effectively interlocked, and I think I have 
that priority right, so let me start with Richard Jones, 
National Legislative Director for AMVETS. Richard, have I 
assumed that correctly?
    Mr. Jones. Yes, sir, The Independent Budget, Chairman 
Craig, will make a presentation right after the American 
Legion.
    Chairman Craig. OK.
    Mr. Jones. Chairman Craig, Ranking Member Akaka, we thank 
you very much for this opportunity. My name is Richard Jones, 
AMVETS' National Legislative Director and Chairman of The 
Independent Budget steering committee. With your consent, as 
you have agreed, we will follow the American Legion 
presentation with the IB.
    Chairman Craig. We have it here in front of us, or I do.
    Mr. Jones. PVA will make the health presentation, Disabled 
American Veterans, the benefits. Veterans of Foreign Wars will 
make the construction and CARES process. AMVETS will follow 
with burial benefits, so we proceed, sir, with your approval 
with the American Legion, followed in that order.
    Chairman Craig. Fine enough; please proceed. Oh, excuse me, 
Peter; make sure that in doing that, because I have not 
introduced all of you to the Committee, that you would state 
your name again and the organization you are representing.

       STATEMENT OF PETER S. GAYTAN, DIRECTOR, NATIONAL 
 VETERANS AFFAIRS AND REHABILITATION COMMISSION, THE AMERICAN 
                             LEGION

    Mr. Gaytan. Yes, sir. I am Peter Gaytan. I am Director of 
Veterans Affairs and Rehabilitation Division of the American 
Legion.
    Chairman Craig. Thank you.
    Mr. Gaytan. The American Legion applauds the efforts of our 
colleagues and their development of The Independent Budget, and 
the American Legion also has our individual, independent 
assessment of the needs of the VA health care system. I will 
outline those specific concerns of the American Legion with the 
2006 fiscal year budget for VA right now.
    Chairman Craig. Thank you. Please proceed.
    Mr. Gaytan. Thank you for the opportunity to express the 
views of the 2.7 million members of the American Legion 
regarding the Department of Veterans Affairs 2006 budget 
request. The American Legion continues a proud tradition of 
advocating for proper funding levels to ensure America's 
veterans receive the health care and benefits they have earned 
through their honorable service to this country.
    As American servicemembers continue to fight for our 
freedoms in more than 130 countries worldwide, it is the 
responsibility of this Committee as well as the entire Congress 
to provide a budget that will allow VA to fulfill its mission. 
The American Legion urges this Committee to fund VA at a level 
that will ensure that all veterans have access to the VA health 
care system. The VA budget must reflect the true demand for 
care.
    Mr. Chairman, the quality of care provided through the VA 
health care system has improved considerably in the past few 
decades. VA has recognized the need to treat the Nation's 
veterans with the highest quality of care possible, and today, 
VA hospitals are consistently recognized as the top providers 
of health care in America. Although the quality of VA health 
care has improved, the current problem facing today's veterans 
who are turning to VA for their health care needs is 
inaccessibility. In recent years, veterans have experienced 
incredibly long wait times at VA health care facilities.
    In early 2003, the backlog of veterans waiting to be seen 
at VA health care facilities reached 300,000. The American 
Legion responded to this health care crisis by implementing the 
I am not a number campaign that identified veterans who were 
dealing with long wait times, canceled appointments and long 
commutes to VA health care facilities. It was our intention to 
remind VA that patients of the VA health care system are 
individual veterans deserving of care and not simply numbers on 
a list.
    Through these facility visits, the American Legion is 
learning that one of the main issues of concern is the increase 
in medical care collection fund targets. Medical center 
directors are concerned over the significant increases in their 
MCCF goals and what impact the restriction on enrolling any 
priority group 8 veterans will have on their ability to meet 
those goals. The American Legion shares this concern, and we 
are also concerned about the impact of certain proposals 
included in the fiscal year 2006 budget request that seek to 
generate increased revenue for VA through the pockets of 
veterans instead of through the allocation of Federal funds.
    The American Legion opposes the implementation of a $250 
annual enrollment fee for non-service connected priority group 
7 and 8 veterans. This newly imposed fee would simply charge 
currently eligible veterans without providing any guarantees of 
improvement in access to care at the very system created to 
treat their very unique needs. The American Legion would urge 
Congress to once again reject this proposal, just as it did 
last year.
    While the American Legion applauds the initiatives to 
eliminate co-payments for hospice care, to exempt former POWs 
from co-payments, and for VA to pay co-pays for emergency care 
for enrolled veterans at private hospitals, we do not support 
increasing the pharmacy co-pays from $7 to $15 for priority 
group 7 and 8 veterans. While the American Legion realizes the 
importance of adequately funding VA, we support other options 
that would create additional revenue streams for VA, such as 
Medicare reimbursement.
    The American Legion would rather VA seek reimbursements 
from CMS for all enrolled Medicare eligible veterans being 
treated for non-service connected medical conditions before 
trying to balance the budget on the backs of priority group 7 
and 8 veterans. The American Legion is very concerned with the 
proposed elimination of the 1998 nursing home capacity 
requirement established in Public Law 106-117. As America's 
greatest generation rely on long-term care, VA must be prepared 
to meet those needs. The American Legion supports the 
provisions of the Millennium health care bill, and eliminating 
long-term care beds is not the answer.
    The American Legion recommends $34.1 billion for VA medical 
care. We continue to advocate for all MCCF collections to be 
added to the budget numbers and not treated as an offset to the 
budget. The American Legion opposes restricting eligibility for 
State veterans homes per diem payments for long-term care to 
veterans in priority groups 1 through 3 and catastrophically 
disabled priority group 4 veterans. The State veterans homes 
have been a successful cost sharing program between VA, the 
States, and the veterans. This proposal would spell financial 
disaster for the State veterans homes and would result in a new 
population of homeless, elderly veterans on our streets, 
especially in those States with poor Medicaid nursing home 
reimbursement rates.
    In closing, the American Legion would like to express full 
support for mandatory funding of the VA health care system. We 
fully support designating VA medical care as a mandatory item 
within the Federal budget. Mr. Chairman, the American Legion is 
fully committed to working with this Committee to ensure that 
America's veterans receive the entitlements they have earned. 
Thank you again for the opportunity to appear before you this 
morning.
    [The prepared statement of Mr. Gaytan follows:]
  Prepared Statement of Peter S. Gaytan, Director, National Veterans 
       Affairs and Rehabilitation Commission, The American Legion
    Mr. Chairman and Members of the Committee:
    Thank you for this opportunity to present The American Legion's 
views on the Department of Veterans Affairs' fiscal year 2006 budget 
request. The American Legion continues to advocate for adequate funding 
levels to ensure America's veterans receive the health care and 
benefits they have earned through their honorable service to this 
country. With young servicemembers currently deployed to more than 130 
countries, it is the responsibility of this Committee to ensure VA is 
indeed capable of meeting its obligation to provide for America's 
veterans. The American Legion commends the Committee for holding this 
hearing to discuss this important matter.
    Mr. Chairman, the quality of care provided through the VA Health 
Care System has improved considerably in the past few decades. VA has 
recognized the need to treat the Nation's veterans with the highest 
quality of care possible and today VA hospitals are consistently 
recognized as the top providers of health care in America.
    Although the quality of VA health care has improved, the current 
problem facing today's veterans who are turning to VA for their health 
care needs is inaccessibility. In recent years, veterans have 
experienced incredibly long wait times at VA health care facilities. In 
early 2003, the backlog of veterans waiting to be seen at VA health 
care facilities reached 300,000. The American Legion responded to this 
health care crisis by implementing the ``I Am Not A Number'' campaign 
that identified veterans who were dealing with long wait times, 
canceled appointments and long commutes to VA facilities. It was our 
intention to remind VA that patients of the VA health care system are 
individual veterans deserving of care and not simply numbers on a list.
    As a result of the ``I Am Not A Number'' campaign, leadership and 
staff of The American Legion visited VA health care facilities 
nationwide to meet with VA Administration and gain a better perspective 
of the challenges faced by VA in providing timely access to health 
care. The American Legion is continuing those visits and as of June of 
this year, The American Legion will have visited all VA hospitals 
within the continental United States. In July of this year, National 
Commander Tom Cadmus will be issuing the third in a series of Reports 
on the Condition of VA Health Care in America that reflect the findings 
of the visits.
    It is important that VA be funded at a level that will allow it to 
improve accessibility not only to the current population of veterans, 
but to those servicemembers who are currently serving to protect the 
freedoms of this Nation.
    Once again, Congress has been given a proposed budget for VA that 
includes provisions that would place more of the burden of payment on 
the veteran. The fiscal year 2006 Proposed VA Budget would require a 
$250 annual enrollment fee for Priority Groups 7 and 8 veterans. Under 
this budget proposal, two groups of eligible veterans would now be 
required to pay an annual fee to access the very health care system 
that was created to treat their unique needs. Those Category 8 veterans 
who escaped the shut out in 2003 and are currently enrolled in VA would 
now find themselves paying out of pocket to be treated at VA.
    The fiscal year 2006 Proposed VA Budget would also raise the 
pharmaceutical co-payment for Priority Groups 7 and 8 veterans to more 
than twice the current rate.
    While The American Legion understands all too well the funding 
crisis within VA, the solution to this problem is not to balance the VA 
budget on the backs of America's veterans. The solution is to provide 
guaranteed funding for VA.
    As a Nation at war, The American Legion advocates increasing VA 
funding in fiscal year 2006 to meet the increased health care demand of 
America's veterans. In response to the overwhelming backlog of veterans 
seeking care at VA, former VA Secretary, Anthony Principi was forced to 
prohibit enrollment of new Priority Group 8 veterans. Many of the 
recently separated servicemembers, especially Reservists and National 
Guard personnel, will qualify as Priority Group 8 veterans and will be 
denied enrollment, unless they served in theaters of operation. 
However, this new demand for services places even greater demands on VA 
to provide timely access to quality medical care. In light of this 
demand, The American Legion recommends the following discretionary 
funding levels for fiscal year 2006.

  Budget Proposals for Selected Discretionary Programs for Department of Veterans Affairs for Fiscal Year 2006
----------------------------------------------------------------------------------------------------------------
                                       VA fiscal year 2005 \1\    VA fiscal year 2006      Legion's Fiscal Year
               Program                       Appropriation              Request               2006  Request
----------------------------------------------------------------------------------------------------------------
Medical Care.........................  $29.98 billion.........  $30.75 billion.........  $34.1 billion
                                                                                          (includes MCCF)
  Including:
  Medical Services...................  $19.08 billion.........  $22.37 billion.........
  Medical Administration.............  $4.64 billion..........  $4.43 billion..........
  Medical Facilities.................  $3.65 billion..........  $3.88 billion..........
  Medical Care Collections...........  $1.95 billion (Offset).  $2.16 billion \2\        Supplement \3\
                                                                 (Offset).
  DoD/VA HCIF........................    .....................  $15 million............
  Medical and Prosthetics  Research..  $393 million...........  $365 million...........  $447 million
  Construction.......................  $578 million...........  $750 million...........  $ 1.58 billion
  Major..............................  $442 million...........  $590 million...........  $327 million
  CARES (dedicated)..................  ($341 million).........    .....................  ($1 billion Major and
                                                                                          Minor)
  Minor..............................  $212.3 million.........  1$160 million..........  $261 million
  CARES (dedicated)..................  ($167million)..........    .....................
  State Extended Care Facilities.....  $104.3 million.........  Moratorium.............  $124 million
  State Veterans' Cemeteries.........  $32 million............  $32 million............  $42 million
  NCA................................  $273 million...........  $290 million...........  $274 million
  Departmental Management............  $1.3 billion...........  $1.1 billion...........  $1.8 billion
----------------------------------------------------------------------------------------------------------------
1 Includes 0.8% rescission.
2 Proposed $250 enrollment fees and increased prescriptions co-payments ($424 million) not included.
3 Third-party reimbursements should supplement rather than offset discretionary funding.

