[Senate Hearing 109-240]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-240
 
AN OPEN DISCUSSION: PLANNING, PROVIDING, AND PAYING FOR VETERANS' LONG-
                               TERM CARE

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 12, 2005

                               __________

       Printed for the use of the Committee on Veterans' Affairs


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate




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


                            C O N T E N T S

                              ----------                              

                              May 12, 2005
                                SENATORS

                                                                   Page
Craig, Hon. Larry E., U.S. Senator from Idaho....................     1
Akaka, Hon. Daniel K., Ranking Member, U.S. Senator from Hawaii..     3
Burr, Hon. Richard, U.S. Senator from North Carolina.............     4
Salazar, Hon. Ken, U.S. Senator from Colorado....................    22
    Prepared statement...........................................    23
Obama, Hon. Barack, U.S. Senator from Illinois...................    48

                               WITNESSES

Perlin, Hon. Jonathan B., M.D., Under Secretary for Health, U.S. 
  Department of Veterans' Affairs................................     4
    Prepared statement...........................................     5
Alvarado-Ramos, Lourdes E., President, National Association of 
  State Veterans' Homes..........................................     9
    Letter for the record to Secretary Nicholson.................    10
    Prepared statement...........................................    13
Wiener, Josh, Senior Fellow, Program Director for Aging, 
  Disability, and Long-Term Care, RTI International..............    17
    Prepared statement...........................................    19
Cowell, Fred, Associate Director, Health Analysis, Paralyzed 
  Veterans of America............................................    37
    Prepared statement...........................................    38
Mooney, Donald L., Assistant Director, Veterans' Affairs and 
  Rehabilitation Division, The American Legion...................    41
    Prepared statement...........................................    42


                     AN OPEN DISCUSSION: PLANNING,
           PROVIDING, AND PAYING FOR VETERANS' LONG-TERM CARE

                              ----------                              


                         THURSDAY, MAY 12, 2005

                               U.S. Senate,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m., in 
room SR-418, Russell Senate Office Building, Hon. Larry E. 
Craig (Chairman of the Committee) presiding.
    Present: Senators Craig, Burr, Thune, Akaka, Rockefeller, 
Obama, and Salazar.

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

    Chairman Craig. Well, good morning, ladies and gentlemen, 
and welcome to this hearing of the Committee on Veterans' 
Affairs. Today the Committee meets to explore and discuss the 
very important issue of long-term care for our Nation's 
veterans. It is no secret that for too many Americans, long-
term care for elderly and disabled friends and relatives can 
quickly become the most expensive and emotionally difficult 
issue they will ever face.
    Confronting those realities is no different for those who 
once wore the uniform of the United States Armed Forces and 
their families. Thirty-eight percent of veterans are over age 
65, as compared to 12 percent in the general population, and 
the number of veterans over age 85 is expected to nearly double 
by 2012 to 1.3 million people. Given these basic statistics, it 
is not a stretch to say that dealing with long-term care is a 
bigger issue today among veterans and their families than any 
other group of Americans.
    The Department of Veterans' Affairs is doing its part to 
provide some long-term care services to veterans enrolled for 
care. VA will spend nearly $2.4 billion this year providing 
institutional long-term care to 34,000 veterans each day. This 
care is provided not only in VA's 130 nursing home facilities, 
but also the 120 State veterans homes, as well as dozens of 
privately-owned facilities around the country. In addition, VA 
will spend nearly $300 million providing non-institutional 
long-term care to 26,000 veterans each day. These services 
range from adult day care to home-based primary care and basic 
care coordination.
    Even with that extraordinary sum of money going to care for 
tens of thousands of veterans, VA is still merely scratching 
the surface of long-term care provided to our Nation's 
veterans. The Medicaid system, which is the shared Federal-
State responsibility, captures the largest portion of long-term 
care services for this population. In fact, because many of the 
veterans never come to VA for care at all, we are unsure of 
just how many veterans Medicaid cares for.
    Still, it is important to ask whether VA is providing the 
right services to the right people in the right setting. I 
think it is fair to say that VA believes it is not 
accomplishing that goal. They have proposed a series of changes 
in their long-term care program as part of the fiscal year 2006 
budget. Two of those proposals--limiting per diem payments to 
certain patients in State veterans' homes, and establishing a 
moratorium on new home grants--would greatly impact the State 
veterans' home system. A third proposal to limit the population 
VA will serve will have significant implications on the 
Medicaid system and State budget coffers. Finally, a fourth 
proposal to greatly expand the non-institutional care program 
would ease financial and family burdens in a multiple of ways. 
Of course, all four of these proposals would impact the 
veterans who rely on VA for their health care services.
    To begin the discussion over VA's long-term care proposal 
and the future needs of our veterans, I've assembled a group of 
witnesses who can speak on each or all of these issues. Joining 
us today to discuss VA's proposal is VA Under Secretary for 
Health, Dr. Jonathan Perlin. Also on Panel 1 to discuss State 
home programs is the president of the National Association of 
State Veterans Homes, Ms. Alfie Alvarado-Ramos. And finally, on 
Panel 1 to discuss long-term care more broadly, as well as 
Medicaid policy, is a well-respected expert in the field, Josh 
Wiener of RTI International. Welcome to all of you.
    After the first panel, we will hear from two of the 
veterans' service organizations whose members have a great 
interest in long-term care services. Fred Cowell, who joins us 
from the Paralyzed Veterans of America, and Mr. Donald Mooney, 
will speak on behalf of the American Legion. And gentlemen, I 
trust that each of your comments will represent a broader 
population of veterans than just your two organizations. We 
welcome you as well.
    I can't emphasize enough to my colleagues and those here 
today that long-term care is a very complicated problem facing 
American health care. Few of our citizens even consider 
planning for their own long-term care needs, and those who do 
are limited to a few insurance programs or just general 
savings. Many changes in these programs will, of course, 
greatly affect Federal and State budgets at a macro level. But 
more importantly, changes will likely affect individual 
veterans and their families on a very personal level. I hope 
our discussions today and in the future bear those realities in 
mind.
    I've been joined, of course, by my colleague and the 
Ranking Member on the Democrat side, Senator Danny Akaka of 
Hawaii, and I'll turn to him for any opening comments he would 
like to make.
    Good morning, Danny.