                              medical care
    Today, there are nearly 25 million veterans. As more choose to use 
VA as their primary health care provider (over 8 million veterans 
enrolled or waiting to enroll), the strain on the system continues to 
grow. The American Legion fully supported the enactment of Public Law 
104-262, the Veteran's Healthcare Eligibility Reform Act that opened 
enrollment in the VA health care system. Many veterans who, until this 
time, were ineligible for VA health care were now able to enroll. 
Veterans recognize that VHA provides affordable, quality care that they 
cannot receive anywhere else.
    The astronomical growth of Priority Groups 7 and 8 veterans seeking 
health care at their local VA medical facility resulted in over 300,000 
veterans being placed on waiting lists regardless of their assigned 
Priority Group. Fiscal year 2003 saw the suspension of enrollment of 
new Priority Group 8 veterans due to this growth in enrollees. The 
American Legion does not agree with the decision to deny health care to 
veterans simply to ease the backlog. Denying earned benefits to 
eligible veterans does not solve the problems resulting from an 
inadequate budget.
    Additionally, VA must be capable of providing health care to the 
new era of veterans returning from Operation Enduring Freedom and 
Operation Iraqi Freedom. These young servicemembers have earned the 
right to health care through VA and we as a Nation must ensure that 
that right is protected by fully funding VA. According to VA as of 
January 2005, 48,733 veterans of Operation Iraqi Freedom have presented 
themselves to VA for medical care. The cost of treating these veterans, 
and all enrolled veterans, is a continuing cost of war that cannot be 
ignored.
    The American Legion recommends $34.1 billion for Medical Care in 
fiscal year 2006.
                         medicare reimbursement
    Under current law, VA is required to seek third-party 
reimbursements for the treatment of enrolled veterans' non-service-
connected medical conditions. Upon enrollment, veterans are asked to 
provide information on their health care insurance coverage. Over half 
of the enrolled VA patient population lists the Centers for Medicare 
and Medicaid Services (CMS). However, current law prohibits VA from 
collecting from CMS for the treatment of enrolled Medicare-eligible 
veterans.
    The American Legion recommends Congress authorize VA to collect 
third-party reimbursements from the Centers for Medicare and Medicaid 
Services.
                      medical care collection fund
    Public Law 105-33, the Balanced Budget Act of 1997, established the 
Department of Veterans Affairs (VA) Medical Care Collections Fund 
(MCCF) and requires that amounts collected or recovered after June 30, 
1997, be deposited into this fund. The MCCF is a depository for funds 
collected from third party insurance, outpatient prescription co-
payments and other medical charges and user fees. The funds collected 
may only be used for providing VA medical care and services and for VA 
expenses for identification, billing, auditing and collection of 
amounts owed the Government.
    Funds collected through MCCF are also used as an offset rather than 
as a supplement to appropriations for the medical care budget. The 
efficient and timely collection of these reimbursable costs would 
greatly benefit the VHA in helping meet the demands for a severely 
impacted veteran's health care system. The American Legion adamantly 
opposes offsetting annual VA discretionary funding by the MCCF 
recovery. By off-setting these funds the VA loses valuable funding that 
is not representative of the veteran population in VERA allocations 
(Priority Groups 7 and 8) nor does it allow for the full utility of 
collecting from Medicare, the largest health insurance provider.
    Technically, the MCCF is not considered a Treasury offset because 
the funds collected do not actually go back to the MCCF treasury 
account, but remain within VHA and are used for operating funds. 
Instead, in developing a budget proposal, it appears that the total 
appropriation request is reduced by the estimate for MCCF for the 
fiscal year in question. We fail to see the difference in the net 
effect to the VISNs and VAMCs.
    The American Legion opposes reducing annual VA discretionary 
funding by the MCCF recovery estimate.
                  mandatory funding of va medical care
    The simple fact is that the Veterans Health Administration (VHA) 
does not have the funding needed to treat all veterans seeking care 
from VA. VHA operates under a constant cloud of fiscal uncertainty. 
Over the last several years, VHA has struggled to meet the increased 
demand for care while staying within budget constraints. These 
budgetary uncertainties create problems within VA's health care system. 
Future spending projections, staffing levels, equipment purchases, 
structural improvements are all stalled if the funding is not a 
certainty.
    In an effort to provide a stable and adequate funding process, The 
American Legion has joined with Nine other Veterans Service 
Organizations in support of mandatory funding for veterans' medical 
care.
    The American Legion and the Partnership of veterans' service 
organizations adamantly believe VA Medical Care should receive annual 
guaranteed appropriations to meet the health care needs of VA's 
enrolled patient population. The adverse impact of continued inadequate 
discretionary funding on VA's ability to provide timely access to 
quality health care is well documented. The President's Task Force to 
Improve Health Care Delivery for our Nation's Veterans advanced two 
proposals--one advocates re-designation of VA medical care as mandatory 
funding (like Medicare or Social Security), rather than discretionary 
funding; the other recommends creation of an independent board to 
recommend the VA medical care annual funding needs.
    The American Legion supports guaranteed funding of the VA health 
care delivery system.
  capital asset realignment for enhanced services (cares) and medical 
                              construction
Major Construction Under CARES
    Over the past 4 years, The American Legion has carefully followed 
the progress of the Secretary of Veterans Affairs' Capital Asset 
Realignment for Enhanced Services (CARES) process. CARES has been an 
incredibly complex national process to reorganize VA through a data 
driven assessment of veterans' health care needs through the years 2012 
and 2022. CARES is the future of VA health care delivery of services 
that will, ostensibly, meet veterans' current and future health care 
needs. The American Legion has participated at each stage of the 
process by gathering information on VA Medical Centers throughout the 
country to make certain medical facilities were not closed simply to 
save money.
    In May 2004, then-Secretary Principi released his final CARES 
decisions and the implementation process is going forward. While The 
American Legion was not in total agreement with all the decisions made 
so far, we feel the process was fair due in large part to the hard work 
and input of The American Legion leadership, membership and national 
staff and that of numerous other stakeholders. As the implementation 
process continues, The American Legion is prepared to remain vigilant 
to assure that veterans are not deprived of their earned health care.
    The CARES decision supports establishing new hospitals in three 
locations--Orlando, Las Vegas, and Denver. It also supports new bed 
towers in Tampa and San Juan, 156 new community clinics in 33 states 
and territories, a new multi-specialty outpatient clinic in Columbus, 
four new or expanded spinal cord injury centers and two new blind 
rehabilitation centers. Included in the plan are the closures of the 
Highland Drive (PA), Brecksville (OH) and Gulfport (MS) facilities.
    The American Legion believes VA should exercise caution during the 
planning phases for these closures. No doors should be closed for 
services before new services are in place and functioning. Contingency 
planning needs to take place and stakeholders should be involved in all 
aspects of the implementation of these closures. Through the CARES 
process over one hundred major construction projects were identified 
and submitted for review. VA prioritized these major capital 
investments through fiscal year 2010. A plan of this magnitude requires 
a significant amount of resources to include trained and experienced 
personnel. This will have a major impact on VA's ability to move 
forward with the construction projects, even if they have the needed 
funding.
    To successfully implement the CARES decision, VA has estimated that 
it will require an infusion of a $1 billion per year for the next 6 
years, with continuing substantial infrastructure investments well into 
the future. The American Legion is opposed to the CARES funding coming 
out of the discretionary medical care account. The American Legion 
believes the CARES implementation must occur in the context of a fully 
utilized VA health care system. It must take into consideration VA's 
role in emergency preparedness, organizational capacity for ``special 
emphasis programs'' like mental health, long-term care, domiciliary and 
homeland security. Further, there must be continued oversight of the 
integration of the CARES process into the strategic planning process.
CARES Implementation
    Of the amount appropriated for medical care in fiscal year 2005, P. 
L. 108-477 authorizes the Secretary of Veterans Affairs (Secretary) to 
divert $400,000,000 for the implementation of CARES under the Major 
Construction account. The American Legion strongly opposes the use of 
needed medical care funding for the implementation of CARES.
    The American Legion recommends $1.58 billion for Major Construction 
in fiscal year 2006, including $1 billion for CARES.
    The American Legion supports a separate appropriation of $1 billion 
per year for the next 6 six fiscal years for the implementation of 
CARES.
Minor Construction
    Similar to VA's major construction program, VA's minor construction 
program has likewise suffered significant neglect over the past several 
years. The requirement to maintain the infrastructure of VA's buildings 
is no small task. When combined with the added cost of the CARES 
program recommendations and the request for minor infrastructure 
upgrades in several research facilities, it is easy to see that a major 
increase over the previous funding level of $211 million is crucial.
    The American Legion recommends $261 million for Minor Construction 
in fiscal year 2006.
                    medical and prosthetics research
    VA's Medical and Prosthetic Research Service has a history of 
productivity in advancing medical knowledge and improving health care 
not only for veterans, but for all Americans. VA research has led to 
the creation of the cardiac pacemaker, nicotine patch, and the 
Computerized Axial Tomography (CAT) scan, as well as other medical 
breakthroughs. Over 3800 VA physicians and scientists conduct more than 
9,000 research projects each year involving more than 150,000 research 
subjects.
    The VA Medical and Prosthetic Research budget has not kept pace 
with inflation during the past 15 years. It is essential that Congress 
and the Administration support strong medical and prosthetic research 
programs within VA so that veterans and all citizens continue to 
benefit from the exceptional research capability of the Department.
    The American Legion supports adequate funding for VA biomedical 
research activities. Congress and the Administration should encourage 
acceleration in the development and initiation of needed research on 
conditions that significantly affect veterans--such as prostate cancer, 
addictive disorders, trauma and wound healing, post-traumatic stress 
disorder, rehabilitation, and others--jointly with the Department of 
Defense (DoD), the National Institutes of Health (NIH), other Federal 
agencies, academic institutions.
    The American Legion recommends $447 million for Medical & 
Prosthetics Research in fiscal year 2006.
                             long-term care
    This year, VA adds three new legislative initiatives toward 
minimizing its financial responsibility to America's aging veterans.
    ELIMINATE VA NURSING HOME CARE UNITS MANDATORY CENSUS REQUIREMENTS 
UNDER 38 U.S.C. Sec. 1710B(b).
    The Veterans Millennium Health Care and Benefits Act of 1999, P.L. 
106-117, 113 Stat. 1545 (1999), (Millennium Act) (codified at 38 U.S.C. 
Sec. 1710B(b)), requires VA to maintain its in-house Nursing Home Care 
Unit (NHCU) bed capacity at the 1998 level of 13,391. The American 
Legion does not believe this requirement of law constitutes a 
``baseline for comparison"; rather we maintain that the language in the 
law is quite clear.
    (b) The Secretary shall ensure that the staffing and level of 
extended care services provided by the Secretary nationally in 
facilities of the Department during any fiscal year is not less than 
the staffing and level of such services provided nationally in 
facilities of the Department during fiscal year 1998.
    This capacity has significantly eroded rather than maintained. In 
1999 there were 12,653 VA NHCU beds, 11,812 in 2000, 11,672 in 2001 and 
11,969 in 2002. VA estimates it will have only 9795 beds in fiscal year 
2006.
    This issue has a contentious recent history.
    It was charged in the House Veteran's Affairs Committee's (HVAC) 
fiscal year 2004 Budget Views and Estimates that VA plans to do away 
with a large part of its existing LTC beds, to wit:
    The Committee has been in regular communication with the Secretary 
concerning a noted decline in VA nursing home beds (approximately 2,000 
beds). On May 8, 2002 the Secretary made a commitment to restore these 
beds to their prior level, provided that Congress appropriates an 
increase in VA's medical care appropriation for fiscal year 2003. In 
the omnibus appropriation approved by Congress on February 13, 2003, VA 
received $1.1 billion more than what was requested by the President for 
the period.
    The Committee is disappointed by the Secretary's proposal in this 
budget to close thousands of additional VA nursing home beds. VA's own 
long-term care model, based on the medical needs of its users, 
indicated a need for 17,000 new nursing home beds by 2020. The 
Committee does not believe that VA can replace 5,000 nursing home beds 
with outpatient programs for elderly, chronically ill veterans.
    VA has never fulfilled the promise of its landmark mid-1980s study, 
Caring for the Older Veteran. That study recommended large increases in 
both inpatient and alternative programs, such as respite, hospice, 
adult-day and home-based care, so that VA could approach the needs of 
World War II veterans with meaningful, health and end-of-life care 
programs, on both institutional and non-institutional bases. This has 
not been achieved.
    In order to aid the Department in maintaining its current nursing 
home bed level, the Committee recommends that VA's budget request be 
augmented by an additional $297 million. Furthermore, VA should fund 
effective alternatives to long-term care and reopen long-term care 
nursing beds that have been closed.
    VA has claimed that it cannot maintain both the mandated bed 
capacity and implement all the non-institutional programs required by 
the Millennium Act. In a February 2002 letter to HVAC Ranking 
Democratic Member Lane Evans, Secretary of Veterans Affairs Anthony 
Principi stated:
    ``I have come to the conclusion that as long as we continue to use 
VA inpatient average daily census (ADC) as the singular measure for 
long-term care capacity, it will not be possible for VA to meet the 
requirements of P.L. 106-117 without adversely affecting our ability to 
provide other essential health care services to veterans on a timely 
basis.''
    On March 20, 2002, the Secretary forwarded a plan to HVAC to 
restore VA NHCU bed capacity to the 1998 level including ``substantial 
implications'' for doing so. The cost was to be offset by forgoing 
planned expansion of contract community nursing care, decreasing 
education and research programs, reprogramming technology 
infrastructure requirements, transferring a portion of the SVH 
construction budget and converting intermediate medicine beds to NHCU 
beds. Following these ``threats'', HVAC replied on March 26 that it was 
prepared to recommend appropriation of additional funds to enable VA to 
comply with the law.
    VA has made clear its determination not to expand it's own Nursing 
Home Care Unit bed capacity; in fact, VA has defied Congress' mandate 
to maintain its 1998 bed capacity of 13,391. Instead VA's inpatient 
nursing home bed count now stands at 9795.
    The American Legion supports the maintenance of VA Nursing Home 
Care Unit bed capacity at the 1998 level of 13,391.
                     state veterans homes per diem
    VA's Budget Request for fiscal year 2006 contains a legislative 
proposal that would restrict eligibility for State Veterans Homes (SVH) 
Per Diem payments for long term (maintenance) care to veterans in 
Priority Groups 1 through 3 and catastrophically disabled Priority 
Group 4 veterans. Non-catastrophically disabled Priority Group 4 and 
Priority Groups 5 through 8 would be entitled to only short-term care. 
This is unacceptable to The American Legion.
    The State Veteran Homes have been a successful cost-sharing program 
between VA, the States and the veteran. Veterans in SVHs tend to be 
without family, indigent and requiring of Aid and Attendance. One SVH 
has estimated that these eligibility criteria would cut its Average 
Daily Census by over 50 percent and cost the facility $2 million per 
year. This proposal would spell financial disaster for SVHs and would 
result in a new population of homeless elderly veterans on our streets, 
especially in states with poor Medicaid nursing home reimbursement 
rates. It has also been suggested that a surge in claims for service 
connection would ensue as SVHs scramble to qualify veterans for 
inclusion in Priority Groups 1 through 3 and catastrophically disabled 
Priority Group 4.
    The American Legion supports increasing the amount of authorized 
per diem payments to 50 percent of the cost of nursing home and 
domiciliary care provided to veterans in State Veterans Homes and full 
reimbursement for veterans with 70 percent or greater service-connected 
disabilities. The American Legion also supports the provision of 
prescription drugs and over-the-counter medications to veterans with 50 
percent or greater service-connected disabilities, along with the 
payment of authorized per diem to State Veterans Homes. The National 
Association of State Veterans Homes and VA should develop mutual 
planning efforts, enhanced medical sharing agreements, and enhanced-use 
construction contracts with qualified providers.
    The American Legion opposes any legislative changes in the 
eligibility criteria for receipt of State Veterans Homes Per Diem.
              state extended care facility grants program
    The fiscal year 2006 VA Budget Request contains zero dollars for 
the State Extended Care Facility Grants Program; instead VA would 
impose a 1-year ``moratorium'' on grants for new facilities 
construction while VA completes a nationwide infrastructure assessment 
study of its institutional long term care. The American Legion agrees 
that such a study is long overdue; projections for long-term care 
inpatient capacity were largely left out of the CARES process. We fail 
to see the utility in suspending payment of construction grants in 
fiscal year 2006, especially in states having never previously applied 
and in states having significant need.
    State Veterans Homes were founded for indigent and disabled Civil 
War veterans beginning in the late 1800s and have continued to serve 
subsequent generations of veterans for over one hundred years. Under 
the provisions of 38 USC, VA is authorized to make payments to states 
to assist in the construction and maintenance of State Veterans Homes. 
Today, there are 109 State Veterans Homes facilities in 47 states with 
over 23,000 beds providing nursing home, hospital, and domiciliary 
care. The State Veterans Home Program has proven to be a cost-effective 
provider of quality care to many of the Nation's veterans and this 
program is an important adjunct to VA's own nursing, hospital, and 
domiciliary programs. The Grants for Construction of State Extended 
Care Facilities provides funding for 65 percent of the total cost of 
building new veterans homes. VA has not been able to keep pace with the 
number of grant applications; currently there is over $120 million in 
unfunded new construction projects pending.
    Recognizing the growing long-term health care needs of older 
veterans, it is essential that the State Veterans Home Program be 
maintained as a viable and important alternative health care provider 
to the VA system.
    The American Legion recommends $124 million for the State Extended 
Care Facility Grants Program in fiscal year 2005.
                 national cemetery administration (nca)
The National Cemetery System
    VA's National Cemetery Administration (NCA) is comprised of 120 
cemeteries in 39 states and Puerto Rico as well as 33 soldiers' lots 
and monuments. NCA was established by Congress and approved by 
President Abraham Lincoln in 1862 to provide for the proper burial and 
registration of graves of Civil War dead. Since 1973, annual interments 
in NCA have increased from 36,400 to over 84,800. Annual burials are 
expected to increase to more than 115,000 in the year 2010 as the 
veteran population ages. Currently 59 national cemeteries are closed 
for casket burials. Most of these can accept cremation burials, 
however, and all of them can inter the spouse or eligible children of a 
family member already buried. Another 22 national cemeteries are 
expected to close by the year 2005, but efforts are underway to 
forestall some of these closures by acquiring adjacent properties.
    Congress must provide sufficient major construction appropriations 
to permit NCA to accomplish its stated goal of ensuring that burial in 
a national or State cemetery is a realistic option by locating 
cemeteries within 75 miles of 90 percent of eligible veterans.
    P.L. 107-117 required NCA to build six new National Cemeteries. 
Fort Sill opened in 2001 under the fast-track program, while the 
remaining five, Atlanta, Detroit, South Florida, Pittsburgh and 
Sacramento are in various stages of completion. Additional acreage is 
currently under development in 10 national cemeteries, columbaria are 
being installed in 4 and additional land for gravesite development has 
been acquired at national cemeteries in 5 states. 9 national cemeteries 
are expected to close to new interments between 2005 and 2010. The rate 
of interments in national cemeteries has increased from 36,400 in 1978 
to 84,800 in 2001. This rate is expected to rise to 115, 000 in 2010.
    The average time to complete construction of a national cemetery is 
7 years. The report of a study conducted pursuant to the Millennium Act 
concluded that an additional 31 national cemeteries will be required to 
meet the burial option demand through 2020. Legislation is currently 
pending in this session that will authorize the establishment of 10 new 
national cemeteries in areas of the country facing a shortage of burial 
space. Together with the 6 national cemeteries under development, this 
will go a long way toward fulfilling this need. NCA will be able to 
keep pace with current demand for burial space if this legislation is 
enacted and fully funded this year.
    The American Legion urges Congress to provide sufficient major 
construction appropriations to permit NCA to accomplish its mandate of 
ensuring that burial in a national cemetery is a realistic option for 
90 percent of our nations veterans.
                       national shrine commitment
    Maintaining cemeteries as National Shrines is one of NCA's top 
priorities. This commitment involves raising, realigning and cleaning 
headstones and markers to renovate gravesites. The work that has been 
done so far has been outstanding; however, adequate funding is key to 
maintaining this very important commitment. At the rate that Congress 
is funding this work, it will take twenty-eight years to complete. The 
American Legion supports the goal of completing the NCA's National 
Shrine Commitment in 5 years. This Commitment includes the 
establishment of standards of appearance for national cemeteries that 
are equal to the standards of the finest cemeteries in the world. 
Operations, maintenance and renovation funding must be increased to 
reflect the true requirements of the National Cemetery Administration 
to fulfill this Commitment.
    The American Legion recommends $274 Million for the National 
Cemetery Administration in fiscal year 2006.
                     state cemetery grants program
    The National Cemetery Administration (NCA) administers a program of 
grants to states to assist them in establishing or improving state-
operated veterans cemeteries through VA's State Cemetery Grants Program 
(SCGP). Established in 1978, the matched-funds program helps to provide 
additional burial space for veterans in locations where there are no 
nearby national cemeteries. Through fiscal year 2002, more than $169 
million in grants have been awarded to states and the Territories of 
Guam and the Northern Marianas, including 5 new State cemeteries and 
the improvement and/or expansion of 9 existing ones.
    Under the Veterans Programs Enhancement Act of 1998, P.L. 105-261, 
VA may now provide up to 100 percent of the development cost for an 
approved project. For establishment of new cemeteries, VA can provide 
for operating equipment. States are solely responsible for the 
acquisition of the necessary land.
    The American Legion recommends $42 Million for the State Cemetery 
Grants Program in fiscal year 2006.
                    veterans benefits administration
    The Department of Veterans Affairs has a statutory responsibility 
to ensure the welfare of the Nation's veterans, their families, and 
survivors. Each year, the 58 regional offices of the Veterans Benefits 
Administration (VBA) receive over 100,000 new and reopened benefits 
claims. A majority of these claims involve multiple issues that are 
legally and medically complex and time consuming to adjudicate. Whether 
a case is complex or simple, these offices are expected to develop and 
adjudicate veterans' and survivors' claims in a fair, legally proper, 
and timely manner.
                             claims backlog
    Last year we expressed concern about the probable effect of a major 
cut back in regional office staffing slated for fiscal year 2004 and a 
further smaller reduction proposed for fiscal year 2005. It did not 
appear that the available staffing resources were going to be 
sufficient to handle the additional workload associated with 
legislation enacted by this Congress affording new benefit 
entitlements, along with liberalized VA policy on diseases related to 
Agent Orange and required support for DoD's Combat Related Special 
Compensation Program (CRSC). There has also been an influx of new 
claims for service connection, due to the fact that enrollment in VA's 
medical care system remains closed to some Category 8 disabled 
veterans. Much of the overall increased workload, however, stems 
directly from the required rework of tens of thousands of pending and 
previously decided cases, due to precedent decisions of both the United 
States Court of Appeals for Veterans Claims and the United States Court 
of Appeals for the Federal Circuit.
    The Veterans' Claims Assistance Act of 2000 (VCAA), P.L. 106-475, 
was designed to overcome deficiencies in the claims adjudication 
process, improve the way VBA communicates with claimants, and the way 
in which claims were developed. The basic goal was to ensure that VA 
regional offices provided individuals essential information concerning 
their claim, so that they would know what evidence they were expected 
to submit and what evidence VA would try and obtain. This legislation 
was expected to result in claims that were more fully developed and 
which could be adjudicated in a more expeditious and accurate manner. 
There was also an expectation that these improvements would increase 
claimant's satisfaction with the decision received and reduce the 
appeals workload for the Decision Review Officers and the Board of 
Veterans Appeals.
    VBA has, over the last 3 years, begun aligning its policies and 
procedures to conform to the letter and intent of VCAA, and has 
directed most of the regional offices' time and effort toward reducing 
claims processing time and reducing the backlog of pending claims. 
Achievement of former Secretary Principi's stated goal of 100 days to 
process a claim, on average, and a backlog of 250,000 pending claims by 
the end of fiscal year 2003 has been and continues to be VBA's No. 1 
priority. To fulfill mandated production quotas, regional office 
management and adjudicators have been put in the difficult and 
unenviable position of having to choose between deciding thousands of 
cases as quickly as possible or going through the more time consuming 
steps necessary to comply with VCAA and provide the claimant full due 
process.
    In October 2003, Former Secretary Principi announced that the 
claims backlog had been reduced to the promised target level. Claims 
processing times were also trending down toward the 100-day goal and 
the error rate was improving. From VBA's perspective, these results 
showed that regional office service had improved dramatically. Part of 
Secretary Principi's promise was, once the backlog goal had been 
achieved, VBA would be able to shift time and attention to improving 
the quality of claims adjudication. However, experience has once again 
shown that ``faster is not always better.''
    Unfortunately for thousands of veterans and their families, their 
rights under the VCAA have been subordinated to bureaucratic 
convenience for the sake of an arbitrary administrative goal. This 
persistent disregard of the law prompted thousands to file otherwise 
unnecessary appeals. Since judicial review of veterans' claims was 
enacted in 1988, of those cases appealed to the United States Court of 
Appeals for Veterans Claims (CAVC), the remand rate, historically, has 
been about fifty percent. In a series of precedent setting decisions by 
the CAVC and the United States Court of Appeals for the Federal 
Circuit, the courts have invalidated a number of longstanding VA 
policies and regulations because they were not consistent with the 
statute. In response to the these decisions, VBA provided the regional 
offices with revised templates for VCAA notices to conform to the 
directives of the court. Unfortunately, VA's notices still do not 
adequately fulfill the notice requirements of the VCAA.
    These court decisions immediately added thousands of cases to 
regional office pending workloads, since they require the review and 
reworking of tens of thousands of completed and pending claims. Between 
October 2003 and December 2003, the case backlog increased from 250,000 
to 350,000. From January to August 2004, the number of pending claims 
has been reduced only by some 25,000 cases. However, over the same 
period, the number of appeals pending in the regional offices has grown 
by 20,000 cases. Data on regional office performance appear to 
contradict VBA's description of improvements in service to veterans.
                 lack of quality decision making in vba
    The adequacy of regional office staffing has as much to do with the 
actual number of personnel as it does with the level of training and 
competency of the adjudication staff. VA's fiscal year 2005 budget 
request noted the fact that VBA has lost much of its institutional 
knowledge base over the past 4 years, due to the retirement of many of 
its 30-plus year employees. Retirements among this group are expected 
to continue at a significant rate in 2005. As a result, staffing at 
most regional offices is now made up mostly of trainees, with less than 
5 years of experience. Over this same period, as regional office 
workload demands escalated, these trainees have been put into 
production units as soon as they completed their basic training.
    The American Legion's visits to regional offices have found that, 
frequently, there have been too few supervisors or inexperienced 
supervisors to provide trainees necessary mentoring, training, and 
quality assurance. In addition, at many stations, ongoing training for 
the new hires as well as the more experienced staff would be postponed 
or suspended, so as to focus maximum effort on production. Despite the 
fact that VBA's policy of ``production first'' has resulted in many 
more veterans getting faster action on their claims, the downside has 
been that tens of thousands of cases have been prematurely and 
arbitrarily denied. As a consequence, the appeals burden at the 
regional offices, the Board and the Appeals Management Center (AMC) 
continues to grow. What must also be kept in mind is that there is a 
disabled veteran, most often with a family, behind each one of these 
appeals, who has been fighting the VA system for a year, 2 years, or 
more to get what he or she feels they are rightfully entitled to.
    The American Legion was very disturbed by information presented at 
the July 2004 VBA Leadership Conference about regional office 
adjudicators' job performance. VBA had two groups of Veterans Service 
Representatives (VSRs) take a job skill certification test. There were 
650 individuals tested. They were GS 10 and GS 11 with three to 5 years 
of regional office claims experience and were considered to be 
proficient workers. It was, therefore, very disconcerting to learn that 
only 25 percent of the GS 10's and 29 percent of the GS 11s passed the 
open book test. If these individuals are supposed to be VBA's best and 
brightest adjudicators, it is little wonder that appeal workload 
continues to rise, the combined overturn rate at the Board of Veterans' 
Appeals continues to be extremely high. From these results, it appears 
that, despite having spent millions on its adjudicator-training 
program, this effort has not succeeded in correcting the many problems 
that contribute to poor quality decisionmaking and create unnecessary 
appellate work. Rather than providing a solution to the problem, the 
deficiencies in training and the lack of effective quality assurance 
continue to fuel the growing backlogs.
                       appeals management center
    As a result of a successful legal challenge to the establishment of 
a unit at the Board of Veterans' Appeals (Board or BVA) to undertake 
needed development of appeal cases, VBA established the AMC. Its 
purpose is to provide more expeditious action on remands and also to 
relieve the regional offices of the workload burden associated with 
remands. The AMC basically functions as a national regional office for 
this type of case. It undertakes the additional development of evidence 
specified by the Board and readjudicates the claim. With a staff of 82 
FTEs the AMC is overwhelmed by a growing volume of cases. Initially, 
16,484 cases were inherited from the now-defunct BVA development unit 
and, currently, the AMC has a total of 22,002 remands under 
development. As a result, VBA recently established AMC resource centers 
in St. Petersburg, Cleveland, and Huntington to assist with its 
enormous backlog. Although it is too early to comment on the 
productivity or quality of work produced by these resource centers, 
questions remain as to the AMC 's overall ability to produce quality 
and timely work in the face of the continually increasing backlog and 
the growing pressure to reduce it.
    While the AMC is an admirable attempt by VBA to improve service to 
veterans, it does nothing to address the problems underlying the 
continued rise in the number of appeals and remands by the Board of 
Veterans Appeals. In our view, the very necessity of the AMC's 
existence begs the question--why hasn't VBA mandated the regional 
offices to correct their own mistakes?
    This new super regional office is now responsible for correcting 
errors that the regional offices were unwilling or unable to do. 
However, the AMC has no authority to prevent the same type of error, 
which prompted the appeal and remand, from occurring again. It is worth 
noting that regional offices did not receive any work credit for remand 
actions. This should have been an incentive for local management to try 
and improve decisionmaking and avoid appeals and potential remands. 
Experience has shown just the opposite.
    Since production work on new claims were the highest priority and 
there was no work credit for remands, many regional offices simply 
ignored their appellate workload with remands pending for two and 3 
years. Now, there is still no clear incentive for the regional offices 
to improve quality. They are continuing to forward new cases to the 
Board where almost sixty percent are being remanded to the AMC. VBA 
must ensure that the regional offices are held accountable for the poor 
quality of initial decisionmaking and development of appeals and not 
allow them to shift the workload onto the Board of Veterans Appeals 
and, ultimately, the AMC.
                       board of veterans' appeals
    The BVA is a separate entity within VA. Its responsibility is to 
render a final decision on the propriety of a regional office decision. 
If the Board determines a final decision cannot be made on a case due 
to inadequate or incomplete development, including lack of due process, 
it has the authority to remand the case back to agency of original 
jurisdiction, which now includes the AMC, for additional required 
development and readjudication.
    Regional office appeals and dispositions by the Board are a direct 
reflection of the level of claimant satisfaction or dissatisfaction 
with and confidence or lack thereof in the fairness and propriety of 
regional office adjudication. It is, therefore, painfully obvious that 
the level of dissatisfaction is substantial and growing, in view of the 
increasing number of new appeals coming into the system.
    To ensure VA and VBA are meeting their responsibilities; The 
American Legion strongly believes that Congress must scrutinize VBA's 
budget requests more closely. Given current and projected future 
workload demands, regional offices clearly will need more rather than 
fewer personnel and The American Legion is ready to support additional 
staffing. However, VBA must be required to provide better justification 
for the resources it says are needed to carry out its mission and, in 
particular, how it intends to improve the level of adjudicator 
training, job competency, and quality assurance.
    Mr. Chairman, this concludes my testimony. I again thank the 
Committee for this opportunity to express the views of The American 
Legion on VA's fiscal year 2006 Budget Request and look forward to 
working with you and the Members of the Committee to ensure VA is 
funded at a level that will allow all veterans to receive the care they 
have earned through their service.

    Chairman Craig. Peter, thank you for being cognizant of 
that time. Of course, all of your full statements will be a 
part of the record. Thank you.
    Please proceed.
    Mr. Fuller. I believe I am next, Mr. Chairman.
    Chairman Craig. That is right.

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

    Mr. Fuller. I am Richard Fuller. I am National Legislative 
Director of the Paralyzed Veterans of America.
    Chairman Craig. Yes.
    Mr. Fuller. And, Mr. Chairman, and Senator Akaka, in the 19 
years since The Independent Budget was published, Paralyzed 
Veterans of America has coordinated the medical care portion, 
and I will confine my remarks to that particular area.
    The overview of the Administration's 2006 budget request 
provides very little, if any, new appropriated dollars for the 
VA health care system, I think as you have pointed out, Mr. 
Chairman. It relies on overly optimistic third-party 
collections, accounting gimmicks, and punitive and totally 
unrealistic management efficiencies to drive its budget 
figures. The Independent Budget, using a clear assessment of 
the coming need and rising costs of health care, projects that 
VA will need a $3.4 billion increase in fiscal year 2006. At 12 
percent, this increase is actually below the 13 or 14 percent 
the previous Under Secretary for Health testified before the 
House Veterans' Affairs Committee that he needed just to keep 
the system afloat.
    In the interests of time, I would like to make three 
points: for the last 2 years, the Members of this Committee, 
its counterpart in the other body and likewise the 
appropriations committees have realized that both the $250 user 
fee and a $15 prescription co-pays were unduly onerous to the 
veteran patients and were rejected, and I would like, instead 
of just referring to them as category 7s or 8s, try to put a 
human face on exactly who these people are, and I think if you 
look at the figures, this would affect 2 million currently 
enrolled veterans.
    And the statement is made, oh, well, do not worry; it is 
only category 7s and 8s, but it is not. What they are not 
telling you is that there are veterans who are enrolled in 
category 4, who have catastrophic disabilities, many of them 
PDA members with spinal cord injuries who need to go to the VA 
because the VA is the only place that they can get the 
specialized care that they need who are enrolled in category 4, 
but VA makes the determination because these people with severe 
disabilities are able to get out there and try to work and earn 
a living to support themselves and their family and not stay 
home and live on the dole, have incomes that might rise above 
$25,000 or $30,000.
    And these individuals have to pay all the co-payments, have 
to pay all the fees for outpatient, inpatient visits and would 
be severely affected by this increase in fees, because they are 
high-end users of the system: multiple prescriptions, multiple 
supplies, multiple equipment. So it is not just category 7s and 
8s that they are talking about, and we urge the Committee to 
reject these proposals.
    Second, the effect of the proposed drastic reductions in 
long-term care funding would be catastrophic. Eliminating the 
traditional per diem contribution to support the vast majority 
of veterans in State nursing homes, as Senator Obama pointed 
out, could very well force the closure of many of these homes. 
Reductions in contract nursing homes and VA's own nursing home 
capacity will put many sick and disabled veterans actually out 
on the street, not necessarily back in home care.
    I know, Mr. Chairman, from your work in the Select 
Committee on Aging that you are well aware of the long-term 
care problems facing Americans today. And fortunately, the VA 
has always developed an enlightened and innovative long-term 
care program that could stand as an example to the rest of the 
Nation. This attack on these programs would severely damage the 
long-term care safety net the VA has provided, and with 
proposed changes and reductions in Medicaid coming down the 
pike in the 2006 budget, many veterans would have nowhere else 
to turn.
    And finally, Mr. Chairman, it is true, as has been stated 
several times here today, that the Congress in recent years has 
rightly understood the demands on the VA health care system and 
provided additional resources. But you cannot just turn off the 
tap and say look what we did for you last year. VA is an 
ongoing health care provider. Yet, it is forced every year to 
start with a clean budget slate in the competition for 
discretionary dollars. The needs do not change; the demands do 
not change; but as we see with this year's budget request, 
political pressures, the demands of other Federal programs and 
deficit concerns can drastically alter the amount requested and 
provided for VA health care programs from 1 year to the next.
    These wild swings in funding from 1 year to the next make 
managing a health care system extremely difficult, and for 
these reasons and others, we continue, as we have in the past, 
to urge the Congress to provide a guaranteed funding plan 
mechanism to cover the cost of veterans health care.
    This concludes my remarks, and I would be happy to answer 
any questions you may have.
    [The prepared statement of Mr. Fuller follows:]

prepared statement of richard b. fuller, national legislative director, 
                     paralyzed veterans of america
    Mr. Chairman and Members of the Committee, as one of the four 
veterans services organizations publishing The Independent Budget, 
Paralyzed Veterans of America (PVA) is pleased to present the views of 
The Independent Budget regarding the funding requirements for the 
Department of Veterans Affairs (VA) health care system for fiscal year 
2006.
    This is the 19th year, PVA, along with AMVETS, Disabled American 
Veterans and Veterans of Foreign Wars have presented The Independent 
Budget, a policy and budget document that represents the true funding 
needs of the Department of Veterans Affairs. The Independent Budget 
uses commonly accepted estimates of inflation, health care costs and 
health care demand to reach its recommended levels. This year, the 
document is endorsed by 26 veterans' service organizations, and medical 
and health care advocacy groups.
    This fiscal year 2006 budget request for health care is a shocking 
one, providing once again a woefully inadequate funding level for sick 
and disabled veterans. The Administration request of $27.8 billion 
amounts to an increase of $111 million in appropriated dollars--less 
than one-half of 1 percent over the amount provided in fiscal year 
2005. Last year's request was the smallest health care appropriation 
request in nearly a decade. This year's request is even lower. Health 
care is not a luxury, but this budget request treats it like it is. 
Keep in mind that the VA itself has testified in the past that it 
requires a ``13 or 14 percent per year increase in the money available 
to take care of just our core population of veterans.'' (Department of 
Veterans Affairs Health Care System: Hearing Before the House Committee 
on Veterans' Affairs, 108th Congress, January 29, 2003).
    In place of dollars we are presented with a budget that relies far 
too heavily on gimmicks, accounting tricks, and on forcing some 
veterans to pay for the health care of other veterans. Shifting costs 
onto the back of other veterans is not the way to fulfill this Nation's 
responsibilities to veterans. Once again, the Administration has 
proposed a $250 annual enrollment fee, and increased pharmaceutical co-
payments, ideas soundly rejected in the past by Congress. The budget 
also estimates that the VA will find $590 million in management 
efficiencies, requiring major cutbacks in personnel and services at VA 
hospitals across the country. Last year, VA estimated ``savings'' of 
$340 million. Absent a detailed list or plan to achieve these savings, 
we can only assume that these are only included to mask the true extent 
of the funding chasm faced by the VA in the upcoming fiscal year.
    Punitive co-payments, enrollment fees, and other charges are 
designed not so much to raise revenues as they are meant to deter 
veterans from seeking their care at VA medical facilities. The VA 
estimates that its enrollment fee and co-payment proposals will cause 
more than 213,000 veterans to disenroll. In fact, if this budget 
submission is enacted, the VA expects enrollment to drop by nearly one-
million veterans, a decrease of 12 percent, during fiscal year 2006. 
This is not a lean budget, rather, it is a budget designed to strangle 
a health care system relied upon by sick and disabled veterans.
    The Independent Budget is adamantly opposed to increasing co-
payments. Veterans should not be forced to pay for the health care of 
their fellow veterans. Although Congress has given the Secretary of 
Veterans Affairs the authority to set and raise fees, what was once 
thought of as only an administrative function has now become, in times 
of tight budgets, an expedient way to find the dollars needed to fund 
health care for veterans. Providing health care to veterans is a 
Federal responsibility, and we look to Congress to provide the 
necessary resources to provide this care.
    If this budget tells veterans that they better not get sick, what 
is it telling to veterans in need of long-term care? Although the true 
extent of the VA's cuts to long-term care may be difficult to fully 
discern, it is clear that this budget would gut long-term care, and 
violate the VA's statutory responsibility to maintain the capacity to 
provide long-term care.
    The VA has proposed zeroing out grants for the construction of 
State extended care facilities, while slashing the per diem grants it 
provides State homes by $229 million, a loss of revenue that could very 
well lead to closures in certain circumstances. The VA estimates that 
close to 30,000 fewer veterans will be treated under its proposals. The 
VA proposes $124 million in cuts by ``revising'' eligibility criteria 
for long-term care. In the VA's budget submission in a chart 
summarizing obligations by activity, nursing home care is shown as 
being cut by $351 million, and it is estimated that the VA's proposed 
budget would eliminate 5,000 nursing home beds. These cuts would have a 
drastic effect on some of our neediest veterans.
    It is clear that the Administration's budget does not begin to meet 
the health care needs of veterans, nor does it reflect the resources 
needed by the VA to provide this care. We believe that The Independent 
Budget provides a conservative estimate that more accurately represents 
the needs of the VA.
    For fiscal year 2006, we are recommending a total appropriation for 
medical care of $31.2 billion, an increase of $3.5 billion. This 
reflects an increase of close to 13 percent. This estimate does not 
include funds attributed to MCCF, which we believe should be used to 
augment a sufficient appropriated level of funding and not used to 
replace appropriated dollars.
    The VA health care system, in order to fully meet all of its 
demands and to ameliorate the effects of chronic under-funding, could 
use many more dollars. The Independent Budget recommendation provides 
for the impact of inflation on the provision of health care, and 
mandated salary increases of health care personnel. It would provide 
the resources to begin to meet the demands of specialized services and 
programs, as well as the ever-increasing influx of new veterans 
entering the system. It is estimated that of the more than 168,000 Iraq 
veterans who are no longer on active duty, sixteen percent have sought 
VA health care. The full impact of the 2-year grant of priority health 
care for these veterans is yet to be fully felt. We also believe that 
The Independent Budget recommendation, if enacted, would allow the VA 
to begin enrolling Category 8 veterans once again.
    For Medical and Prosthetic Research, The Independent Budget is 
recommending $460 million. This represents a $58 million increase over 
the fiscal year 2005 amount. The Administration has proposed a $9 
million cut. Research is a vital part of veterans' health care, and an 
essential mission for our national health care system.
    In closing, the VA health care system faces two chronic problems. 
The first is a budget submission that ignores the costs of providing 
care while advocating draconian health care rationing. The second is a 
lack of consistent funding. The budget and appropriations process over 
the last number of years demonstrates conclusively how the VA labors 
under the uncertainty of not only how much money it is going to get, 
but, equally important, when it is going to get it. No Secretary of 
Veterans Affairs, no VA hospital director, and no doctor running an 
outpatient clinic knows how to plan and even provide care on a daily 
basis without the knowledge that the dollars needed to operate those 
programs are going to be available when they need them. Far too often 
veterans' funding is the subject of an omnibus bill that is enacted 
months after the start of the fiscal year.
    Health care delayed is health care denied. If the health care 
system cannot get the funds it needs when it needs those funds the 
resulting situation only fuels efforts to deny more veterans health 
care and charge veterans even more for the health care they receive.
    The only solution we can see is for this Committee and the Congress 
as a whole to approve legislation removing VA health care from the 
discretionary side of the budget process and making annual VA budgets 
mandatory. The health care system can only operate properly when it 
knows how much it is going to get and when it is going to get it.
    We look forward to working with this Committee in order to begin 
the process of moving a bill through the Senate, and the House, as soon 
as possible.
    It is easy to forget, when dealing with dollars and budgets, that 
we are ultimately dealing with real people, people who will be affected 
personally by the cuts and so-called ``savings'' proposed by this 
Administration. We ask that you remember these men and women, these 
veterans who have sacrificed so much for us, when you are drawing up 
your budget views and estimates, and we ask that you join us in 
adopting the recommendations of The Independent Budget.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

    Chairman Craig. Thank you very much.
    Joe.

STATEMENT OF JOSEPH A. VIOLANTE, NATIONAL LEGISLATIVE DIRECTOR, 
                   DISABLED AMERICAN VETERANS

    Mr. Violante. Mr. Chairman and Members of the Committee, 
good morning. I am Joe Violante with Disabled American 
Veterans, and Mr. Chairman, Senator Akaka, let me say 
congratulations to both of you for your leadership roles and 
promise you that we will work with you and your staff this year 
to ensure that our Nation's disabled veterans and other 
veterans are cared for.
    As with DAV's primary responsibility in The Independent 
Budget, I will address mainly the recommendations for the 
benefit programs. This year, in the President's budget, the 
only legislative proposal is for a COLA, a 2.3 percent COLA 
increase. We certainly support that. I will not attempt to 
cover those other items in The Independent Budget where we have 
made recommendations to other programs. I will just ask the 
Committee and the staff to refer to my written testimony and to 
The Independent Budget for the specifics and the reasons for 
those recommendations.
    Though our benefit programs mostly just need some fine 
tuning to make them better serve their purposes, persistent 
problems with the delivery of benefits diminish their 
effectiveness. I am concerned under general operating expenses 
that since we began our war in Iraq in 2003, VA has lost 
roughly about 600 full time employees from the Veterans 
Benefits Administration if the proposals in this year's budget 
go through.
    We are a Nation at war. We have another generation of brave 
young men and women fighting in Iraq and Afghanistan, not only 
to protect our freedoms and guarantee our safety, but to bring 
freedom to other people around the world. Every day, some of 
these men and women return to this country sick, disabled, some 
severely disabled, and I do not believe that this budget is 
adequate to care for their needs.
    It is interesting to note in the dialog that took place 
with the Secretary and the line of questioning that the 
Secretary indicated with Senator Murray's questioning that this 
budget will be a challenge, and what I would like to say, if VA 
is challenged in meeting the demands, what that means for 
veterans and their families is that their health and well-being 
is placed at risk. It is unconscionable that we have dedicated 
VA employees who are on the front line providing care and 
services to veterans and have to, because of shortfalls in 
resources, tell these veterans, in many cases fellow veterans 
that there is just not enough money to take care of their 
needs.
    Within a month or two of the recent passage of the 2005 
appropriations, we have seen stories from around the country of 
shortfalls in medical facilities, in hiring freezes, in 
cutbacks in services. If that is the case with the 2005 
appropriations that increased 2004 by $1.5 billion, I hate to 
see what is going to happen if something is not done with the 
current budget proposal.
    Senator Thune has indicated that since he came to Congress 
as a Representative, VA budget has increased annually by about 
9 percent. As Mr. Richard Fuller pointed out, VA has indicated 
that they need 13 to 14 percent annually, so we are losing 
ground there. If the proposals that are contained in this 
budget go through, such as the enrollment fees and increased 
co-pays, what we are doing is forcing the VA to treat the 
sickest of the sick and the poorest of the poor, and that is 
going to affect the quality of care, and as you pointed out, 
Senator, in that article, the quality of VA health care has 
improved greatly, but I think we place it at risk if we follow 
this current proposal.
    And if we are trying to be fiscally-minded and ensure that 
taxpayers' money is used properly, I will just remind you that 
the cost of care at VA is a lot less than when we force these 
Medicare-eligible veterans out into the Medicare system or into 
Medicaid.
    I want to thank you, and again, we will work with you to 
assure that there is adequate funding and these programs are 
properly staffed.
    [The prepared statement of Mr. Violante follows:]