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

    Senator Akaka. Thank you. Mr. Chairman, it is wonderful 
working with you. And it is wonderful that the Committee--and I 
have to give you credit for your leadership--working on 
critical issues such as this one on veterans' long-term care.
    We truly must have an open discussion on who VA will care 
for and how VA will afford that care. It is a conversation 
which must occur throughout the Hill. After all, conversations 
about how to care for elderly family members occur every day in 
American homes.
    But today, we are talking about veterans. We know that the 
need exists for veterans, yet the President's budget includes 
significant cuts to long-term care programs. The goal seems to 
be: reduce VA's workload and shift the burden elsewhere. Should 
VA be cutting back at a time when a demand is growing? Should 
these cuts target needed nursing home and State home beds? 
According to the President's budget proposal, the answer is 
yes.
    VA nursing home care offers a level of service unparalleled 
in the community. VA sees patients who are increasingly 
difficult to place in the community--veterans with complex 
medical and mental health disorders. The State program is under 
attack as well. The Administration proposes to freeze grants 
for the construction of State veterans' homes and decreases the 
daily funding for these homes. The State home program has been 
described by members of both parties as incredibly cost 
effective. Still, these proposals imperil the very existence of 
these homes. While I am hopeful that these proposals will not 
become law, it signals a very disturbing trend.
    There is another side to this story. There are places on 
the VA landscape where some truly wonderful things are 
happening to keep veterans well cared for and in the setting of 
their choice. Good programs must be fostered, but in the VA 
environment, long-term care services are frequently starved. 
Today, more and more veterans are seeking alternatives to 
nursing homes. They want to remain in the community. With the 
right kind of support and care from VA, they are able to do so, 
even with chronic and debilitating conditions.
    For many veterans, however, non-institutional options will 
not work. And because this Congress is on record stating that 
VA must have sufficient nursing home capacity, it is vital that 
VA's role as a model for long-term care be recognized and 
rewarded, because we will have enormous problems with demand 
for this care in the years ahead.
    The only entity with any scope, size, and capacity that is 
dealing with how to meet the needs of an older population is 
VA. This role of VA must be highlighted and supported. We look 
forward, of course, to working together to meet these 
challenges.
    Thank you very much, Mr. Chairman.
    Chairman Craig. Danny, thank you very much.
    We have been joined by our colleague, Richard Burr. 
Richard, do you have any opening comments you would like to 
make?

OPENING STATEMENT OF HON. RICHARD BURR, U.S. SENATOR FROM NORTH 
                            CAROLINA

    Senator Burr. Mr. Chairman, I would just like to thank you 
and the Ranking Member for taking on a discussion on long-term 
care. We will discuss long-term care as it relates to all of 
America. It will not be limited to veterans. But I can't think 
of a more important area for us to start this discussion to 
identify the challenges and, hopefully, find solutions to it.
    And I would be remiss if I didn't welcome Dr. Perlin and 
congratulate him on his confirmation process. We are glad to 
have him on board.
    Thank you, Mr. Chairman.
    Chairman Craig. Richard, thank you. Well, you have said the 
right words. We have entitled this hearing ``An Open 
Discussion: Planning, Providing, and Paying for Veterans' Long-
Term Care.'' So, I think that is well-said and well-placed, 
Richard.
    Let us turn to our first panel. Let me recognize once again 
Jonathan Perlin, Under Secretary for Health, U.S. Department of 
Veterans' Affairs. He is accompanied by James F. Burris--Dr. 
Burris, chief of geriatrics for the Veterans' Administration. 
Gentlemen, please proceed.

STATEMENT OF HON. JONATHAN B. PERLIN, M.D., UNDER SECRETARY FOR 
             HEALTH, U.S. DEPARTMENT OF VETERANS' 
                            AFFAIRS

    Dr. Perlin. Good morning, Mr. Chairman, Ranking Member 
Akaka, Members of the Committee, Senator Burr. Thank you very 
much for the opportunity to initiate this discussion. I want to 
thank you, Mr. Chairman, Ranking Member Akaka, in particular, 
for your advocacy, not only of veterans, but for all older 
Americans in having this hearing.
    I also want to express my sincere appreciation for the 
support that you have all shown, voting to confirm me as Under 
Secretary for Health. I am truly honored to work with you to 
meet the health needs of the men and women for whom it is VA's 
great privilege to serve.
    In addition to Dr. Burris, I am joined this morning, as 
well, by Mr. Art Klein who is our Director of Policy and 
Planning, and Dr. Adam Darkins who directs our Office of Care 
Coordination.
    I appreciate the opportunity to continue our discussions 
about the broad policy issues related to long-term care. These 
important issues received added emphasis from the recent 
testimony of the Congressional Budget Office which concluded 
that the aging of the American population in the coming decades 
will bring increased demand for the long-term care and 
heightened Federal and State budgetary challenges. We in VA 
believe that long-term care should be provided in the least 
restrictive setting compatible with the veteran's medical 
condition and personal circumstances. Whenever possible, 
veterans should be cared for at home or in community-based non-
institutional settings that help maintain ties with the 
veteran's family, friends, spiritual community as well.
    Nursing home care should be reserved for those situations 
in which the veteran can no longer be maintained safely at 
home. Inevitably, many veterans will require nursing home care; 
however, it is clear that VA alone cannot possibly provide 
nursing home care for all the veterans projected to need such 
care over the next decade. Although we are meeting all of the 
current demand and we will meet all of the projected demand for 
nursing home care for veterans mandated by statute, we must 
nevertheless prioritize care for those veterans most in need, 
along the lines of those proposed in the President's fiscal 
year 2006 budget submission.
    Under this proposed policy, which still provides care to 
veterans well beyond the requirements of the law, VA will reach 
out to the broader veteran population as resources permit. We 
will provide medically necessary long-term care for veterans 
with compensable service-connected disabilities, for veterans 
with special needs, like spinal cord injury, serious mental 
illness, or ventilator dependence, and for veterans who require 
short-term restorative care, respite and hospice care has the 
first priority. VA expects to meet much of the growing need for 
long-term care through non-institutional services such as care 
coordination, home health care, adult day health care, respite, 
home hospice and palliative care, and homemaker/home health-
aide services.
    In keeping with its patient-centered approach, VA has 
rapidly expanded its combined census in these programs, which 
grew by more than 20 percent in fiscal year 2004. These 
programs are on target for at least an 18 percent increase in 
fiscal year 2005 and are budgeted for an additional 18 percent 
increase in fiscal year 2006. A substantial component of the 
increase is attributable to the rapid expansion of care 
coordination. Care coordination involves the use of health 
informatics, tele-health, and disease-management technologies 
and case-management activities to enhance and extend existing 
care. We now have care coordination programs in all 21 VA 
health care networks.
    Mr. Chairman, VA and Congress have developed a rational, 
effective, and flexible system for meeting the long-term care 
needs of veterans. It is this very flexibility that has allowed 
us to reach out to a greater number of veterans requiring long-
term care. Given the challenges ahead, support for the 
flexibility is essential to ensuring that we can continue to 
maximize long-term care benefits for the enrolled population. 
VA's approach to non-institutional care can provide and serve 
as a national model useful in meeting the needs of an aging 
population.
    Mr. Chairman, if you would allow me to submit my full 
statement on this issue for the record, we would now be happy 
to address any questions that you or other Members of the 
Committee may have. Thank you.
    [The prepared statement of Dr. Perlin follows:]

      Prepared Statement of Hon. Jonathan B. Perlin, M.D., Ph.D., 
       Under Secretary of Health, Department of Veterans' Affairs