               Prepared Statement of Joseph A. Violante, 
       National Legislative Director, Disabled American Veterans
    Mr. Chairman and Members of the Committee, I come before you today 
to present the views of the Disabled American Veterans (DAV) and its 
Auxiliary on the President's fiscal year (FY) 2006 budget for veterans' 
programs. In addition to our assessment of the President's budget 
recommendations, I will also provide the Committee with our own budget 
and program recommendations as contained in The Independent Budget 
(IB). The IB is a budget and policy document that sets forth the 
collective views of the DAV, AMVETS, the Paralyzed Veterans of America 
(PVA), and the Veterans of Foreign Wars of the United States (VFW).
    The budget for veterans' programs, and therefore this hearing, is 
one of the most important activities of the Committee. In our view, 
this Committee has some of the most important responsibilities of any 
in Congress. Before discussing the budget, I want to congratulate you, 
Senator Craig, on your selection as Committee Chairman, and you, 
Senator Akaka, on your selection as Ranking Member. DAV's staff and 
members look forward to our work and association with you.
    The President's fiscal year 2006 budget requests $70.8 billion in 
budget authority for the Department of Veterans Affairs (VA). This 
total consists of $37.4 billion for mandatory spending in the benefit 
programs and $33.4 billion for discretionary funding. The mandatory 
funding includes $478.3 million to cover the 2.3 percent cost-of-living 
adjustment (COLA) the budget recommends for disability compensation. 
The discretionary funding includes $30.7 billion for veterans' medical 
care, of which $2.6 billion would be from projected co-payments, 
enrollment fees, and other collections. The remaining $2.7 billion in 
discretionary funding would cover general operating expenses, some 
construction costs, and medical research.
    The President's budget seeks no improvements in the benefits 
programs other than an annual COLA for compensation. Based on a 
projected increase in the cost of living as measured by the Consumer 
Price Index, disability compensation, as well as dependency and 
indemnity compensation (DIC) and the annual clothing allowance, also 
included in the compensation account, would be increased 2.3 percent. 
Increases in monthly benefits for compensation and DIC would be 
effective December 1, 2005. As we observe in the IB, these benefits 
must be adjusted periodically to keep pace with inflation. Veterans 
whose earning power is limited or completely lost due to service-
connected disabilities must rely on compensation for the necessities of 
life. Similarly, surviving spouses and dependent children of veterans 
who died of service-connected causes often have little or no income 
other than DIC. The rates are modest, and any erosion due to inflation 
has a direct detrimental impact on recipients with fixed incomes. We 
therefore recommend in the IB and support the Administration's 
recommendation that Congress enact legislation to increase the rates of 
these benefits.
    In the IB, we also recommend that Congress reject any suggestion or 
move to permanently extend provisions that, for the next several years, 
require rounding down of compensation COLAs to the nearest whole dollar 
amount. Congress has historically increased disability compensation and 
DIC rates each year to keep these benefits even with the cost of 
living. However, as a temporary measure to reduce the Federal budget 
deficit, Congress enacted legislation to require monthly payments, 
after adjustment for increases in the cost of living, to be rounded 
down to the nearest whole dollar amount. Finding this a convenient way 
to meet budget reconciliation targets and fund spending for other 
purposes, Congress seemingly has become unable to break the habit of 
extending this round-down provision and has extended it even in times 
of budget surpluses. Inexplicably, VA budgets have recommended in 
previous years that Congress make the round-down requirement a 
permanent part of the law. While rounding down compensation rates for 1 
or 2 years may not seriously degrade its effectiveness, the cumulative 
effect over several years will substantially erode the value of 
compensation. Moreover, extended rounding down is entirely unjustified. 
It robs monies from the benefits of some of our most deserving veterans 
and dependents, who must rely on their modest compensation for basic 
needs.
    In the IB, we make several other recommendations for legislation to 
improve the compensation program, and we take positions against certain 
detrimental proposals that have been offered or entertained in the 
past. We recommend adjustments in the grants for specially adapted 
housing and home adaptations provided to certain veterans with the more 
serious service-connected disabilities. Similarly, we recommend an 
increase in the grant for purchase of specially equipped automobiles 
provided to veterans with service-connected disabilities that require 
certain adaptations. Due to a lack of regular adjustments for 
inflation, these special benefits have lost much of their value. We 
recommend legislation to authorize use of modern mortality tables in 
setting premium rates for Service-Disabled Veterans' Insurance (SDVI). 
The intended benefit of offering life insurance to disabled veterans at 
standard rates is defeated by the continued use of 1941 mortality 
tables as a basis for premiums. We recommend that Congress increase the 
$10,000 maximum to $50,000 for SDVI policies to more meaningfully 
correspond to today's income replacement needs of survivors. We also 
recommend improvements for the education, vocational rehabilitation, 
and home loan programs. We ask the Committee to refer to the IB for 
these recommendations and give them full consideration.
    The administrative expenses for the benefit programs are included 
in the discretionary funding for the VA's Veterans Benefits 
Administration (VBA), which together with funding for Departmental 
Administration, traditionally made up the General Operating Expenses 
(GOE) appropriation. Because Congress has resisted adopting the new 
budget account structure for VA employed in the President's budget 
beginning with fiscal year 2004, we continue to observe in the IB the 
traditional account structure under GOE.
    The level of funding sought in the President's budget would reduce 
VBA staffing again for the third consecutive year. In fiscal year 2006, 
VBA would have 76 fewer fulltime employees (FTE) under the President's 
budget than it had in fiscal year 2005, and 539 fewer than it had in 
fiscal year 2003. Even this net reduction of 76 FTE does not present a 
true picture of the impact of the President's budget because it would 
cannibalize other benefit lines to partially alleviate critical 
staffing shortages in the Compensation and Pension (C&P) and Vocational 
Rehabilitation and Employment (VR&E) Services. Loan Guaranty Service 
would lose 205 FTE, Education Service would lose 14 FTE, and Insurance 
Service would lose 6 FTE.
    According to the ``Budget Highlights'' in the President's Budget 
Submission, one of VA's highest priorities is to ``[i]mprove the 
timeliness and accuracy of claims processing.'' The Budget Submission 
states: ``Funds are included in the Veterans Benefits Administration to 
sustain progress made under the Secretary's priority of improving 
timeliness and accuracy of claims.'' We assume the intent was to say 
that the funds requested are sufficient to continue the course of 
improving claims processing timeliness and accuracy. In another 
statement, the Budget Submission declares: ``As a Presidential 
initiative, improving the timeliness and accuracy of claims processing 
remains the Department's top priority associated with our benefit 
programs.'' However, it appears that this budget abandons efforts to 
improve on the intolerable situation in which VA has large backlogs of 
pending claims and in which benefits awards to veterans are delayed as 
a consequence. The Budget Submission for fiscal year 2004, for example, 
set a goal of reducing the average processing time for compensation and 
pension claims from a projected 165 days in fiscal year 2003 to 100 
days in fiscal year 2004, with a strategic target of 90 days. The 
Budget Submission for fiscal year 2005 set a goal of reducing the 
average processing time for compensation and pension claims from a 
projected 145 days in fiscal year 2004 to 100 days in fiscal year 2005, 
with a strategic target of 90 days. The fiscal year 2006 Budget 
Submission revises these figures to show that average was actually 166 
days in fiscal year 2004, that the time will be reduced to 145 days in 
fiscal year 2005, and that the goal for fiscal year 2006 is also 145 
days. The strategic target has been increased from 90 days to 125 days. 
This demonstrates that the resources requested are insufficient to meet 
a goal that VA portrays as a ``top priority.'' These figures call into 
question the genuineness of this stated goal.
    The IB has recommended that C&P Service be authorized 8,929 FTE, 
the fiscal year 2004 staffing level. In addition, C&P Service had 174 
FTE for adjudication of burial benefit claims, making the fiscal year 
2004 total 9,103 FTE. The President's budget requests 9,087 FTE for 
C&P. While this is an increase over the 8,959 FTE authorized for fiscal 
year 2005, the failure to meet timeliness goals demonstrates that the 
President's request for fiscal year 2006 is insufficient. At a minimum, 
C&P Service should be authorized 9,103 FTE.
    For Education Service, the IB recommended staffing of 770 direct 
program FTE, an increase of 33 FTE over the fiscal year 2005 staffing 
level. As it has with its other benefit programs, VA has been striving 
to provide more timely and efficient service to its claimants for 
education benefits. However, with the inability to hire new employees 
during fiscal year 2004, Education Service timeliness in processing 
original and supplemental education claims declined during fiscal year 
2004. In addition, legislation authorizing a new education benefit for 
members of the National Guard and Reserve pressed into active service 
for 90 or more days will add to the existing workload during fiscal 
year 2005 and future years, making it even more difficult to address 
the education caseload in a timely manner. In fiscal year 2003, the 
average time to process original education claims was 23 days. The 
strategic target was 10 days. The Budget Submission estimates that the 
average time to complete original education claims in fiscal year 2006 
will have grown to 27 days. Without an increase in staffing adequate to 
meet the existing and added workload, service to veterans seeking 
educational benefits will continue to decline. The President's budget 
would reduce direct program FTE from 737 in fiscal year 2005 to 717 in 
fiscal year 2006. The President requests 53 fewer FTE than the IB 
recommends. Based on experience with the average number of claims 
decisions a claims examiner can process and the average number of 
telephone and Internet contacts an employee can handle, to meet its 
workload demands in a satisfactory fashion, VBA must increase direct 
program staffing in its Education Service in fiscal year 2006 to 770 
FTE.
    For VR&E Service, the President's budget seeks funding for 963 
direct program FTE. The IB recommends 1,017 direct program FTE for this 
business line. During fiscal year 2005 and continuing into fiscal year 
2006, VR&E's workload is expected to increase primarily as a 
consequence of the war in Iraq and ongoing hostilities in Afghanistan. 
Also, given its increased reliance on contract services, VR&E needs 
approximately 60 additional FTE dedicated to management and oversight 
of contract counselors and rehabilitation and employment service 
providers. As a part of its strategy to enhance accountability and 
efficiency, the VA Vocational Rehabilitation and Employment Task Force 
recommended in its March 2004 report the creation of new staff 
positions and training for this purpose. Other new initiatives 
recommended by the Task Force also require an investment of personnel 
resources. To meet its increasing workload and implement reforms to 
improve the effectiveness and efficiency of its programs, it is 
projected that VR&E will need a minimum of 1,017 direct program FTE in 
fiscal year 2006, 54 more than the President requested.
    The IB recommends funding for continued development and deployment 
of modern information technology (IT). The President's budget appears 
to have abandoned many of VA's IT initiatives. We recommend that 
Congress provide $4 million for predeployment testing of new IT 
applications at VA's Hines Information Technology Center. Automated 
testing of new IT at the Hines test center avoids diverting field 
office staff from their regular duties to test the new applications and 
avoids the pitfalls of deploying untested software to VA field offices. 
We recommend $1 million for training to keep VA's IT staff abreast of 
changes in IT systems.
    For new subsystems in C&P Service to be integrated into VETSNET, we 
recommend that Congress provide $12 million. To continue document 
preparation and scanning at VA's pension maintenance centers and to 
continue evaluating VA's electronic imaging system, ``Virtual VA,'' for 
eventual nationwide deployment, we recommend an appropriation of $2 
million in fiscal year 2006.
    We recommend that Congress provide $2 million to cover the costs of 
necessary enhancements of Education Service's Imaging Management System 
(TIMS). TIMS is Education Service's system for electronic education 
claims files, storage of imaged documents, and workflow management. VA 
needs to consolidate four separate TIMS data bases into one data base 
accessible by the Internet and add capacity to meet increased workload 
demands. This will make the system fully interactive nationwide and 
will include the critical additional capacity necessary for continued 
viability of the system.
    To allow for more efficient award processing and sharing of 
information with contractors, employment services, and outside 
partnership entities by deploying a Web-based version of VR&E's case 
management system, WINRS, we recommend that Congress provide $3 
million. To allow it to receive enrollment information from schools and 
to enable it to have online contact between veterans and case managers, 
we recommend that VR&E be provided $2 million for its ``Internet 
Application'' initiative.
    We recommend a $2 million appropriation for upgrading and expansion 
of the ``Loan Servicing System'' to allow claimants direct access to 
Loan Guaranty Service's Automated Certificate of Eligibility 
application. As we noted, the President's budget would reduce staffing 
in Loan Guaranty Service by 205 FTE in fiscal year 2006. An annotation 
to budget briefing documents provided to congressional staff and 
veterans organizations states: ``FTE decreases are offset by 
productivity improvements such as information technology, training, 
management efficiencies, etc.'' Yet the President's budget provides no 
money to allow claimants access to an Automated Certificate of 
Eligibility, an initiative that would be consistent with some reduction 
of FTE. Experience would suggest that management efficiencies can only 
be quantified accurately and can only be counted on to increase 
productivity after they have been attained. It appears that when 
requested resources fall short of what is necessary to meet workload 
demands, VA simply declares that it can achieve management efficiencies 
in the amount of savings necessary to fill the obvious gap between 
resources needed and appropriations requested. In short, the amount of 
savings projected appears to correspond to the funding shortfall rather 
than being derived from any actual calculation based reasonably on 
expected new efficiencies.
    In connection with the funding request for medical care, the 
President's budget assumes savings of $590 million in management 
efficiencies. Again, we believe such a convenient assumption is 
unjustified. As another means to bridge the gap between the resources 
requested and the resources necessary, the budget would shift the 
shortfall onto veterans themselves. It would impose a $250 annual 
enrollment fee for ``all'' Priority 7 and 8 veterans. It would increase 
pharmacy co-payments to 214 percent of the current amount, from $7 to 
$15. A veteran would be required to pay this co-payment on each of his 
or her prescriptions for a 30-day supply of medications. Such user fees 
are nothing more than a disguised tax upon veterans' benefits. In 
addition, the budget would continue the suspension of enrollment of new 
Priority 8 veterans.
    These initiatives would accommodate lower appropriations by 
bringing revenues from collections into the system, by driving large 
numbers of veterans away from VA, and by preventing any growth in 
patient load from priority 8 veterans. VA projects that the enrollment 
fee and higher co-payments will increase collections by $424 million 
and repulse 213,000 veterans from the VA medical care system. Assuming 
all of these changes, the fiscal year 2006 budget would provide for the 
Veterans Health Administration only a 2.41 percent increase over fiscal 
year 2005 budget authority in constant, or nominal, dollars. 
Appropriated dollars would account for only 0.4 percent of this 
increase. According data in the Budget Submission, VA experienced a 4.1 
percent growth rate in patients treated in fiscal year 2004, and VA 
projects a 7 percent growth of enrollees between fiscal years 2004 and 
2006. The Budget Submission for VA states that it includes policy 
changes to ``assure sufficient resources'' are available to continue to 
provide care to all enrolled veterans.
    We often hear Government officials repeating Lincoln's words to 
communicate its solemn mission, ``to care for him who shall have borne 
the battle. . . .'' Many veterans in Priority Groups 7 and 8 have borne 
the battle with the good fortune not to be wounded, and some have 
service-connected disabilities, but this budget does not care for them. 
It employs verbal extenuation to masquerade as an honorable and 
positive action its efforts to abandon these veterans and drive them 
from the system. The Budget Submission for VA states that the budget 
supports a continued focus on health care needs of VA's ``core group of 
veterans.'' Unlike Lincoln's positive words urging the Nation to honor 
its moral obligation to veterans, this statement of exclusion seeks to 
disavow the Nation's obligation for political expedience. A medical 
care system that treats only the sickest of the sick and the poorest of 
the poor is not sustainable and would be undesirable. Such restricted 
focus would in the end seriously erode the quality of care for today's 
and tomorrow's veterans.
    Though we wanted to express our concerns about the glaring 
inadequacy and obvious bad policy of this budget for veterans' medical 
care, we will defer to our partners from PVA to present more 
specifically the IB's views and recommendation of mandatory funding for 
veterans' medical care. To avoid unnecessary duplication, we also defer 
to our IB colleagues from AMVETS and the VFW to cover the budget for 
the National Cemetery Administration and construction.
    We should not forget veterans in times of peace following 
conflicts, but this is certainly a time that our national commitment to 
veterans should be at its highest, a time that providing adequately for 
them should be foremost in the minds of Members and on the agenda of 
Congress. This budget does not provide adequately for veterans 
programs. We urge this Committee and Congress to correct its 
deficiencies and fulfill our commitment to veterans.

    Chairman Craig. Thank you, Joe.

STATEMENT OF DENNIS M. CULLINAN, DIRECTOR, NATIONAL LEGISLATIVE 
     SERVICE, VETERANS OF FOREIGN WARS OF THE UNITED STATES

    Mr. Cullinan. Good morning, Chairman Craig, Senator Akaka. 
I am Dennis Cullinan. I am the Legislative Director for the 
Veterans of Foreign Wars of the United States, and we, too, 
look forward to working together with you in the service of 
America's veterans.
    On behalf of the 2.4 million men and women of the Veterans 
of Foreign Wars and our auxiliaries, I would express our deep 
appreciation for being included in today's important hearing to 
discuss the budget for the Department of Veterans Affairs. As a 
constituent member of The Independent Budget for VA, the VFW is 
responsible for the construction program, so I will limit my 
testimony to that area. Also, for the purpose of today's 
discussion, I will limit my discussion to two main areas: CARES 
and long-term care.
    In light of the Administration's totally inadequate budget 
request for VA, the VFW and the IB VSOs are very concerned that 
Congress may not adequately fund all of CARES proposed changes 
when CARES implementation costs are factored into the 
appropriations process. This will only further worsen current 
obstacles impeding veterans timely access to quality health 
care. It is our opinion that VA should not proceed with the 
final implementation of CARES until sufficient funding is 
appropriated in a separate account for the construction of new 
facilities and renovations of existing hospitals as deemed 
appropriate and pertinent.
    Supporting this view is the fact that the Administration 
budget would pull $539.8 million out of major construction and 
$160 million out of minor construction for their total funding 
of $699.8 million for CARES. This would mean that there is no 
appropriations support for non-CARES projects. It defies 
credibility and good reason that VA will suspend all non-CARES 
related construction projects to include essential, non-
recurring maintenance, seismic corrections and so forth.
    So clearly, both will receive short shrift, and the system 
and veterans will suffer in the process. And it is for this 
reason, that we urge CARES be funded separately, to provide 
sufficient funding and to avoid the temptation to engage in 
this budgetary sleight of hand. The VFW and IB VSOs recommend 
that Congress appropriate, not including funding specific to 
CARES, $563 million for major construction account for fiscal 
year 2006.
    This amount is needed for seismic corrections, clinical 
environmental improvements, National Cemetery Administration 
construction and land acquisition. The VFW and the IB further 
recommend that Congress appropriate $716 million to the minor 
construction account for fiscal year 2006. These funds 
contribute to construction projects costing less than $7 
million. This appropriation also provides for regional office 
account, the National Cemetery Administration account, 
improvements and renovation in VA's research facilities, staff 
office accounts and emergency fund accounts, increases provided 
for inpatient-outpatient care and support infrastructure, 
physical plant, and historic preservation projects.
    With respect to long-term care, we are equally dismayed. 
The budget proposes slashing $351 million from veterans nursing 
homes by serving 28,000 fewer residents and completely 
eliminating the $104 million in State grants. It would also 
provide, as has already been mentioned, per diem support only 
to those categories 1, 2 and 3. This would have a devastating 
consequence for veterans in need of long-term care and for the 
State long-term care program itself. We would also note here 
that the VA also intends to downsize its own long-term care bed 
census at this very juncture.
    VA has an obligation to provide for the full continuum of 
care for those who served this country, and long-term care is 
an essential part of this. This budget abdicates this 
responsibility.
    We look forward to working with you, Mr. Chairman, and the 
other Members of this Committee to come to the aid of this 
Nation's veterans in need and reject this proposal. That 
concludes my testimony.
    [The prepared statement of Mr. Cullinan follows:]