    Mr. Chairman and Members of the Committee:
    Last month, I had the honor of appearing before you to discuss my 
nomination to become Under Secretary of Health for the Department of 
Veterans' Affairs. Today, I am confirmed in that position--thanks to 
your support. I am grateful to every Member of this Committee, both for 
your support and for your faith in me, and I am honored to work with 
you as we build a safe, effective, efficient, and compassionate health 
care system that will fully meet the needs of the men and women it is 
VA's privilege to serve.
    Mr. Chairman, as you know, the Congressional Budget Office (CBO) 
recently testified before the Subcommittee on Health of the House 
Committee on Energy and Commerce about the cost and financing of long-
term care (LTC) services. The CBO concluded that the demographic 
changes projected for the coming decades (i.e., the aging of the 
American population) will bring increased demand for long-term care and 
heightened Federal and State budgetary strains. CBO noted that the 
United States' elderly population will grow rapidly in coming decades, 
creating a surge in demand for LTC services, which already cost over 
$200 billion annually, including the value of donated care. CBO 
reported that financing patterns for LTC are heavily influenced by the 
rules governing public programs such as Medicare and Medicaid, which 
currently create disincentives to self-financing of LTC services. CBO 
also reported that since 1992, Medicaid spending for home-based care 
for seniors has grown faster than spending for institutional care, 
rising by about 11 percent annually, on average, compared with about 3 
percent for care in nursing facilities.
    Therefore, it is in this context, Mr. Chairman, that I express my 
appreciation to the Committee for this opportunity to continue its 
discussion with VA about the broad policy issues related to long-term 
care. In my statement today, I will talk first about the population 
that we serve in long-term care and how we prioritize that care. Then, 
I will discuss the newer models of non-institutional care and how we 
have progressed in our strategies to increase their use. Finally, I 
will address the broader dilemma of coordinating Federal and State 
long-term health care policy and what role VA should play in that 
effort.
    First, let me discuss the population that we serve in VA's long-
term care programs. As you know, the population of veterans who are 
enrolled for VA health care is, on average, older, poorer, and sicker 
than the general population. Thus, VA is already seeing the kinds of 
demographic changes that the CBO projects for the country as a whole.
    VA has testified previously that there is a great and growing need 
for long-term care services for elderly and disabled veterans. Between 
2004 and 2012, the total number of enrolled veterans is projected to 
increase only 0.5 percent, from 7.37 million to 7.4 million. However, 
during this same time period, the number of enrolled veterans aged 65 
and older is projected to increase 8.6 percent (from 3.44 million to 
3.73 million). At the same time period, the number of enrolled veterans 
aged 85 and over will increase from 278,400 to 681,400, an increase of 
145 percent. Looked at in another way, in fiscal year 2004, 3.8 percent 
of all enrollees were ages 85 and over. In fiscal year 2012, it is 
estimated that 9.2 percent of our total enrollment will be ages 85 and 
over. These veterans, particularly those over 85, are the most 
vulnerable of the older veteran population and are especially likely to 
require not only long-term care, but also health care services of all 
types.
    VA recognizes that we cannot, alone, definitively respond to the 
Nation's long-term care challenges. Nor can we meet the long-term care 
needs of every American veteran. What we can do is address the mandates 
set by Congress in Public Law 106-117 and prioritize care for those 
veterans most in need along the lines proposed in the President's 
fiscal year 2006 budget submission.
    In Public Law 106-117, the ``Veterans' Millennium Health Care and 
Benefits Act,'' Congress mandated that VA provide medically necessary 
nursing home care to 
(1) those veterans who have a service-connected disability rated at 70 
percent or more, and (2) any veteran in need of such care for a 
service-connected disability. I am proud to report VA is meeting this 
mandate. In fiscal year 2004, VA provided over 2.7 million days of 
long-term care to 16,485 of these veterans in VA and community nursing 
homes. During this same period, an additional 208,474 days of long-term 
care were provided to 922 of these veterans in State Nursing Homes. 
These data demonstrate that we are meeting all of the current demand 
and will meet all of the projected demand for nursing home care for 
these veterans whose care is authorized by statute and provided within 
the existing capacity of the three nursing home programs supported by 
VA.
    The policy proposed in the President's FY 2006 budget submission 
goes beyond the requirements of Public Law 106-117. Under this proposed 
policy, VA will reach out to the broader veteran population, as 
resources permit, with the objective of providing medically necessary 
long-term care for veterans with compensable service-connected 
disabilities and for all other veterans with special needs. The special 
needs population includes veterans who have been traditionally 
challenged in finding optimal placement in the community due to the 
severity of their disabilities and the accompanying challenges that 
their care presents. Examples of these special needs patients include 
spinal cord injury patients, ventilator dependent patients, and 
chronically mentally ill patients. In addition, we believe it is 
appropriate and necessary for VA to provide short-term restorative 
care, respite, and hospice care for veterans in need of these services. 
In the interest of equity of access for all veterans, we would apply 
this policy equally to all venues of care supported by VA, its own 
Nursing Home Care Units, contract community nursing homes, and State 
Veterans Homes. We believe that the budget will support care for these 
additional, discretionary patients. This policy and the related costs 
have been thoroughly coordinated within the Administration.
    Since many enrolled veterans are also eligible for LTC through 
other public and private programs, including Medicare, Medicaid, State 
Veterans Homes, and private insurance, it is in the interest of both 
the Government and veterans to coordinate the benefits of their various 
programs and work together toward a common goal, that of providing 
compassionate, high-quality care for the Nation's older and more frail 
veterans. I want to emphasize that our efforts in long-term care case 
management are driven by the clinical needs of each patient, the 
patient's preferences, and the benefit options available to that 
patient. VA health care providers work closely with patients and 
family, on a case-by-case basis, to coordinate the veteran's various 
Federal and State benefits, to maximize options for that veteran.
    Next, I would like to discuss the newer models of non-institutional 
care that VA has embraced and how we have progressed in that regard. We 
in VA believe that long-term care services should be provided in the 
least restrictive setting compatible with a veteran's medical condition 
and personal circumstances. Whenever possible, veterans should be cared 
for in home and community-based non-institutional settings that help to 
maintain ties with the veteran's family, friends, and spiritual 
community. Nursing home care should be reserved for situations in which 
the veteran can no longer be maintained safely at home. Inevitably, 
many veterans will continue to require nursing home care. However, it 
is clear that VA alone cannot possibly provide nursing home care for 
all of the veterans projected to need such care over the next decade.