     Prepared Statement of Dennis M. Cullinan, Director, National 
   Legislative Service, Veterans of Foreign Wars of the United States
    Mr. Chairman and Members of the Committee, on behalf of the 2.4 
million men and women of the Veterans of Foreign Wars of the U.S. and 
our Auxiliaries, I would express our deep appreciation for being 
included in today's important legislative hearing to discuss the budget 
for the Department of Veterans Affairs (VA). As a constituent member of 
the Independent Budget for VA, the VFW is responsible for the 
Construction portion of the VA budget so I will limit today's testimony 
to that area.
    The Department of Veterans Affairs (VA) construction budget 
includes major construction, minor construction, grants for 
construction of State extended-care facilities, grants for State 
veterans' cemeteries, and the parking garage revolving fund. VA's 
construction budget annual appropriations for major and minor projects 
decreased sharply to an all-time low in fiscal year 2003. Over the past 
several years, there has been political resistance to funding of any 
major projects before the Capital Assets Realignment for Enhanced 
Services (CARES) process was completed. The prospect of system-wide 
capital assets realignment through the CARES process continues to be 
used as an excuse to hold all construction projects hostage.
    VA has recently completed another phase of CARES, which is a 
national process to reorganize the Veterans Health Administration (VHA) 
through a data-driven assessment of its infrastructure and programs. 
Through CARES, an ongoing process, VA is evaluating the demands for 
health-care services and identifying changes that will help meet 
veterans' current and future health-care needs. The CARES process 
included the development of sophisticated actuarial models to forecast 
tomorrow's demand for veterans' health care and the calculation of the 
supply and identification of current and future gaps in infrastructure 
capacity. This resulted in a Draft National CARES Plan (DNCP) to 
rectify deficiencies through the realignment of VA's capital asset 
infrastructure.
    Since the publication of the fiscal year 2005 Independent Budget, 
the commission has been actively evaluating the DNCP proposed by VA. 
The CARES Commission report was published in March 2004. The Secretary 
of Veterans Affairs formally accepted the CARES Commission report with 
the publication of the Secretary's CARES decision document in July 
2004.
    Initially, the DNCP market plans included flawed projections for 
outpatient mental health services and questionable projections for 
inpatient mental health services. The plans did not include any 
projections for long-term care other than catastrophic care. 
Accordingly, the commission recognized the importance of mental health 
services and long-term care to the veteran population and acknowledged 
in the CARES Commission report that VA must make modifications to its 
projections to include mental health services and long-term care.
    Also last year, during the initial stages of the CARES process, The 
Independent Budget veterans service organizations (IBVSOs) suggested 
that further data be obtained to support various CARES recommendations 
that would either close or change the mission of some VA facilities. We 
appreciate then Secretary Principi's efforts in establishing a CARES 
Implementation Board and the plan to begin further feasibility studies 
of the 22 VA facilities identified for possible mission adjustments in 
the secretary's CARES decision document. However, as stakeholders, we 
would like to remind VA that it is imperative that veterans service 
organizations remain involved in all phases of this new CARES study, 
which will be divided into three different segments: a health-delivery 
study, a comprehensive capital plan, and an excess property plan 
identifying new land usage or disposal.
    Mr. Chairman, we remain supportive of the CARES process as long as 
the primary emphasis is on the ``ES'' portion of the acronym. We 
understand that the locations and missions of some VA facilities may 
need to change to improve veterans' access, to allow more resources to 
be devoted to medical care rather than to the upkeep of inefficient 
buildings, and to accommodate modern methods of health-service 
delivery. Accordingly, we concur with VA's plan to proceed with the 
feasibility study of the remaining 22 facilities contained in the 
Secretary's decision document.
    In light of the Administration's totally inadequate budget request 
for VA, the IBVSOs are very concerned that Congress may not adequately 
fund all CARES proposed changes when CARES implementation costs are 
factored into the appropriations process. This will only further 
exacerbate the current obstacles impeding veterans' timely access to 
quality heath care. It is our opinion that VA should not proceed with 
the final implementation of CARES until sufficient funding is 
appropriated for the construction of new facilities and renovations of 
existing hospitals, as deemed appropriate and pertinent.
    The VFW and IBVSOs recommend that Congress appropriate, not 
including funding specific to CARES, $563 million to the Major 
Construction account for fiscal year 2006. This amount is needed for 
seismic correction, clinical environment improvements, National 
Cemetery Administration construction, land acquisition and claims, as 
follows:

         Construction, Major Projects Recommended Appropriation
   [FY 2006 Recommendation by type of service--Medical Program (VHA)]
------------------------------------------------------------------------
                                                          Dollars  (in
                                                           thousands)
------------------------------------------------------------------------
Seismic Improvements.................................           $315,000
Clinical Improvements................................            $26,250
Patient Environment..................................            $10,500
Advance Planning Fund................................            $63,000
Asbestos Abatement...................................            $63,000
National Cemetery Admistration.......................            $85,050
------------------------------------------------------------------------
    Recommended Fiscal Year 2006 Appropriation.......           $562,800
------------------------------------------------------------------------

    The VFW and IBVSOs recommend that Congress appropriate $716 million 
to the Minor Construction account for fiscal year 2006. These funds 
contribute to construction projects costing less than $7 million. This 
appropriation also provides for a regional office account, National 
Cemetery Administration account, improvements and renovation in VA's 
research facilities, staff offices account, and an emergency fund 
account. Increases provide for inpatient and outpatient care and 
support, infrastructure, physical plant, and historic preservation 
projects:

         Construction, Minor Projects Recommended Appropriation
     [FY 2006 Recommended by Type of Service--Medical Program (VHA)]
------------------------------------------------------------------------
                                                          Dollars  (in
                                                           thousands)
------------------------------------------------------------------------
Inpatient Care Support...............................           $136,000
Outpatient Care and Support..........................           $105,000
Infrastructure and Physical Plant....................           $157,000
Research Infrastructure Upgrade......................            $52,000
Historic Preservation Grant Program..................            $21,000
Other................................................            $26,000
Architectural Master Plans Program...................           $100,000
VBA Regional Office Program..........................            $36,000
National Cemetery Program............................            $36,000
VA Research Facility Improvement and Renovation......            $47,000
------------------------------------------------------------------------
    IB Recommended fiscal year 2006 Appropriation....           $716,000
------------------------------------------------------------------------

    It is here painfully evident just how inadequate the 
Administration's VA construction request is as compared to the VFW/IB 
identified need:

 
----------------------------------------------------------------------------------------------------------------
                                                                    Difference                     Difference IB
                                      FY 2005      FY2006 Admin.   Admin & 2005      FY2006 IB        & Admin
----------------------------------------------------------------------------------------------------------------
Construction Programs...........
Construction Major..............         455,130         607,100         151,970         562,800         -44,300
Construction Minor..............         228,933         208,726         -20,207         720,000         511,274
Grants for Extended Care                 104,322               0        -104,322         150,000         150,000
 Facilities.....................
Grants for Construction of State          31,744          32,000             256          37,000           5,000
 Vets Cemeteries................
----------------------------------------------------------------------------------------------------------------
    Subtotal, Construction               820,129         847,826          27,697       1,469,800         621,974
     Programs...................
----------------------------------------------------------------------------------------------------------------

    It is equally and most painfully clear that long-term care for 
veterans is to bear the brunt of the proposed cutbacks in the budget, 
including the elimination of Federal spending on State-run homes that 
provide veterans with long-term care. The program, which dates back to 
the Civil War, received $104 million this fiscal year. The White House 
plan would also trim nursing home care by $351 million, which would 
eliminate approximately 5,000 beds in VA-run nursing homes. These cuts, 
at a time when demand for VA long-term care services is increasing on 
the rise with a rapidly aging veteran population, are unconscionable 
and absolutely reprehensible.
    In another area, good stewardship demands that VA facility assets 
be protected against deterioration and that an appropriate level of 
building services be maintained. Given VA's construction needs--such as 
seismic correction, compliance with the Americans With Disabilities Act 
(ADA) and Joint Commission of Accreditation of Health Care Organization 
(JCAHO) standards, replacing aging physical plant equipment, and 
CARES-- VA's construction budget continues to be inadequate.
    The Independent Budget for Fiscal Year 2005 cites the 
recommendations of the interim report of the President's Task Force to 
Improve Health-Care Delivery for Our Nation's Veterans (PTF). That 
report was made final in May 2003. To underscore the importance of this 
issue, we again cite the recommendations of the PTF:
    VA's health-care facility major and minor construction over the 
1996 to 2001 period averaged only $246 million annually, a 
recapitalization rate of 0.64 percent of the $38.3 billion total plant 
replacement value. At this rate, VA will recapitalize its 
infrastructure every 155 years. When maintenance and restoration are 
considered with major construction, VA invests less than 2 percent of 
plant replacement value for its entire facility infrastructure. A 
minimum of 5 percent to 8 percent investment of plant replacement value 
is necessary to maintain a healthy infrastructure. If not improved, 
veterans could be receiving care in potentially unsafe, dysfunctional 
settings. Improvements in the delivery of health care to veterans 
require that VA and the Department of Defense adequately create, 
sustain, and renew physical infrastructure to ensure safe and 
functional facilities.
    Mr. Chairman, the PTF also recommended that ``an important priority 
is to increase infrastructure funding for construction, maintenance, 
repair and renewal from current levels. The importance of this 
initiative is that the physical infrastructure must be maintained at 
acceptable levels to avoid deterioration and failure.''
    The PTF goes on to state; ``Within VA, areas needing improvement 
include developing systematic and programmatic linkage between major 
construction and other lifecycle components of maintenance and 
restoration. VA does not have a strategic facility focus, but instead 
submits an annual top 20-facility construction list to Congress. Within 
the current statutory and business rules, VA can bring new facilities 
online within four years. However, VA facilities are constrained by 
reprogramming authority, inadequate investment, and lack of a strategic 
capital-planning program.''
    The PTF articulates that VA must accomplish three key objectives: 
(1) invest adequately in the necessary infrastructure to ensure safe, 
functional environments for health-care delivery; (2) right-size their 
respective infrastructures to meet projected demands for inpatient, 
ambulatory, mental health, and long-term care requirements; and (3) 
create abilities to respond to a rapidly changing environment using 
strategic and master planning to expedite new construction and 
renovation efforts.
    We of the IBVSOs concur with the provisions contained in the PTF 
final report. If construction funding continues to be inadequate, it 
will become increasingly difficult for VA to provide high-quality 
services in old and inefficient patient care settings.
    Mr. Chairman and distinguished members of the Committee, Congress 
must ensure that there are adequate funds for the major and minor 
construction programs so the VHA can undertake all urgently needed 
projects.
    I will here briefly articulate our view that in those instances 
where no impediment arises in providing veteran's care and services the 
extensive inventory of historic structures must be protected and 
preserved. VA's historic structures illustrate America's heritage of 
veterans' care, and they enhance our understanding of the lives of the 
soldiers and sailors who have shaped our country. Of the almost 2,000 
historic structures VA owns, many are neglected and deteriorate further 
every year. These structures must be stabilized, protected, and 
preserved. As the first step in addressing this responsibility, VA must 
develop a comprehensive national program for its historic properties. 
Because most heritage structures are not suitable for modern patient 
care, the Capital Asset Realignment for Enhanced Services planning 
process did not produce a national preservation strategy. VA must 
undertake a separate initiative for this purpose immediately.
    VA should inventory its historic structures, classify their current 
physical condition, and evaluate their potential for adaptive reuse by 
either the medical centers, local governments, nonprofit organizations, 
or private-sector businesses. To accomplish these objectives, we 
recommend that VA establish partnerships with other Federal 
departments, such as the Department of the Interior, and also with 
private organizations, such as the National Trust for Historic 
Preservation. Such expertise should prove helpful in establishing this 
new program. VA must also expand its limited preservation staffing.
    For its adaptive reuse program, VA needs to develop models and 
policies that will protect historic structures that are leased or sold. 
VA's legal responsibilities, for example, could be addressed through 
easements on property elements, such as building exteriors, interiors, 
or grounds. The National Trust for Historic Preservation has 
successfully assisted the Department of the Army in managing its 
historic properties.
    We recommend that specific funds should be included in the FY 2006 
budget to develop a comprehensive program with detailed 
responsibilities for the preservation and protection of VA's inventory 
of historic properties.
    The last issue I will address here today is the view that VA should 
avoid the temptation to reuse empty space inappropriately. Studies have 
suggested that the VA medical system has extensive empty space that can 
be cost-effectively reused for medical services, and that one medical 
center's unused space may help address another's deficiency. Although 
these space inventories are accurate, the basic assumption regarding 
viability of space reuse is not.
    Medical design is complex because of the intricate relationships 
that are required between functional elements and the demanding 
requirements of equipment that must be accommodated. For the same 
reasons, medical facility space is rarely interchangeable. Unoccupied 
rooms located on a hospital's eighth floor, for example, cannot offset 
a second-floor space deficiency because there is no functional 
adjacency. Medical space has very critical inter- and intradepartmental 
adjacencies that must be maintained for efficient and hygienic patient 
care. In order to preserve these relationships, departmental expansions 
or relocations usually trigger ``domino'' effects on the surrounding 
space. These secondary impacts greatly increase construction costs and 
patient care disruption.
    Medical space's permanent features, such as floor-to-floor heights, 
column-bay spacing, natural light, and structural floor loading cannot 
be altered. Different medical functions have different requirements 
based on these characteristics. Laboratory or clinical space, for 
example, is not interchangeable with ward space because of the need for 
different column spacing and perimeter configuration. Patient wards 
require natural light and column grids that are compatible with room 
layouts. Laboratories should have long structural bays and function 
best without windows. In renovation, if the ``shell'' space is not 
suited to its purpose, plans will be larger, less efficient, and more 
expensive.
    Using renovated space rather than new construction only yields 
marginal cost savings. Build out of a ``gut'' renovation for medical 
functions is approximately 85 percent of new construction cost. If the 
renovation plan is less efficient or the ``domino'' impact costs are 
greater, the savings are easily lost. Remodeling projects often cost 
more and produce a less satisfactory result. Renovations are 
appropriate to achieve critical functional adjacencies, but they are 
rarely economical.
    Early VA centers used flexible campus-type site plans with separate 
buildings serving different functions. Since World War II, however, 
most hospitals have been consolidated into large, tall ``modern'' 
structures. Over time, these central towers have become surrounded by 
radiating wings with corridors leading to secondary structures. Many 
medical centers are built around prototypical ``Bradley buildings.'' 
The VA rushed to build these structures in the 1940s and 1950s for 
World War II veterans. Fifty years ago, these facilities were flexible 
and inexpensive, but today they provide a very poor chassis for the 
body of a modern hospital. Because most Bradley buildings were designed 
before the advent of air conditioning, for example, the floor-to-floor 
heights are very low. This makes it almost impossible to retrofit 
modern mechanical systems. The wings are long and narrow (in order to 
provide operable windows) and therefore provide inefficient room 
layouts. The Bradley hospital's central core has a few small elevator 
shafts that are inadequate for vertical distribution of modern 
services.
    Much of the current vacant space is not situated in prime 
locations, but is typically located in outlying buildings or on upper 
floor levels. The permanent structural characteristics of this vacant 
space often make it unsuitable for modern medical functions. VA should 
perform a comprehensive analysis of its excess space and deal with it 
appropriately. Some of this space is located in historic structures 
that must be preserved. Some space may be suitable for enhanced use. 
Some should be demolished. Each medical center should develop a plan to 
find suitable uses for its non-historic vacant properties.
    VA should develop a comprehensive plan for addressing excess space 
in properties that are not suitable for medical or support functions 
due to its permanent characteristics or location.
    Mr. Chairman and distinguished Members of this Committee, this 
concludes my statement and I will be happy to respond to any questions 
you may have.

    Chairman Craig. Thank you.
    Richard.

                  STATEMENT OF RICHARD JONES, 
              AMVETS NATIONAL LEGISLATIVE DIRECTOR

    Mr. Jones. As co-author of The Independent Budget, AMVETS 
is pleased to give you our best estimates on the resources 
necessary to carry out a responsible National Cemetery 
Administration budget for the coming year. The members of the 
individual budget recommend Congress provide $204 million in 
fiscal year 2006 for the operational requirements of NCA, the 
National Shrine Initiative and the backlog of repairs. This is 
an increase of approximately $40 million above the 
Administration request.
    The Independent Budget supports the Administration request 
for additional work force in the burial budget. The request 
would increase the work force by 13 percent over the current 
fiscal year. Additional employees and additional outside 
contracts are necessary to meet construction requests for new 
national cemeteries in Atlanta, Detroit, Miami, Oklahoma City, 
Pittsburgh and Sacramento.
    The Administration's recommendation in the 2006 budget also 
contains $41 million of additional funding for land acquisition 
and related costs for six additional cemeteries authorized in 
last year's Congress. It also recommends the provision of $19.5 
million for expansion at Fort Rosecranz National Cemetery.
    The Independent Budget supports the Administration's land 
acquisition and cemetery expansion requests. Accelerating 
cemetery construction will help answer the increasing number of 
families who seek VA for interment of their loved ones. But 
there are repair and upgrades needed also. Pursuant to past 
legislation, VA awarded some years ago a contract to the 
Logistics Management Institute to conduct an assessment of 
veterans burial needs.
    One of their reports, entitled National Shrine Commitment, 
dealt with capital improvements needed at existing veterans 
cemeteries. It identified 928 restoration and repair projects 
estimated to cost approximately $280 million. The Independent 
Budget veterans service organizations recommend funding be 
accelerated to correct current issues. We all know that delayed 
maintenance results in exponential increases in the costs of 
repair. We need to attend to these as quickly as possible.
    The members of The Independent Budget and more than 25 
veterans and military groups who endorse the recommendations 
ask Congress to establish a five-year, $250 million program to 
restore and improve the condition and character of NCA 
cemeteries. In total, our funding recommendations represent a 
$40 million increase over the request of the Administration.
    In addition, the State Cemetery Grants Program is a vital 
program. It has greatly assisted States in increasing burial 
services to veterans. We are very pleased to see that there are 
currently six new cemeteries under construction. One of these 
includes the construction of a cemetery in Boise, Idaho. The 
development of this cemetery in your home State, Mr. Chairman, 
is the last State in the Nation without a veterans cemetery. We 
look forward to completion of that cemetery.
    The Independent Budget veterans service organizations also 
request Congress review a series of burial benefits that have 
seriously eroded in value over the past years. While these 
benefits were never intended to cover the full costs of burial, 
they now pay for only a fraction of what they covered in 1973. 
The recommendations are, of course, contained in The 
Independent Budget, but I would like to highlight one matter: 
with the heightened interest in increasing servicemembers' 
death gratuity to $100,000 or more from the current level of 
$12,000, The Independent Budget veterans service organizations 
want you to recognize that deaths also result from military 
wounds and those wounds carried by veterans long after the last 
shot has been fired.
    We therefore recommend a modest increase in the service-
connected benefits from $2,000 to $4,000. That is one-third of 
what it used to be at $12,000, and a mere portion of what 
Congress is considering today for those killed in military 
service. The deaths sometimes result long after that last shot. 
This request would restore the allowance to its original 
proportion of burial expenses and tell veterans their sacrifice 
that they have given is appreciated and well-deserved.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Jones follows:]