    VA expects to meet much of the growing need for long-term care 
through care coordination, home health care, adult day health care, 
respite, home hospice and palliative care, and homemaker/home health 
aide services. In keeping with this patient-centered approach, VA has 
rapidly expanded its non-institutional services. The combined census in 
these programs, which grew by more than 20 percent in FY 2004, is on 
target for at least an 18 percent increase in FY 2005 and is budgeted 
for an additional 18 percent increase in the FY 2006 VA budget 
proposal.
    A substantial component of this increase in VA's non-institutional 
care services is attributable to the rapid expansion of Care 
Coordination. Care Coordination in VA involves the use of health 
informatics; tele-health and disease management technologies to enhance 
and extend existing care; and case management activities. VA's national 
Care Coordination initiative commenced in July 2003 and is supported by 
a national program office. Care Coordination enables appropriately 
selected veteran patients with chronic conditions (e.g. diabetes, heart 
failure, spinal cord injury, PTSD, and depression) to remain in their 
own homes, and it defers or obviates the need for long-term 
institutional care admission.
    Veteran patients receiving Care Coordination are assessed on 
admission to a program and will be reassessed every 3 months thereafter 
to ensure institutional placement is made whenever it is indicated by a 
patient's functional status. The technology VA has selected for Care 
Coordination links care coordinators directly to patients in their 
place of residence. This continuous connection allows care coordinators 
to proactively institute clinical support from across the continuum of 
care and prevent avoidable deterioration in a patient's condition.
    Local collaborations between Care Coordination and Advanced Clinic 
Access Programs help further expedite access to specialty care for 
these patients. A vital part of Care Coordination is ensuring that 
family members and other caregivers receive information and education 
to support their critical role in helping patients receive the right 
care in the right place at the right time. Care Coordination Programs 
have now been established in all 21 Veterans Integrated Service 
Networks (VISNs), and VA expects each Network's Care Coordination 
Program to reach a census of between 500 and 2,500 patients by the end 
of FY 2005, depending on the demographics, location, and density of the 
veteran population.
    Care Coordination services have been created to link with existing 
home and community-based programs, including Home-based Primary Care 
(HBPC), Mental Health Intensive Case Management (MHICM), and General 
Primary and Ambulatory Care Services. The average daily census (ADC) in 
Care Coordination was 2,000 patients in fiscal year 2002, is currently 
5,800, and is projected to be 9,000 by the end of fiscal year 2005.
    VA is committed to measuring the effectiveness of its care-
coordination program. Accordingly, the VA Office of Research and 
Development, Health Services Program, includes a focus in its FY 2006 
solicitation for projects that will:
     Evaluate models for care coordination, making patients the 
focus of care, including transitions across outpatient, acute, 
residential, and home-based care;
     Examine methods to facilitate family and friends' 
involvement in the patient's LTC experiences;
     Evaluate approaches to financial, transportation, 
administrative, and other barriers to LTC coordination; and
     Explore how to maximize LTC facilities' use of findings or 
expertise from existing research centers in VA, academic, and clinical 
settings to enhance patient and caregiver quality of life.
    In addition to advances through the Care-Coordination program, VA 
also continues to make progress in expanding its more traditional home 
and community-based non-institutional care programs. From 1998 through 
the end of fiscal year 2004, the ADC in these programs increased from 
11,706 to 19,752. VA continues to have a VISN performance measure that 
calls for an additional 18 percent increase in the number of veterans 
receiving home and community-based care by the end of this fiscal year. 
This census is monitored in the Monthly Performance Report to the 
Secretary. Each VISN has been assigned targets for increases in their 
non-institutional LTC workload. VA is expanding both the services it 
provides directly and those it purchases from providers in the 
community.
    Finally, Mr. Chairman, I would like to speak to the national 
discussion on long-term care and VA's role in that dialogue. Many of us 
in this room have possibly had to deal with trying to coordinate an 
approach to the long-term care needs of a loved one. I don't know 
anyone involved in such a situation who hasn't been frustrated by the 
complexities of the current multi-payer system--however well intended 
the design might have been. The unfortunate reality is that the 
patchwork of benefits and payers was constructed around what was 
affordable and available--as opposed to what was needed.
    For its part, VA will continue to see large demographic shifts in 
population as the aging World War II population gives way to an aging 
Korean Era veteran population. Nationwide geographic shifts in 
population, from the north to the south, will continue to impact long-
term care demand and the placement of services. Changing attitudes and 
preferences in the elderly population, such as elders' insistence on 
personal independence and self reliance, will affect the models of care 
offered. The economy plays an ever increasing role in life choices of 
the aging population. Changes in an individual's personal financial 
situation or changes in State economies may drive greater demand for 
Federal support in meeting the long-term care needs of the elderly.
    Fortunately, I think that VA and Congress have developed a rational 
and effective system for meeting the long-term care needs of the 
highest priority veterans. I am thankful for your support in allowing 
us to explore new relationships, mechanisms, and technologies. It is 
this flexibility that has allowed us to reach out to greater numbers of 
veterans requiring long-term care. Given the challenges ahead, support 
for this flexibility is essential to ensuring that we can continue to 
maximize long-term care benefits for the enrolled population. While VA 
is ``ahead of the curve,'' VA's approach to non-institutional care can 
serve as a national model useful in meeting societal needs of an aging 
population.
    I think it is worth noting that the CBO report cited earlier in my 
testimony made no mention of VA long-term care benefits. Certainly, I 
would hope that any national dialogue would include discussion of the 
needs of veterans, including those enrolled for VA health care. It is 
important that veterans' needs are considered in this great national 
debate.
    In conclusion, Mr. Chairman, let me leave you with the following 
summary of the basic elements in VA's plans for long-term care:
     an integrated care coordination system that incorporates 
all of the patient's clinical care needs;
     programs to support the provision of care in home and 
community-based settings whenever possible;
     a continued commitment to institutional care when this 
best serves the needs of the veteran;
     an emphasis on research and educational initiatives to 
improve delivery of services and outcomes for VA's elderly veteran 
patients; and
     computerization and advanced technologies to better 
provide patient-centered care, not only in the hospital, clinic, or 
long-term care facility, but also to support patients' successful aging 
and management of illness and facilities in their communities, in the 
context of their social and spousal relationships, and in their homes.
    Mr. Chairman, this completes my statement. I will be happy to 
address any questions that you and other Members of the Committee might 
have.