                 Prepared Statement of Richard Jones, 
                  AMVETS National Legislative Director
    Chairman Craig, Ranking Member Akaka, and members of the Committee:
    AMVETS is honored to join fellow veterans service organizations at 
this hearing on the VA's budget request for fiscal year 2006. My name 
is Richard A. Jones, National Legislative Director, and I am pleased to 
provide you our best estimates on the resources necessary to carry out 
a responsible budget for the fiscal year 2006 programs of the 
Department of Veterans Affairs. AMVETS testifies before you today as a 
co-author of The Independent Budget.
    For over 19 years AMVETS has worked with the Disabled American 
Veterans, the Paralyzed Veterans of America, and the Veterans of 
Foreign Wars to produce a working document that sets out our spending 
recommendations on veterans' programs for the new fiscal year. Indeed, 
we are proud that over 40 veteran, military, and medical service 
organizations endorse these recommendations. In whole, these 
recommendations provide decision-makers with a rational, rigorous, and 
sound review of the budget required to support authorized programs for 
our Nation's veterans.
    In developing this document, we believe in certain guiding 
principles. Veterans must not be forced to wait for the benefits 
promised them. Veterans must be assured of access to high quality 
health care. Veterans must be guaranteed access to a full continuum of 
healthcare services, including long-term care. And, veterans must be 
assured burial in a State or national cemetery in every State.
    It is our firm belief that the mission of the VA must continue to 
include support of our military in times of emergency and war. Just as 
this support of our military is essential to national security, the 
focus of the VA medical system must remain centered on specialized 
care. VA's mission to conduct medical and prosthetics research in areas 
of veterans' special needs is critical to the integrity of the veterans 
healthcare system and to the advancement of American medicine.
    In addition, the VA healthcare system is responsible for great 
advances in medical science, and these advanced benefits all Americans. 
The VHA is the most cost effective application of Federal healthcare 
dollars, providing benefits and services at 25 percent lower cost than 
other comparable medical services. In times of national emergency, VA 
medical services can function as an effective backup to the DoD and 
FEMA.
    Noting the mission of the VA, it is important to understand the 
areas where VA funding must be increased. The VA budget must address 
the pending wage increases for VA employees. It must address the 
continuing backlog in veterans waiting for health care and it must 
address, as well, VA's benefits casework backlog. There are severely 
disabled veterans and those needing home-based healthcare in those 
backlogs, and I think we can all agree that this situation should be 
addressed and corrected.
    As we look to fiscal year 2006, we witness a live lesson about the 
challenges inherent to inadequate funding. VA says that action was 
taken, due to inadequate resources, to ban healthcare access to tens of 
thousands of veterans who are eligible to enroll in the very system put 
in place to serve them. The resource situation reaches the absurd when, 
after blocking entry to these so-called ``high income'' veterans, VA 
directs its workers under VHA Directive 2003-003, January 17, 2003, to 
send banned veterans to Community Social Work for assistance. For those 
brave men and women who once served to defend America's freedom, 
welfare has replaced their earned benefit.
    Looking at the 2006 budget, released last week, AMVETS notes that 
the Administration is proposing an $880 million increase in VA health 
care. More than 85 percent of the Administration's proposed increase, 
$768 million, comes directly from the wallets of veterans using the 
system, in the form of a new user tax and a doubling of prescription 
co-payments for about 2 million veterans.
    When stripped of the proposed new user tax and increased co-pay, 
the budget recommendation presents a paltry one-half of one percent 
increase above last year's funding--$111.2 millionnot even enough to 
cover the president's proposed Federal pay raise for the medical staff 
that delivers veterans' health care. The result of these proposals, 
according to VA, would push 215,000 former servicemembers out of the 
very system designed for their care.
    To avoid implementation of the proposed exclusion of these 
veterans, The Independent Budget recommends Congress provide $31.2 
billion to fund VA medical care for fiscal year 2005, an increase of 
$3.5 billion over the Administration's request. We ask Congress to 
recognize that the VA healthcare system can only bring quality health 
care if it receives adequate funding. It is an excellent investment for 
America.
    Not only would adequate funding allow VA to achieve its mission of 
providing veterans health care, young Americans will see that our 
Nation does not abandon its responsibilities to those who have served 
in armed defense of our Nation. It would send a message that the 
contributions of servicemembers are appreciated above the priorities of 
non-defense, non-homeland security, and other non-veteran spending 
programs.
    It is also important to clearly state that AMVETS along with its 
independent Budget partners strongly supports shifting VA healthcare 
funding from discretionary funding to mandatory. We recommend this 
action because the current discretionary system is not working. Moving 
to mandatory funding would give certainty to healthcare services. VA 
facilities would not have to deal with the whimsy of discretionary 
funding, which has proven inconsistent and inadequate. Mandatory 
funding would provide a comprehensive solution to the current funding 
problem. Once healthcare funding matches the actual average cost of 
care for veterans enrolled in the system, with annual indexing for 
inflation, the VA can fulfill its mission.
                  the national cemetery administration
    Before I address budget recommendations for the National Cemetery 
Administration (NCA), which is AMVETS's primary responsibility in the 
development of The Independent Budget, I would like Members of the 
Committee to know that AMVETS is truly grateful to those who serve on 
this important Committee. Through your work, you represent the 
veteran's voice. And as you lead the country in addressing issues 
important to veterans and their families, you may be assured that we 
will work with you and help report your leadership to the Nation.
    The members of The Independent Budget recommend that Congress 
provide $204 million in fiscal year 2006 for the operational 
requirements of NCA, the National Shrine initiative, and the backlog of 
repairs. We recommend your support for a budget consistent with NCA's 
growing demands and in concert with the respect due every man and woman 
who wears the uniform of the United States Armed Forces. This 
recommendation includes the start of a five-year $250 million program 
to restore and improve the condition and character of NCA cemeteries 
and, in total, is an increase--almost entirely aimed at improving the 
NCA Shrine initiative--of $40 million over the Administration's request 
for next year.
    Clearly, the aging veteran population has created great demands on 
NCA operations. Primarily because of the mortality rate of World War II 
and Korean War veterans is increasing, as is the usage of burial 
services by Vietnam War Veterans, actuarial projections do not suggest 
a decline in these demands for many years. From current interment 
levels of 100,000 per year, the VA interment rate is projected to 
increase successively over the next several years peaking at 109,000 in 
the year 2008.
    The National Cemetery Administration maintains more than 2.6 
million gravesites in approximately 14,000 acres of cemetery land and 
inters more than 100,000 veterans annually. The NCA management 
responsibilities include 120 cemeteries: of these, 60 have available, 
unassigned gravesites for burial of both casketed and cremated remains; 
26 allow only cremated remains; and 34 are closed to new interments.
    Progress is underway at several sites around the country to 
complete construction of new national cemeteries. Funding is already in 
place for the Georgia National Cemetery, Atlanta, Georgia; the Great 
Lakes National Cemetery, Detroit, Michigan; the Southern Florida's 
National Cemetery, Miami, Florida; the Ft Sill National Cemetery, 
Oklahoma City, Oklahoma; the National Cemetery of the Alleghenies, 
Pittsburgh, Pennsylvania; and the Sacramento National Cemetery, 
Sacramento, California.
    The Administration's recommendations in the 2006 budget contain $41 
million of additional funding for land acquisition and related costs 
for six new cemeteries authorized under Public Law 108-109 to include 
sites at Bakersfield, California; Birmingham, Alabama; Columbia/
Greenville, South Carolina; Southeastern, Pennsylvania; and Sarasota, 
Florida.
    We ask for your strong commitment in supporting the 
Administration's request for these funds in the congressional budget 
and final appropriations for the new year. With the opening of these 
new national cemeteries and State cemeteries, too, the percentage of 
veterans served by burial option within 75 miles of their residence 
will rise to 85 percent from a level of 73 percent in 2001, almost 
doubling the number of gravesites during this period.
    The members of The Independent Budget are encouraged by the 
Administration's recommended increase in NCA resources for Fiscal Year 
2005. It should be recognized, however, that while the Administration's 
proposal adequately addresses employment increases and equipment needs, 
it does not serve to address problems and deficiencies identified in 
the Study on Improvements to Veterans Cemeteries, a comprehensive 
report submitted in 2002 by VA to Congress on conditions at each 
cemetery.
    Volume 2 of the Study identifies over 900 projects for gravesite 
renovation, repair, upgrade, and maintenance. According to the Study, 
these project recommendations were made on the basis of the existing 
condition of each cemetery, after taking into account the cemetery's 
age, its burial activity, burial options and maintenance programs. The 
total estimated cost of completing these projects is nearly $280 
million, according to the Study.
    As any public facilities manager knows, failure to correct 
identified deficiencies in a timely fashion results in continued, often 
more rapid, deterioration of facilities and increasing costs related to 
necessary repair. The IBVSOs agree with this assessment and request 
Congress carefully consider this report to address the condition of NCA 
cemeteries. We recommend that Congress and VA work together to 
establish a timeline for funding these projects based on the severity 
of the problems to ensure they remain respectful settings for deceased 
veterans and visitors. We recommend an establishment of a 5-year $250 
million program to complete projects identified in the Study.
    Volume 3 of the Study describes veterans cemeteries as national 
shrines saying that one of the most important elements of veterans 
cemeteries is honoring the memory of America's brave men and women who 
served in the Armed Forces. ``The commitment of the Nation,'' the 
report says, ``as expressed by law, is to create and maintain national 
shrines, transcending the provisions of benefits to the individual. . 
.even long after the visits of families and loved ones.''
    Indeed, Congress formally recognized veterans cemeteries as 
national shrines in 1973 stating, ``All national and other veterans 
cemeteries. . .shall be considered national shrines as a tribute to our 
gallant dead.'' (P.L. 93-43:24 1003(c)) Moreover, many of the 
individual cemeteries within the system are steeped in history and the 
monuments, markers, grounds and related memorial tributes represent the 
very foundation of these United States. With this understanding, the 
grounds, including monuments and individual sites of interment, 
represent a national treasure that deserves to be protected and 
nurtured.
    Unfortunately, despite NCA continued high standards of service and 
despite a true need to protect and nurture this national treasure, the 
system has and continues to be seriously challenged. The current and 
future needs of NCA require continued adequate funding to ensure that 
NCA remains a world-class, quality operation to honor veterans and 
recognize their contribution and service to the Nation.
                   the state cemetery grants program
    For funding the State Cemetery Grants Program, the members of The 
Independent Budget recommend $37 million for the new fiscal year, an 
increase of $5 million over the Administration proposal. The State 
Cemetery Grants Program is an important complement to the NCA. It helps 
States establish gravesites for veterans in those areas where NCA 
cannot fully respond to the burial needs of veterans. The enactment of 
the Veterans Programs Enhancement Act of 1998 has made this program 
very active and attractive to the States.
    Clearly, the enactment of the Veterans Benefits Improvements Act of 
1998 has heightened the interest in the State cemetery grants program 
and increased participation of States in establishing fully equipped 
cemeteries for veterans. In fiscal year 2004, the State cemetery grant 
program had helped provide burial space for 19,246 burials of veterans 
and their eligible family members, an increase of nearly 5.6 percent 
over the prior year.
    Currently, six new cemeteries are under construction in Boise, 
Idaho (the last State in the Nation without a veterans' cemetery); 
Wakeeny, Kansas; Winchendon, Massachusetts; Killeen, Texas; and 
Suffolk, Virginia (serves 200,000 veterans in the Tidewater area). As 
before the 1998 legislative change, States remain totally responsible 
for operations and maintenance expenses to ensure conditions remain in 
a manner appropriate to honor the memory of veterans.
    To augment support for veterans who desire burial in State 
facilities, members of The Independent Budget support increasing the 
plot allowance to $745 from the current level of $300. The plot 
allowance now covers less than 6 percent of funeral costs. Increasing 
the burial benefit to $745 would make the amount nearly proportional to 
the benefit paid in 1973. In addition, we firmly believe the plot 
allowance should be extended to all veterans who are eligible for 
burial in a national cemetery not solely those who served in wartime.
    The Independent Budget veterans service organizations (IBVSOs) also 
request Congress review a series of burial benefits that have seriously 
eroded in value over the years. While these benefits were never 
intended to cover the full costs of burial, they now pay for only a 
fraction of what they covered in 1973, when they were initiated.
    The IBVSOs recommend an increase in the service-connected benefits 
from $2,000 to $4,100. Prior to action in the last Congress, increasing 
the amount $500, the benefit had been untouched since 1988. The request 
would restore the allowance to its original proportion of burial 
expense.
    The IBVSOs recommend increasing the non-service-connected benefit 
from $300 to $1,270, bringing it back up to its original 22 percent 
coverage of funeral costs. This benefit was last adjusted in 1978, and 
today covers just 6 percent of burial expenses.
    The IBVSOs also recommend that Congress enact legislation to index 
these burial benefits for inflation to avoid their future erosion.
    Mr. Chairman, this concludes my statement. I thank you again for 
the privilege to present our views, and I would be pleased to answer 
any questions you might have.