    Chairman Craig. Doctor, thank you very much.
    We will now turn to Alfie Alvarado-Ramos, national 
president, the National Association of State Veterans Homes. 
Welcome to the committee. Please proceed.

  STATEMENT OF LOURDES E. ALVARADO-RAMOS, PRESIDENT, NATIONAL 
              ASSOCIATION OF STATE VETERANS' HOMES

    Ms. Alvarado-Ramos. Thank you, Mr. Chairman.
    Mr. Chairman, Senator Akaka, Members of the Committee, I 
appreciate the opportunity to testify today. My name is Alfie 
Alvarado-Ramos. I am the current president of the National 
Association of State Veterans' Homes, but my real job is as the 
assistant director of the Washington State Department of 
Veterans' Affairs. I am joined today by Gary Bermesolo, the 
administrator of the Nevada State Veterans Home and former 
director of State Veterans' Affairs for the State of Idaho; 
Phil Jean of the State of Maine, who is the immediate past 
president of NASVH; and Fritz Sganga, the executive director of 
the Long Island State Veterans' Home.
    Chairman Craig. Well, we welcome them to the Committee. 
Thank you.
    Ms. Alvarado-Ramos. Thank you.
    As the largest provider of long-term care to our Nation's 
veterans, the State veterans' homes play an irreplaceable role 
in ensuring that eligible veterans receive the benefits, 
services, and quality long-term care 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 our veterans, your understanding of the 
indispensable functions State veterans homes perform, and your 
strong support for our programs. We especially appreciate the 
support of this Committee in restoring funds to the 2006 budget 
to assure that per diem payments by the Department of Veterans' 
Affairs for veterans who are residents in our State homes will 
continue uninterrupted.
    For nearly half a century State veterans' homes have 
operated under a VA program which supports the homes through 
construction grants and per diem payments. Both the VA 
construction grants and the per diem payments are essential 
components of a very cost-effective arrangement. In recent 
years, State veterans' homes have experienced a period of 
controlled growth. From 2000 to 2010, the number of veterans 
age 85 and older is expected to triple. Many of our homes have 
occupancy rates of 100 percent, or nearly 100 percent, and some 
have waiting lists. It is critical that the construction grant 
program be sustained in order to meet this growing need.
    In your letter of invitation, Mr. Chairman, you asked how 
the State homes can better assist VA in providing long-term 
care. Our vision is State veterans' homes working closely with 
the VA to provide a full continuum of care to veterans. 
According to a recent GAO report, the VA is currently utilizing 
one-third of its nursing home beds for extended space. We 
believe the VA could shift more of its long-term care and other 
specialty services to the State homes and ultimately increase 
the capacity of VA to provide short-term specialized care. The 
average cost for care at a VA long-term care facility has been 
calculated nationally to be over $420 per day. The cost of care 
to the VA for the placement of a veteran at a community 
contract home is approximately $195 per day. The same daily 
cost to the VA long-term care at a State home is only $59 per 
day.
    Mr. Chairman, I recently wrote a letter to Secretary 
Nicholson on this topic, and I respectfully ask that a copy of 
this letter be inserted in the hearing for the record.
    Chairman Craig. Without objection, it will become part of 
our record.
    [The letter follows:]

                                                      April 5, 2005
Hon. James Nicholson, Secretary,
Department of Veterans' Affairs,
810 Vermont Ave., NW,
Washington, DC 20420.
    Dear Secretary Nicholson: On behalf of the National Association of 
State Veterans Homes (NASVH), thank you for meeting with Roy Griffith 
(OK), Fred Sganga (NY), and me (WA) on February 21, 2005. At that time, 
I assured you that we would follow up with written comments not only 
about our discussion of the President's FY 2006 budget, but also on our 
thoughts about how the State Veterans Homes Program can play an 
increasing role in meeting the future needs of our veterans.
    NASVH is an organization without a headquarters or administrative 
support staff. Those who lead the organization are not paid employees. 
Most Veterans Homes administrators are veterans, who belong to, and 
support, this organization out of our love and respect for those who 
served our country and their need for a dignified end of life.
    Our 119 Veterans Homes, with over 27,000 beds, are a resource to 
the VA and an example of a successful, more than 100-year-old, Federal-
State partnership. Yet, the President's proposed budget for FY 2006 
dismisses their potential for helping realize the VA's vision of 
establishing a continuum of care. NASVH is an organization that 
constantly monitors the evolution of long-term care. We want to be a 
real partner with the VA to develop and implement solutions that will 
give our veterans the best options for quality long-term care at the 
most reasonable cost.
    We appreciate your personal recognition of this partnership as 
reflected in your recent comment regarding a construction grant for 
improvements to the Missouri Veterans Home in St. Louis--``This grant 
reflects the Federal-State partnership that is honoring our commitment 
to care for the men and women who have served in uniform. The 
partnership provides a comfortable home for veterans in a time of great 
personal need.''
    The State Veterans Home Program represents over 51 percent of the 
VA's total long-term care workload. We provide services to the most 
frail and medically-compromised veterans at a cost to the VA of about 
$59 per day, well below the cost of care in a VA nursing home, which 
exceeds $400. We recognize that the higher cost reflects, in part, the 
VA's transition to rehabilitative care and decreased maintenance care. 
The same transition is taking place in many State Veterans Homes 
nationwide. Our acuity is rising, the lengths of stay are declining, 
and the mental health challenges presented by our residents are 
becoming more complex.
    The Millennium Veterans Health Care Act brought significant changes 
to VA long-term care in 2000. As veterans 70 percent service-connected 
and above became entitled to long-term care, NASVH asked for its 
rightful place to provide care to this population, under similar 
conditions as contract community homes. This would have resulted in the 
veteran retaining his/her income, while VA would set a reasonable rate 
to compensate the homes for services. We believe that we are extremely 
competitive and could have saved the VA contract dollars over the past 
few years. Unfortunately, the VA's General Counsel ruled that VA could 
not enter into a contract with our homes under the current terms of the 
Act. This is an issue we would like to reopen, as we know it can be 
fixed.
    VA established an Assisted Living pilot which took place in VISN 20 
that is about to expire. Again, due to rigid contracting rules and 
legal opinions, the State Veterans Homes Program was excluded from that 
continuum of care option. In Washington State, for example, we could 
have banked nursing home beds so as not to ``double dip'' in per diem 
and contract dollars, and we could have saved significant VA social 
work staff hours and operating capital.
    The State Veterans Homes Program is a resource, not a burden. We 
have proposed, and continue to propose, that our beds be counted toward 
your overall long-term care census. This will allow the VA to meet the 
Millennium Health Care Act's long-term care bed requirements. We 
respectfully request that we approach this issue together to 
demonstrate to Congress that a nursing home bed in a State Veterans 
Home is as viable, and more economical, than a nursing home bed in a VA 
hospital. The object is to not only provide care in a quality manner, 
but to also expand the VA's capacity to provide services without 
increasing cost. The result could allow the VA to meet its legislative 
mandate, shift its maintenance care and other specialty services to the 
State Homes, and ultimately increase its capacity to care for short 
stay, highly-specialized rehabilitation care.
    NASVH continues to offer its assistance to Geriatrics and Extended 
Care in the area of regulatory reform. It can take years to develop and 
implement rules because of turnover and personnel shortages in 
Geriatrics and Extended Care. NASVH enjoys a good working relationship 
with the staff. Again, we offer our expertise, unconditionally, to 
assist in the drafting of much needed rules, like Domiciliary Care. We 
believe that we can assist in decreasing the development time, augment 
your staff's capacity, and help the Department promulgate sensible 
rules.
    NASVH recognizes and supports the national trend towards 
deinstitutionalization and the provision of long-term care at the most 
independent and cost-effective setting. We believe this is why the VA 
should involve NASVH as a full partner in the development and 
implementation of programs such as Hospice, Home Health, Adult Day Care 
and Gero-Psychiatric care under the Per Diem Grant and Palliative Care 
Programs. VA pays significant contract dollars for palliative care, and 
we know that with our expertise in caring for veterans and their unique 
issues, we can provide quality care in alternative settings if given 
the opportunity. This will require a flexible approach towards the 
establishment of pilot programs that will allow both the VA and State 
Veterans Homes to experiment with a variety of institutional and non-
institutional settings and per diem rates.
    In our meeting, we also discussed the impact of the proposed 
legislation that restricts the payment of the VA per diem to Priorities 
1, 2, 3, and 4 (Catastrophically Disabled). With respect to the latter 
category, NASVH has experienced significant challenges in pinpointing 
who qualifies as ``catastrophically disabled.'' There are many 
inconsistencies between the revised VA's Geriatrics and Extended Care 
long-term care policy in the congressional budget submission and the 
latest clarification made by the VA's Chief Financial Officer. This has 
made it virtually impossible to get an accurate assessment of the 
proposed legislation's impact. To complicate matters, some VA Medical 
Centers claimed not to have the information available while others were 
very accommodating. This should not occur if we are a true partner in 
the VA's continuum of care. We ask for your assistance in overcoming 
the barriers that prevent critical information sharing.
    It is our best estimate that the proposed change in eligibility for 
the per diem would result in about 80 percent of the veterans in our 
homes being disqualified for the nursing care per diem and the loss of 
over $300 million in operating funds to State Veterans Homes 
nationwide. This loss would affect approximately 15,000 of our 19,000 
nursing-home-care residents. We assume that the VA believes that these 
veterans, if not able to remain in our homes, will somehow be picked up 
by State systems. It has been our experience that many residents were 
referred to our homes by those systems because the individuals were 
difficult to manage. Veterans often present histories of chronic heart, 
diabetes, and respiratory diseases coupled with homelessness, 
incarceration, poly-substance abuse, and/or mental health illnesses 
that relate to their service. These residents have been able to thrive 
and remain at their highest level of function because of our superior 
medical and mental health care and the supportive environment our homes 
provide.
    Finally, we believe it is important to underscore the factors that 
make the State Veterans Program the ideal alternative for our heroes' 
long-term care:
     Veterans Homes provide residents with a sense of community 
and tradition that dates back to their active service.
     Veterans have a common experience related to their service 
and provide peer support to each other. Many veterans come to our homes 
following long-term homelessness, chronic depression, mental illness, 
and substance abuse. This structure fortifies their spirit and allows 
them to thrive despite failures in other community settings.
     Our homes attract quality employees who are dedicated to 
serving this worthy group of men and women. We also attract caregivers 
who are themselves veterans and who provide an enhanced level of care 
because of their own service.
     Veterans Homes celebrate our residents' service every day, 
not just in annual observances.
     Residents in Veterans Homes receive tangible and 
consistent daily support from the military and Veterans Service 
Organizations. These organizations provide thousands of volunteer hours 
at the Homes, and also host outside activities tailored to our 
veterans.
     State Home employees understand and are trained to manage 
the behaviors and idiosyncrasies that veterans exhibit as a result of 
their exposure to combat or military service stress.
     Families choose an environment that honors what their 
loved ones are most proud of--their service to country.
     At the point where there is no other non-institutional 
alternative, some veterans will not go to a ``nursing home,'' but they 
will accept admission to a Veterans Home. They served with their peers 
and often prefer to spend their last days with their peers, as well.
     Since the Veterans Homes are VA partners, we are better 
able to coordinate benefits not only for veterans, but also for their 
families in the community.
    We believe the VA should consider the State Veterans Homes as a 
resource, not a burden. NASVH is open to explore every option that will 
give veterans the quality of life they have earned. This will require 
creativity, flexibility, openness, and inclusiveness. We have made 
small gains in past endeavors, but our greatest challenge is upon us 
today. Our State Veterans Homes cannot be a resource, and may not 
survive, if the President's proposed changes in the per diem go into 
effect. We urge you to give us the opportunity to be at the table so 
that we can provide our expertise in the laborious planning required to 
provide all our veterans a place to call home.
            Sincerely,
                                 Lourdes E. Alvarado-Ramos,
                                                         President.