    Chairman Craig. Well, gentlemen, thank you for that 
comprehensive testimony and let me also thank you for this. It 
serves as an excellent template from which to work through the 
task we have at hand to compare it and what you believe to be 
reasonable levels of service in relationship to the 
Administration's budget, and I am sure in the coming days, we 
will be doing just that as we work through these issues.
    Let me ask this question and possibly, well, maybe Richard, 
I guess Richard Fuller and Peter could respond to this: in our 
advocacy for veterans, and I do not step back nor do any of you 
in that role, is VA's proposal to outline exactly who is 
eligible for VA-provided care and who is not eligible not much 
more fair than what I call the hit and miss system of today?
    Mr. Fuller. Well, I think in the VA's effort to try to draw 
that line and make distinctions between the veterans, a couple 
of tales might be told. I mean, one, you could basically have a 
veteran in category 8 who scaled the cliffs of Normandy, but 
did not get shot, did not get wounded, and escaped, coming home 
without any service-connected disability. Is his service any 
less honorable than the individual who got shot during D-Day?
    Trying to make these distinctions now is rather strange, 
because all of these people were always eligible for VA health 
care going back 25 years. Prior to 1986, when they instituted 
the first means test, all veterans, any veteran over age 65 was 
eligible for VA health care, because they were determined to be 
totally and completely disabled at that age.
    Even when they instituted the means test, you had category 
A, B and C veterans, and the C veterans were basically the 7s 
and 8s, they were still eligible to get into the VA and utilize 
those services as well, international after eligibility reform 
in 1996. The contingency was made to try to be able to take 
care of these people.
    What happened is that the VA became wildly popular. It 
became, as you say, a credit to health care in the United 
States. But more than that, and not just in eligibility reform; 
subsequent to eligibility reform, VA changed how it provided 
that care, and they opened up 800 outpatient clinics across the 
country. Prior to that, it took an act of Congress to open an 
outpatient clinic, because the Office of Management and Budget 
said if you open that, it is going to create more demand, and 
so, if you open up 800 of them, 800 McDonald's, you can sell a 
lot more cheeseburgers than you could before you opened them 
up.
    Why should the VA not be a haven for veterans?
    Basically, we are not talking about people driving up in 
their Cadillacs; we are talking about people with very human 
needs. And health care in the United States today has become 
more expensive and less effective for Americans than ever 
before in recent history, and naturally, the VA should be a 
viable resource at a time of need.
    Chairman Craig. Please, any comment that you wish to make 
on that?
    Mr. Gaytan. Yes, Mr. Chairman, on behalf of the American 
Legion, thank you for the question. And I think we could ask 
any veteran, if they feel that those individuals who they 
served with, who they served beside and with and who may or may 
not have survived as well or have suffered a disability that 
they had suffered, you could ask any veteran to make that 
assessment: is the person that they served with any more 
qualified to receive care through the VA health care system?
    And the American Legion supports the definition of eligible 
veteran as defined in the Health Care Eligibility Reform Act. 
And also, the American Legion is quite concerned that the 
approach to funding VA in recent years has gone from providing 
a budget that meets the patient population. The American Legion 
supports that approach as opposed to tailoring the patient 
population to meet the budget. The funding should be there to 
treat those veterans who are eligible for care with the VA.
    When determining the budget levels, we should not have to 
take into consideration how many we can treat. Those eligible 
veterans, the budget should be tailored to meet the care that 
those eligible veterans have earned through their service to 
our country.
    Chairman Craig. Well, with 53 seconds left in my round, I 
will turn to Senator Akaka.
    Danny.
    Senator Akaka. Thank you very much, Mr. Chairman. This is a 
question for all members of the panel. I would like to hear 
your comments on VA's $250 user fee and increase in the 
prescription drug co-payment for priority 7 and 8 veterans, a 
plan the Administration has tried to implement for the past few 
years. In your testimony, Mr. Gaytan, I believe you described 
this as an attempt to, and I am quoting, balance the VA budget 
on the back of American veterans, unquote.
    Given that Congress rejected these proposals last year, 
what do you think of the Administration proposing them again 
this year, and do you believe that Congress should be more 
receptive this year?
    Mr. Gaytan. Thank you, sir.
    The American Legion's position of opposition against these 
proposals has not changed. We trust that Congress will do as 
they have done in the past and oppose those provisions that 
would indeed seek to increase the VA budget and to eliminate 
the enrollment levels by implementing a $250 co-pay as well as 
the increase in the pharmaceutical costs. The American Legion 
does not--again, it falls back on the budget, the actual 
allocation of funds.
    The funds should be there to allow the VA to meet their 
obligations to treat these veterans without calling on them to 
pay for an earned benefit that they have earned through their 
service to their country.
    Mr. Cullinan.
    Mr. Cullinan. Thank you, Senator Akaka.
    The VFW feels it is just plain wrong to attempt to change 
the rules at this stage in the process. The category 8 and 7 
veterans who rely on VA health care, with only a few 
exceptions, very few exceptions in the category 8 group are not 
wealthy individuals. Category 7 veterans, by definition, are 
not wealthy, and there is a good question whether these 
individuals can actually afford to make such co-payments.
    A major concern, of course, with the enrollment fee is they 
would actually be driven out, and I believe VA has factored 
that right into their budget calculations. We strongly oppose 
it.
    Senator Akaka. Mr. Violante.
    Mr. Violante. Thank you, Senator.
    DAV is also opposed to that. Some of our members, disabled 
veterans rated zero percent, fall into category 7s and 8s. Some 
of our members who have not received service connection through 
the VA for various reasons, VA does not accept their evidence, 
also fall into that category, and as Mr. Cullinan pointed out, 
it is a way to drive veterans out of the system, and we oppose 
that process.
    Senator Akaka. Mr. Fuller.
    Mr. Fuller. Senator, Paralyzed Veterans of America, as we 
testified before, is adamantly opposed to these fee increases. 
The enrollment fee, we consider to be a health care tax, and 
adding in the doubling of the prescription fee could cause 
certain veterans with catastrophic disabilities, high-end users 
of the system, hundreds of dollars a month.
    The other factor, which is the principal of the thing, and 
we are talking about separating veterans into categories; all 
of a sudden, you have one category of veterans who is deemed 
less worthy than others, who then is required to pay additional 
fees in order to generate revenue for the system, in order to 
pay for the health care of the others who are considered to be 
more deserving. We find this, one veteran paying for the health 
care of another, a complete anathema and oppose the fees on all 
grounds.
    Senator Akaka. Mr. Jones.
    Mr. Jones. Yes, sir. It is a user tax. It would drive 
216,000 veterans currently enrolled in the system out of the 
system. We need some wisdom here. We have a program that was 
put in place last year, a four-year, $1 billion program to pay 
the health care costs of illegal aliens. That is $250 million a 
year over the next four years, and we are asking veterans--we 
are telling veterans that we do not have money for their health 
care, veterans who developed this country, brought us 
prosperity, cherished its freedom and defended it everywhere 
around the globe.
    We are paying $250 million a year for illegal alien health 
care? We need some wisdom in this budget, sir. Do not put us in 
a box. The box is not limited. It is artificial. It is an OMB 
box. Make sure you take a good look at your budget, gentlemen.
    Thank you so very much.
    Senator Akaka. Well, I really appreciate your responses, 
and I must tell you that you are in concert with your 
statements here, and thank you very much for them.
    My time is almost up, and I want to turn it back to the 
Chairman.
    Chairman Craig. Just a couple more questions of you.
    For a moment, because I agree with so much of what you are 
saying, I am going to be a bit of a devil's advocate, because I 
think it is important to build a record from which we can work 
to try to resolve this issue. I think we all know that the 
dollars and cents we are going to try to achieve this year are 
going to be a bit of a struggle, and getting there is not going 
to be easy, but we will make every effort to do so.
    Some of you have said that the current fee proposal, 
enrollment fee, would put about 1.1 million veterans off the 
rolls. VA says that at least 900,000 of these veterans would be 
those who do not use the system now, but are enrolled into the 
system and are therefore not recipients of it. My devil's 
advocacy says it seems to me that non-users of VA health care 
are neither sick or disabled. If they are neither sick nor 
disabled--if they were, they would be users of the system. Is 
that not correct?
    Mr. Cullinan. Senator----
    Chairman Craig. Yes.
    Mr. Cullinan. I would like to speak to that issue. If you 
look at the category 8 veterans, many of these individuals, as 
I mentioned awhile ago, are not wealthy individuals.
    Chairman Craig. I concur.
    Mr. Cullinan. However, they may not be sick at the time, 
but VA represents their only health care option. If they drop 
out of the system, they cannot get back in again. So they are 
effectively shut out. Category 7 veterans, the situation is 
similar. It is not that they could not get back in again, but 
oftentimes, they do not want to surrender their health care 
option. Once they are out of the system, even if they can get 
back in, it could be a hard time and take too long to do it.
    So that is the key issue right there. It is all good and 
well for VA to say it will save money by pushing non-users out, 
but these individuals are, in fact, potential users, and VA 
represents their only health care option.
    Chairman Craig. Is a $250 a year fee not by far the 
cheapest access to the finest health care system in the world?
    Mr. Cullinan. Senator, I have to agree with that. However, 
there are still individuals who cannot afford to pay it. I wish 
that my premium was $250 a year.
    Chairman Craig. Likewise.
    Mr. Cullinan. That would be terrific. That is not the case.
    The thing is I am economically a little bit better off than 
these individuals are. And for them, it is a lot of money. And 
then, there is also, two, the whole issue of differentiating 
between veterans: who is worthy, who is not worthy.
    Chairman Craig. I appreciate that, and Congress has always 
struggled, if you will, with a means test versus universality 
in coverage of certain things. We have struggled with that; we 
have breached that line a year ago in looking at Medicare and 
prescription drugs for the first time, largely because of 
overall costs and budget concerns, and I struggle here with 
looking at what is being proposed and suggesting we might start 
drawing lines, and is that an appropriate thing to do? So I 
appreciate your advocacy.
    Peter, you wish to comment?
    Mr. Gaytan. Yes, sir; thank you.
    The need for enrollment was created by VA. Those 
individuals must enroll in it. Dennis mentioned specifically 
what I wanted to reiterate as well, which is that category 8s, 
if they do--the VA health care system for those who are 
considered under priority group 8s. They cannot enroll if they 
disenroll. If they decide that that $250 enrollment fee, they 
just cannot cover it, once they get out, that is it. They just 
cannot get back into the system.
    Closing the door on any veterans who are prior eligible to 
receive health care at the VA health care system, the American 
Legion does not support.
    Chairman Craig. Well, I have a good many other questions. I 
am getting squeezed on time now.
    Danny, do you have any other question you would want to ask 
before we consider adjourning?
    Senator Akaka. Yes, Mr. Chairman.
    Again, for The Independent Budget representatives with us 
here today, I direct this question towards each of you: in its 
current budget request, VA has proposed achieving management 
efficiencies in the neighborhood of $600 million. You have 
folks on the ground in hospitals and clinics. Do you think 
there is still so-called low-hanging fruit, easy and painless 
management efficiencies that can be achieved without hurting 
the quality of care for VA patients and specialty programs?
    Mr. Violante. Senator, the short answer to that is no. We 
are hearing from VA people from around the country that most of 
the efficiencies have been found, and we all certainly know 
that there might be other ways to save some money, but nowhere 
in the neighborhood of what VA is proposing.
    Mr. Fuller. Senator, from Paralyzed Veterans of America's 
point of view, this is nothing more than just another budget 
gimmick, and we see it in the budget every single year. For 
instance, the previous--in this year, they were asking for $340 
million in management efficiencies. They have now jumped that 
up to $590 million. And it is fine, well, we are going to buy 
gauze pads in quantity and all these kinds of things, but in 
talking with people in the field, what normally happens to 
these budget estimates is that the word goes out from 
Washington, and each hospital is then assessed a certain amount 
to come up with in savings.
    In talking to one hospital director yesterday, he estimated 
that of a major tertiary care facility, a VA hospital around 
the center, reconciliation instructions of this kind would 
cause them to reduce their budget next year by $6 million. Now, 
you cannot get that out of proverbial fraud, waste and abuse. 
He says you have got to cut staff. You have to cut programs, 
and you have to cut staff, and it is the only way to meet your 
target.
    Mr. Jones. AMVETS supports, of course, every effective, 
efficient process we can find. We want that delivery to be as 
low cost, but yet as high quality as possible. But just take a 
look at the budget this year, 2005. VA has already recognized 
that they are $187 million short of what they need to carry out 
their mission this year. How have they gone about it? Have they 
found new efficiencies? No.
    Their new efficiencies, sir, are to take away funds that 
are designed for replacing medical equipment and also 
maintenance. They are raiding their maintenance and replacement 
of equipment funds to carryout their medical mission. $187 
million, sir; we would love to see that as part of the 
supplemental. That is for this year.
    Mr. Cullinan. Senator, for the VFW, I would just reiterate 
something that Senator Obama referenced earlier today. The fact 
is that VA does not realize these savings, which, in all 
likelihood, it will not, it comes out of care and services. It 
hurts veterans, and it hurts the VA.
    Mr. Gaytan. If I may, sir, even though the American Legion 
is not part of the IB VSOs, we feel strongly in agreement with 
what my colleague Dennis Cullinan just stated, that any 
efficiencies will most likely negatively effect the quality of 
care. You can look at the drastic cuts in FTEs for long-term 
care. We are talking about over 4,000 employees being cut from 
long-term care. That is elimination of care that veterans are 
depending on. If that is labeled as an efficiency, I think we 
are going down the wrong path to save funds for VA.
    Senator Akaka. Thank you for your responses on that. We 
have been alluding to a system only for the service-connected. 
The President is clear on who should be eligible for VA health 
care: those with service-connected needs. Do you think the 
system as we know it today can survive if eligibility is 
severely narrowed? Can we continue to train nearly half of all 
physicians in the U.S., maintain specialty programs 
unparalleled in the community, and teach the rest of the health 
care system about quality maintenance if eligibility is limited 
to service-connected health needs?
    Mr. Cullinan. Senator, there are a number of issues here. 
It has long been understood that it is important with respect 
to maintaining certain specialty services, spinal cord, 
blinded, that the system needs to maintain what is known as a 
critical mass of patient load. In addition to that, one of the 
things that draws this Nation's top physicians in the VA is the 
fact that they have an array of patients to work with. If the 
system were suddenly limited to only service-connected, that 
benefit, that clinical and learning benefit would be gone.
    Mr. Violante. Senator, I would like to respond to that 
also, and I agree with Dennis. You know, my members, at least 
currently, would be provided for. However, we do have serious 
concerns about the new veterans coming back who will need this 
system 50, 60 years from now, and where will the system be if 
we start to erode its base now? We will not have a viable 
system, and those veterans with service-connected disabilities 
from Iraq and Afghanistan and wherever else our war on terror 
takes us will not have the system we have now, and we have 
serious concerns about just caring for, as I said, the sickest 
of the sick and the poorest of the poor.
    Senator Akaka. Thank you, Mr. Violante.
    Mr. Fuller.
    Mr. Fuller. I think, again, trying to carve veterans up 
into little boxes is really quite dangerous, and it gets into 
the mentality of the system. And even the discussions that we 
are having about this about worthy veterans and not-so-worthy 
veterans leads systemically into the VA system. I was talking 
with someone yesterday who said that already, reports of 
surgeries in VA hospitals, drawing up surgery schedules where 
you provide the operations to the service-connected veteran 
first before you provide the services for the non-service-
connected veteran.
    Now, I think this is in violation of medical practice, if 
you would ask me, but it also shows me that there is this 
spirit which is now beginning to pervade the system that in 
order to avoid providing the resources to take care of these 
people, we need to cut back on the number of people we take 
care of.
    Mr. Gaytan. Thank you, sir.
    Narrowing down the patient population for VA would not only 
negatively affect America's veterans who have earned the right 
to treatment through the VA health care system, but it would 
negatively affect the overall health care system of America. If 
you look at the research investments and the research 
accomplishments of the VA, it is outstanding. It does not only 
benefit those who have worn the uniform, but it also benefits 
all Americans and people worldwide.
    The medical school affiliations that VA enjoys are 
outstanding. As part of the American Legion's System Worth 
Saving report, where our national commander in tandem with our 
field service staff visits every single VA health care 
facility, and in fact, by June of this year, in the past 3 
years, the American Legion staff with the national commander 
will have visited every single VA health care system within the 
continental United States, and we will publish that report in 
July.
    In those visits, we have seen first-hand the benefits of 
the medical school affiliations and as well as the research 
developments. And to limit the population would also limit the 
accomplishments of both of those programs.
    Mr. Jones. I had a Valentine's Day conversation last night 
with my father, who is a World War II veteran. I told him where 
I would be today, and he was very pleased. I told him what we 
were fighting for and what we were looking for, and he asked me 
to tell you this: that he was never asked about income when he 
served in the armed forces. He has only been asked about his 
income when he sought his earned benefits. That is what we are 
fighting for.
    He is a World War II veteran who is old. He probably had 
some injuries, but he never took them to the benefit service 
people, because he, frankly, thought the system was meant for 
those more deeply wounded. But now, he is older. He probably 
needs a little bit of care, a little bit of help. He served 
once, but now, because the bar is down, the wall has been 
constructed between the veterans 1 through 7 and veterans in 
priority 8, he just cannot have access.
    So we would ask you to tear down that wall.
    Senator Akaka. Thank you very much, all of you, for your 
responses.
    Chairman Craig. I apologize, gentlemen, but we are out of 
time. This is not the last bite on or at this apple, as we work 
collectively together to continue to assure adequate and 
appropriate service to our veterans.
    We will leave the record open for a period of time for the 
introduction of the questions that I will have, but again, let 
me thank you for the work here and the work that lies ahead of 
us as we push to assure the sustainability of the quality and 
the service of the Veterans Administration health care system.
    Thank you all very much. The hearing will stand adjourned.
    [Whereupon, at 12:34 p.m., the hearing adjourned.]
                            A P P E N D I X

      Prepared Statement of Lourdes E. Alvarado-Ramos, President, 
              National Association of State Veterans Homes
    I am pleased to submit testimony on behalf of the National 
Association of State Veterans Homes (``NASVH'') with respect to the 
President's fiscal year 2006 budget proposal for the Department of 
Veterans Affairs. I am the Assistant Director of the Washington State 
Department of Veterans Affairs, and I serve as the 2004-2005 President 
of NASVH.
    As the largest deliverers of long-term care to our Nation's 
veterans, the State Veterans Homes system plays an indispensable role 
in ensuring that eligible veterans receive the benefits, services, 
long-term health care, and respect that they have rightfully earned by 
their service and sacrifice to our country. We greatly appreciate this 
Committee's commitment to the long-term care needs of veterans, your 
understanding of the vital role that State Veterans Homes play, and 
your strong support for our programs.
    NASVH's membership consists of the administrators and staff of 
State-operated veterans homes throughout the United States. We 
currently operate 119 veterans homes in 47 States and the commonwealth 
of Puerto Rico. Nursing home care is provided in 14 homes, domiciliary 
care in 52 homes, and hospital-type care in 5 homes. These homes 
presently operate over 27,500 resident beds for veterans and provide 
over 50 percent of long-term care workload for the Department of 
Veterans Affairs (``VA'').
    We work closely with the VA, State governments, the National 
Association of State Directors of Veterans Affairs, veterans service 
organizations, and other entities dedicated to the long-term care of 
our veterans. Our goal is to ensure that the level of care and services 
provided by State Veterans Homes meet or exceed the highest standards 
available.
                    role of the state veterans homes
    State Veterans Homes first began serving veterans after the Civil 
War. Faced with a staggering number of soldiers and sailors in critical 
need of long-term medical care, and with the capacity of the Federal 
veterans home system unable to meet that demand, several States 
established veterans homes to provide for those residents who had 
served honorably in the military.
    In 1888, Congress first authorized Federal aid to States which 
maintained homes in which certain disabled American soldiers and 
sailors received long-term care. At the time, the payments amounted to 
about 30 cents per resident per day. In the years since, Congress has 
made several major revisions to the State Veterans Homes program to 
expand the base of payments to include specialized hospital, nursing 
home, and domiciliary care.
    For many years, State Veterans Homes have operated under a program 
administered by the VA which offers construction grants and per diem 
payments to support State Veterans Homes. Both the VA construction 
grants and the VA per diem payments are essential components of this 
support. Each State Veterans Home meets stringent VA-prescribed 
standards of care, which exceed standards prescribed for other long-
term care facilities. The VA conducts annual inspections to ensure that 
these standards are met and to certify the proper disbursement of 
funds. Together, the VA and the State Homes represent a very effective 
and financiallyefficient Federal-State partnership in the service of 
our veterans.
    Construction grants are authorized by 38 D.S.C. Sec. Sec. 8131-
8137. The objective of such grants is to assist the States in 
constructing or acquiring State Veterans Home facilities. Construction 
grants are also utilized to renovate existing facilities, and to ensure 
continuing compliance with life safety and building codes, and this 
recently has become a more important activity. Construction grants made 
by the VA may not exceed 65 percent of the estimated cost of 
construction or renovation of facilities, including the provision of 
initial equipment for any such project. State funding covers at least 
35 percent of the cost.
    The per diem payments to State Homes are authorized by 38 U.S.C. 
Sec. Sec. 1741-1743. They are intended to assist the States in 
providing for the higher level of care and treatment required for 
eligible veterans residing in State Veterans Homes. As you know, the 
per diem rates are established annually. They are currently $59.36 per 
day for nursing home care and $27.44 per day for domiciliary care. 
State Veterans Homes have experienced a period of sustained growth--the 
result of increasing numbers of elderly veterans who have reached that 
point in life when long term care is needed. In fact, we face the 
largest aging veterans population in our Nation's history, with our 
aged veteran population growing substantially each year, and creating a 
growing demand for long-term health care service to veterans. The State 
Veterans Homes program will fill the existing unmet need for longterm 
care beds for veterans in certain States and will respond to the annual 
absolute increase in the number of veterans eligible for such care 
nationally.
    Specifically, the VA has identified 10 States as having either a 
``great'' or ``significant'' need to build new State Veterans Homes 
beds immediately. These 10 States are Florida, Texas, California, 
Pennsylvania, Ohio, New York, Hawaii, Delaware, Wyoming, and Alaska. In 
response to this need, Florida has five new homes in the planning 
stages, and Texas has four additional homes in the planning stages and 
two additional homes in the final stages of construction. California 
has three new homes approved. Delaware and Alaska are planning their 
first State Homes, and Hawaii expects to open its first State Home next 
year.
    The State Veterans Homes construction and renovation program is 
working very well. According to priorities set by the Veterans 
Millennium Health Care and Benefits Act of 1999 (Public Law 106-117), 
up to 35 construction or renovation projects that will improve the 
State Veterans Homes system are either underway or planned in 19 
States, including Florida, New York, New Hampshire, California, Texas, 
Hawaii, Connecticut, Arkansas, Minnesota, and Ohio.
    Most importantly, the State Veterans Homes system can construct and 
operate these long-term care facilities for veterans at substantially 
less cost to taxpayers than can the Federal Government. The average 
daily cost of care for a veteran at a long-term care facility run 
directly by the VA has been calculated nationally to be $423.40 per 
day. The cost of care to the VA for the placement of a veteran at a 
contract nursing home is approximately $194.90 per day. The same daily 
cost to the VA to provide long-term care at a State Veterans Home is 
far less--only $59.36per day for nursing care and only $27.44 per day 
for domiciliary care.
    This substantially lower daily cost to the VA of the State Veterans 
Homes system compared to other available long-term care alternatives 
led the VA Office of Inspector General to conclude in a 1999 report: 
``the SVH [State Veterans Home] program provides an economical 
alternative to Contract Nursing Home (CNH) placements, and VAMC [VA 
Medical Center] Nursing Home Care Unit (NHCU) care'' (emphasis added). 
In this same report, the VA Office of Inspector General went on to say: 
A growing portion of the aging and infirm veteran population requires 
domiciliary and nursing home care. The SVH [State Veterans Home] option 
has become increasingly necessary in the era of VAMC [VA Medical 
Center] downsizing and the increasing need to discharge long term care 
patients to community based facilities. VA's contribution to SVH per 
diem rates, which does not exceed 50 percent of the cost to treat 
patients, is significantly less than the cost of care in VA and 
community facilities.
                      va budget proposal for fy06
    The President's FY06 budget would devastate the State Veterans 
Homes system and the thousands of veterans who currently use the 
system. The budget proposal would: 1) slash the per diem eligibility 
requirements for the State Veterans Homes so that the vast majority of 
veterans who currently reside in State Veterans Homes would suddenly be 
ruled ineligible for per diem benefits; and 2) impose a moratorium on 
grants to fund construction of new State Homes, stopping plans for many 
new Homes, life and safety projects, and renovations where a need has 
been justified or required by State or Federal regulatory authorities.
    The change in the per diem criteria would have the most profound 
impact on the State Homes system. Under the President's budget 
proposal, per diem payments for care at State Veterans Homes would be 
limited to veterans in priorities 1-3 and those in priority 4 who are 
catastrophically disabled.
    According to the VA's average daily census for long-term care, 
there are estimated to be more than 19,000 individuals in State 
Veterans Home nursing care this year. The President's budget documents 
claim that Veterans eligible for per diem payments in FY06 would drop 
to 7,217--a 62 percent decline in just one year, according to the VA.
    NASVH has polled its members and concluded that the President's 
proposal represents an even more devastating cut. Data from nearly all 
of the State Veterans Homes shows that the proposal would actually rule 
ineligible approximately 80 percent of the current population of the 
State Veterans Homes. More than 14,000 of the 19,000 veterans in State 
Veterans Homes would be denied the per diem benefit.
    These veterans are often frail, elderly, and afflicted with mental 
health and complex medical conditions. Some are admitted to the homes 
following chronic homelessness or from more restrictive settings such 
as mental health hospitals or rehabilitation programs. These veterans 
are able to thrive in the Veterans Home environment where they are 
among their comrades who provide support and where they are attended to 
by staff experienced in the management of their unique issues. Most 
State Home residents would not be able to afford such care without the 
support of the per diem.
    Attached is a chart that shows, on a State-by-State basis, the 
human impact of this proposal on the residents of the State Veterans 
Homes.
    The proposed budget virtually abandons the Federal Government's 
commitment to the State Veterans Homes system. It would also force 
veterans into overburdened State systems increasing exponentially the 
cost to the Medicaid and Medicare programs. NASVH members have found it 
difficult to calculate the number of residents who would qualify as 
``catastrophically disabled'' under the proposal. There have been 
inconsistencies in the definitions provided by the VA, and in some 
States, VA hospitals have refused to provide information to the State 
Homes to assist in this calculation, citing privacy concerns, falls far 
short of the commitment that we have made to our veterans and fails to 
recognize adequately the service of veterans to our Nation. This 
shortfall will eventually impact the recruitment and retention of 
military personnel. Those who aspire to serve in the military should 
rest assured that their government will care for them well after they 
retire their uniforms.
    The President's proposal would abrogate a long-term partnership 
with the States. State taxpayers have paid millions of dollars to help 
construct the State Veterans Homes system with the understanding that 
the Homes would remain a long-term Federal/State partnership. With no 
consultation with the States or with the State Veterans Homes, however, 
the President's budget abruptly and needlessly abandons this 
arrangement and places the Homes in an untenable financial position.
    The impact of the President's proposal would be felt not only by 
those veterans who no longer qualify for per diem payments. The 
President's proposal also would jeopardize the future of the State 
Veterans Homes system and could lead to the closure of many State 
Veterans Homes. By denying the per diem Federal support for the 
majority of State Home residents, the budget proposal would threaten 
the financial viability of the State Veterans Homes system, which was 
designed to share costs between the State and Federal Governments in 
the most economical manner possible. The proposals in the President's 
budget obviously frustrate the intent of Congress and the partnership 
with the States in establishing the State Veterans Homes system in the 
first place. The changes would jeopardize care for thousands of aging 
veterans and put at risk the entire State Veterans Homes system, which 
has proven its fiscal and health care value to veterans and the Federal 
Government for more than 100 years.
    We applaud both the House and Senate Veterans Affairs' Committees 
for objecting to the cuts in the per diem for the State Veterans Homes. 
Chairman Craig, in his ``views and estimates'' letter, wrote that 
``severe restrictions in per diem support for State homes is, in my 
estimation, an unsound idea.'' He concluded: ``I cannot endorse a 
cutting of per diem assistance to State homes to which needy veterans 
will increasingly turn for care.''
    Chairman Buyer's views and estimates letter described the ``long-
standing partnership between the VA and States for cost-sharing in 
caring for veterans in State nursing homes'' and noted that the ``VA's 
per diem reimbursement to the States for nursing home care compares 
favorably to the cost of VA operated and community nursing homes.'' 
With respect to the per diem proposal, Chairman Buyer concluded: 
``Therefore, the Committee does not expect to act on the legislative 
proposal.''
    The Senate Democratic views and estimates letter likewise expressed 
support for the per diem program: ``It is our view that eligibility for 
per diem payments to [State Veterans Homes] should remain intact.'' 
Democrats on the House Veterans' Affairs Committee reached the same 
conclusion in their views and estimates: ``We also are greatly dismayed 
by proposals in the President's budget that could literally bankrupt 
many of the 109 veterans' State homes throughout the Nation. For more 
than 40 years, VA and States have viewed State homes as a mutually 
beneficial means of providing veterans with a long-term care safety 
net.''
    The bipartisan support for the per diem program was demonstrated 
during Senate debate on the FY06 budget resolution. An amendment by 
Senators Craig, Ensign, Hutchison, and Vitter to increase funding for 
veterans benefits was adopted by a vote of 96 to 4. The amendment was 
described by the sponsors as intended to provide sufficient funding to, 
among other goals, ``protect those in veterans nursing homes'' by 
``rejecting the proposal to scale back State nursing home per diem 
payments made by VA.''
    NASVH is grateful for the support of the Veterans Service 
Organizations, which also oppose the proposed cuts to the per diem 
payments. The American Legion testified before Congress that ``this 
proposal would spell financial disaster for [State Veterans Homes] and 
would result in a new population of homeless elderly veterans on our 
streets.'' The Veterans of Foreign Wars recently told the Veterans 
Affairs' Committees that ``the States have been excellent partners with 
VA in caring for aging veterans and have picked up VA's slack for the 
last few years. And now, VA plans to abandon the States, which will 
result in dramatic cuts in the number of available nursing home beds at 
the State level.''
    In conclusion, we thank you for your support of the State Veterans 
Homes and urge that the Committees work toward a final budget 
resolution and with the Appropriations Committees to ensure that the VA 
has the resources to maintain the per diem program in its current form, 
without the cuts proposed by the President's budget.
    We remain concerned that the VA may seek to implement these cuts 
administratively, without legislative action by your Committees or 
specific instructions by the Appropriations Committees. We look forward 
to working with you and the VA to maintain and improve the service we 
provide to America's veterans.

           Impact of Per Diem Proposal on Veterans Receiving Nursing Home Care in State Veterans Homes
----------------------------------------------------------------------------------------------------------------
                                                               No.         No.
                                                            Eligible   Ineligible  Percent of
                                                 No. of      for per     for per    residents
                    State                       Veterans   diem Under  diem Under   who would    Estimated Cost
                                               in SVH-NHC    Proposed    Proposed   be denied
                                                            Criteria    Criteria    per diem
----------------------------------------------------------------------------------------------------------------
Alabama......................................         425         159         366          86        $ 7,929,902
Arkansas.....................................          51          13          38          75            823,323
Arizona......................................         189         111          78          41          1,689,979
California...................................         464          79         385          83          8,341,564
Colorado.....................................         246          43         203          83          4,398,279
Connecticut..................................         N/A         N/A         N/A         N/A                N/A
Florida......................................         466          85         381          82          8,254,898
Georgia......................................         495          90         405          82          8,774,892
Idaho........................................         265          46         219          83          4,744,942
Illinois.....................................         324          44         280          86          6,066,592
Indiana......................................         131          48          83          63          1,798,311
Iowa.........................................         350          92         258          74          5,589,931
Kansas.......................................         134          30         104          78          2,253,306
Kentucky.....................................         502          84         418          83          9,056,555
Louisiana....................................         335          29         306          91          6,629,918
Maine........................................         421          61         360          86          7,799,904
Maryland.....................................         193          25         168          87          3,639,955
Massachusetts................................         250          22         228          91          4,939,939
Michigan.....................................         779         158         621          80         13,454,834
Minnesota....................................         586         201         385          66          8,341,564
Mississippi..................................         559          67         492          88         10,659,869
Missouri.....................................        1139         190         949          83         20,561,414
Montana......................................         147          26         121          82          2,621,634
Nebraska.....................................         473          75         398          84          8,623,227
Nevada.......................................         149           7         142          95          3,076,629
New Hampshire................................         169          35         134          79          2,903,298
New Jersey...................................         812         104         708          87         15,339,811
New Mexico...................................         179          30         149          83          3,228,294
New York.....................................         919          86         833          91         18,048,111
North Carolina...............................         130          21         109          84          2,361,638
North Dakota.................................          34           7          27          79            584,993
Ohio.........................................         517          74         443          86          9,598,215
Oklahoma.....................................        1366         450         916          67         19,846,422
Oregon.......................................         125          22         103          82          2,231,639
Pennsylvania.................................        1226         192        1034          84         22,403,058
Puerto Rico..................................          65           3          62          95          1,343,317
Rhode Island.................................         220          36         184          84          3,986,618
South Carolina...............................         285          38         247          87          5,351,601
South Dakota.................................          38          19          19          50            411,662
Tennessee....................................         179          34         145          81          3,141,628
Texas........................................         557          80         477          86         10,334,873
Utah.........................................          52          23          29          56            628,326
Vermont......................................         N/A         N/A         N/A         N/A                N/A
Virgina......................................         124          22         102          82          2,209,973
Washington...................................         488          81         407          83          8,818,225
West Virginia................................         N/A         N/A         N/A         N/A                N/A
Wisconsin....................................         749          34         715          95         15,491,476
Wyoming......................................         N/A         N/A         N/A         N/A                N/A
----------------------------------------------------------------------------------------------------------------
Nationwide...................................      17,307       3,076      14,231          82        308,334,538
----------------------------------------------------------------------------------------------------------------

                               __________
      Prepared Statement of Thomas H. Corey, National President, 
                      Vietnam Veterans of America
    Mr. Chairman and other distinguished Members of this Committee, on 
behalf of the membership of Vietnam Veterans of America (VVA), I am 
pleased to submit our views with respect to the President's budget 
proposal for FY06 as it pertains to the funding of programs of 
relevance and concern to veterans and their families. VVA thanks you 
for the opportunity to provide this statement, and for considering our 
thoughts in this important matter.
    This Administration has trumpeted the increases in funding for the 
operations of the Department of Veterans Affairs in the past four 
years. It is true that in President Bush's first term, appropriations 
for veterans' affairs have increased by more than 40 percent. Some of 
those increases were in mandatory funding, some were in increased 
collections from veterans and third-party payments. But there have been 
substantial increases in funds for medical care. Yet these increases 
have failed to keep pace not only with medical inflation, but also with 
the increased demand for services by veterans statutorily eligible for 
care and treatment by the VA. The per capita funding for a veteran at 
VA has lagged far behind even the increases provided to Medicare 
recipients, which is so inadequate that providers continue to drop out 
of that system.
    In fairness to the President, he inherited an inadequate budget 
base, due to the flatline funding of veterans' health care during his 
predecessor's second term. It appears that another few years of 
flatline medical budget proposals are in our future yet again.
    Certainly Undersecretary of Defense David Chu's public statement 
portends this attitude, especially in light of the fact that neither 
the President nor anyone else in the Administration moved to neither 
rebuke Mr. Chu for his remarks nor to distance themselves from his 
remarks demeaning and slandering those who have served our Nation 
honorably and well in military service. It appears that this 
unfortunate and disgraceful pattern of second-term neglect and 
irresponsibility is about to repeat itself.
    We see the writing on the wall in the President's budget proposal 
for FY 2006.
    The ``enhanced restraint'' touted by the Office of Management and 
Budget (OMB) bodes ill for veterans. This restraint eliminates, on 
paper, more than one million veterans from the VA health care system. 
Men and women who are
    categorized as Priority 7 and 8 veterans, who have no service-
connected disabilities, but whose, economic fortunes are tottering or 
who do have service-connected disabilities, but are rated as 0 percent 
compensable at the present time.
    It is an affront to term these men and women ``higher income'' 
veterans. Most make less than $40,000 per year; most have no health 
insurance. Otherwise they would likely not seek help from the VA health 
care system. VVA points out that these are also the men and women who 
account for some 40 percent of the third-party reimbursement to VA 
coffers. The marginal cost of including these veterans in the system 
actually may produce more income than they cost the system, as they 
tend to be less sick when they seek help from VA. Most importantly, 
they are men and women who have served our country honorably and are 
statutorily eligible for care and treatment. Yet they are being denied 
that earned entitlement by the conscious starving of the system for 
resources.
    This ``enhanced restraint'' also will make it difficult if not 
impossible to well serve all disabled veterans who depend on the VA 
system as their primary health care provider.
    Let it be clearly said: ``enhanced restraint'' means budget cuts.
    We have seen this coming for a while, in VA's long-term strategic 
planning documents and, most recently in, a February 7th press release 
from the Department of Veterans Affairs that attempted to put a rosy 
spin on the $70.8 billion budget request for that agency's operations. 
No fewer than five times is it noted that the department ``will be able 
to care for those veterans who count on VA the most.'' This makes a 
presumption that the veterans who will be pushed out of the system have 
other options for health care.
    Many do not. Therefore, they will do without medical care until 
they get so sick that they lose their jobs, and become destitute and 
therefore eligible for care. For those who are service-connected 
disabled, but excluded for the moment, they will be denied medical care 
until such time as their service-connected condition worsens to the 
point that they become service-disabled compensable. This does a 
distinct disservice to veterans. It also means that when, after much 
delay and worsening of their medical condition, these veterans are 
granted medical care from VA to which they were statutorily eligible, 
their need for clinical resources will likely be greater and therefore' 
more expensive than it would have been if they had been granted access 
to VA health care at an earlier point.
    This is not only wrong, but it is fiscally foolish in the medium 
and long run. It is also a blatant attempt to circumvent the law and 
the will of the American people to care for veterans.
    We challenge the new Secretary of Veterans Affairs, the bureaucrats 
at the Office of Management and Budget (OMB) who are in large measure 
responsible for this document, and all concerned to cite anywhere in 
statute where it says that the VA will only serve a ``core 
constituency'' of ``veterans who count on VA the most.'' Indeed, if it 
is the will of the people to narrow the parameters of eligibility for 
VA services, then one would hope you will be open, honest, and 
forthright in this matter and move to amend the law. But do not 
penalize veterans in a backdoor machination.
    VVA has said this before and we'll say it again: The cost of caring 
for those who have borne the battle, and their widow and their 
orphans--this quote adorns the side of the VA headquarters on Vermont 
Avenue--is part of the cost of the national defense. It is up to you, 
the members of Congress who must agree on what programs and services 
are to take precedence in funding, to consider this--and honor this--as 
you deliberate the Administration's budget proposal. Caring for 
veterans is not a Democratic cause. It is not a Republican effort. It 
is an American issue, one that cuts across all party affiliations.
    VVA has in the past, and does today, Mr. Chairman, call for action 
for much greater accountability from all elements of the VA. From 
Veterans Health Administration (VHA) there must be much greater 
accountability for clinical outcomes, overall management of resources, 
and securing the best possible use of the taxpayer dollars to secure 
the best possible health care for our Nation's veterans. That means 
greater scrutiny of all contracts, of part time physicians, of so-
called ``enhanced use'' lease deals that may be, in fact, be 
``sweetheart'' deals, a hard look at bonuses at every level, and 
comprehensive and close scrutiny of high ranking doctors, nurses, and 
other clinicians who see few or no patients at the same time that it is 
difficult to secure enough coverage for inpatient wards.
    We hope that you will work with us on this vital issue of 
accountability, as well as the effort to ensure that VHA moves more 
quickly toward truly becoming a ``veterans health care system'' and not 
one that is all too often general health care that happens to be for 
veterans. To VVA, that means that a complete military history must be 
taken and used for each veteran in the VHA system, to get the most 
complete diagnosis and medical treatment plan possible.
    VVA also hope to work closely with you to achieve more proper 
observance of veterans preference in hiring by all parts of VA, and 
ensuring that VA exceeds the goal set in law, and re-emphasized by 
President Bush in Executive Order 13-360 to exceed securing at least 3 
percent of all goods and services from service-disabled veteran-owned 
businesses. Part of real accountability is holding VA managers strictly 
accountable in regard to these two Federal laws, which affect the 
economic well being of veterans.
    VVA has certain very specific concerns about the budget request for 
FY06. We outline them for you now.
     Our main concern revolves around the effects of this flat-
line budget. The effect on a system already operating on the margin of 
safety in medical and acute care units will now be strained all the 
more by the ``hard freeze'' on hiring already implemented at most VA 
medical centers. Specialized services, such as prosthetics, spinal cord 
injury, and mental health will be strained to the point of delays or 
denials of service.
     If passed, this budget will eventuate in a decrease of 
1,110,416 veterans from the VA health care system. It says so on page 
2-16 of the medical programs budget submission. This is not right. This 
usurps the covenant between the American people and those who in 
uniform defended the Constitution.
     The $250 ``user fee,'' if passed, will force the exodus of 
veterans who cannot afford this fee. The VA estimates that some 213,000 
currently enrolled veterans will opt not to pay this fee to the 
detriment of their health nor will they opt not to pay the increased 
drug co-payment of $15 as proposed by the Administration. Congress 
rejected these misguided proposals last year. We hope you will do the 
same this time around.
     The budget cites an anticipated savings of some $590 
million in unnamed ``management efficiencies.'' Does this mean laying 
off half of the staff at VA's headquarters? Deferring yet more needed 
preventive maintenance and capital improvements? More important, what 
exactly will this mean as it trickles down to individual VA medical 
centers? We fear that this will lead to longer waits to be seen by 
primary care physicians and by specialists, and a general degradation 
of the system.
     At the same time, the proposed budget does not take into 
account long-term care. Nor does it consider the shortterm or long-term 
needs of a new generation fighting today in hotspots around the globe. 
Many of these men and women are returning to our shores with grievous, 
maiming injuries that will take years of treatment and rehabilitation.
     With regard to long-term care facilities, an increasing 
need will be met by decreasing resources. The $312 million slash in 
funding for nursing homes (including care for veterans in State 
extended care facilities) will result, according to top VA officials, 
in some 5,000 fewer beds in the VA system. This will impact the States, 
and on the families of veterans who urgently need this care. What will 
they do?
     There are no additional resources provided for the VA 
Readjustment Counseling Service, or vet center program. This is the 
most studied program of the VA, and every study, by GAO and others, 
have found that this is the most cost-effective, cost-efficient program 
operated by the VA. An investment of $17 million in the vet centers 
would by one full-time family counselor skilled in grief counseling and 
PTSD counseling in each of the 206 centers, as well as an additional 40 
staff to augment the staff at centers near clusters of the returning 
veteran population to be able to meet their needs. Vet Centers help 
keep veterans employed, and help keep their families together. This $17 
million would disappear into the rest of VHA without a trace, whereas 
by setting aside this amount for an increase in the vet centers budget 
will have an immediate, measurable, and very visible impact.
     The budget proposal flat-lines funding for medical 
research, which we believe is a mistake. The National Institutes for 
Health received a significant increase yet once again, despite the fact 
that it does not fund even one veteran-specific grant. Are veterans 
less worthy, or their health care needs not worth studying? It is only 
through research that we gain knowledge that we then turn into 
practical applications of immediate benefit to improve care for 
veterans, especially as to conditions that may have originated in 
military service. Of course, these discoveries not only accrue to 
veterans, but to all of us. The VA can be justifiably proud of the 
fruits of its research over the past half-century; one researcher was 
awarded a Nobel Prize for her research. This cannot continue without 
proper funding.
     When the endorsement of the CARES program by former 
Secretary Principi was announced, we were assured, in a presentation at 
the Longworth House Office Building, that this initiative would be 
funded to the tune of $1 billion a year over the next five years. This 
was guaranteed. Now we see funding of $750 million. This might be the 
silver lining in an otherwise grim budget: The VA is forced to rework 
what we see as a flawed formula on which the CARES model is based. Most 
veterans are not middle class. They present at VAMCs with far greater 
frequency than do most middle-class health consumers, a salient fact 
not taken into account by CARES. Currently CARES still does not take 
into account long term care, nor does it take into account returning 
veterans who are disabled, wounded, and ill from the war raging in 
Iraq, Afghanistan, and elsewhere in the world.
    Mr. Chairman, as you are aware there are more than 250,000 homeless 
veterans sleeping on the streets or in shelters every night. While we 
appreciate the slight increase in the VA FY06 budget for homeless 
programs, VVA believes that the VA Health Care for Homeless Veterans 
funds, which includes the Homeless Grant and Per Diem Program, needs to 
be a separate line item in the budget. For these veterans, who once 
served our Nation with pride, we simply must do more and we must do 
better.
    In regard to the Veterans Benefits Administration, (VBA), VVA is 
concerned that the structural shortfall of resources in funding is not 
addressed in this budget. As you are aware, $125 million had to 
transferred from medical care services this year just to keep a minimum 
number of staff, particularly compensation and pension adjudicators, on 
the job and working in order not to fall even further behind in the 
time it takes to get a fair and accurate decision on a veteran's claim. 
We are also concerned that there does not appear to be any significant 
enhancement in the number of veteran benefits counselors to assist 
returning OIF/OEF veterans who may need their assistance, nor does 
there appear to be any major outreach campaign to reach returning 
veterans, as well as returning members of the National Guard and 
Reserves.
    Many Members of this committee are familiar with a quote from the 
Father of Our Country, George Washington: ``The willingness with which 
our young people are likely to serve in any war, no matter how 
justified, shall be directly proportional as to how they perceive the 
veterans of earlier wars were treated and appreciated by their 
Nation.'' As you discuss and debate this budget, think about this, and 
those in uniform in Iraq and Afghanistan.
    Mr. Chairman, Vietnam Veterans of America thanks you and your 
distinguished colleagues for considering our views on this issue of 
vital importance to veterans of every generation.
  

                                  
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