    Ms. Alvarado-Ramos. Under current law, strict limits and 
standards control the construction or renovation of State homes 
according to need. This process assures that new State homes 
are built only in those States that have the greatest unmet 
need. The VA has identified 10 States as having either great or 
significant need to build new State homes immediate. They 
include Texas, Pennsylvania, and Hawaii, which expects to open 
its first State home next year. As the Committee knows, the 
Administration's budget would have imposed a moratorium on 
construction grants and would have slashed per diem payments by 
revising the eligibility requirements.
    State taxpayers have paid hundreds of millions of dollars 
to help construct, maintain, and operate State homes. The 
budget would have abruptly and needlessly abandoned this 
partnership and placed the States in an untenable financial 
position leading to the ultimate closure of many State homes. 
On behalf of the Veterans we serve, thank you for rejecting the 
proposal to do this. We appreciate what you have done for our 
homes.
    In conclusion, Mr. Chairman, I reiterate the key issues 
facing the State homes. First, the per diem eligibility rules 
should be preserved. Second, we believe the Committee and 
Congress should reject the moratorium on State home 
construction. And third, the State homes should gain a more 
substantial role in planning the future of long-term care for 
veterans. With this Committee's support, the National 
Association of State Veterans' Homes is anxious, ready, and 
willing to work with the VA to explore innovative ways to meet 
the needs of America's aging veteran population.
    Thank you again to the Committee for your diligent work. I 
will be happy to answer any questions you may have.
    [The prepared statement of Ms. Alvarado-Ramos follows:]

      Prepared Statement of Lourdes E. Alvarado-Ramos, President, 
             National Association of State Veterans' Homes

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify today on behalf of the National Association of 
State Veterans' Homes (``NASVH'') on access to and the availability of 
long-term care services for our Nation's veterans. I am the Assistant 
Director of the Washington State Department of Veterans Affairs, and I 
serve as the 2004-2005 President of NASVH.
    The State Veterans Homes program is the largest provider of long-
term care to our Nation's veterans. As such, the State Veterans Homes 
play an irreplaceable role in ensuring that eligible veterans receive 
the benefits, services, and quality long-term health care 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 indispensable function 
that State Veterans Homes perform, and your strong support for our 
programs.
    We especially appreciate the support of this Committee in restoring 
funds to the FY 2006 budget resolution to assure that per diem payments 
by the Department of Veterans Affairs (``VA'') to veterans who are 
residents in our State Homes will continue uninterrupted.
    The membership of NASVH 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 114 homes, domiciliary 
care in 52 homes, and hospital-type care in 5 homes. These homes 
presently provide over 27,500 resident beds for veterans of which more 
than 21,000 are nursing home beds. These beds represent about 50 
percent of the long-term care workload for the 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 large number of soldiers and sailors in critical need 
of long-term care, several States established veterans' homes to care 
for those who served in the military.
    In 1888, Congress first authorized Federal grants-in-aid to States 
that maintained homes in which 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 nursing home, domiciliary, and adult day health 
care.
    For nearly half a century, State Veterans Homes have operated under 
a program administered by the VA which supports the Homes through 
construction grants and per diem payments. Both the VA construction 
grants and the VA per diem payments are essential components of this 
support. Each State Veterans Home must meet stringent VA-prescribed 
standards of care, which exceed standards mandated by Federal and State 
governments for other long-term care facilities. The VA conducts annual 
inspections to ensure that these standards are met and to ensure the 
proper disbursement of funds. Together, the VA and the State Homes 
represent a very effective and financially-efficient Federal-State 
partnership in the service of our veterans.
    VA per diem payments to State Homes are authorized by 38 U.S.C. 
Sec. 1741-1743. Congress 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 by the VA annually and may not exceed 50 percent of the 
cost of care. They are currently $59.36 per day for nursing home care, 
$35.17 per day for adult day health care, and $27.44 per day for 
domiciliary care. Our State Veterans Homes cannot operate without the 
per diem payments from the VA.
    Construction grants are authorized by 38 U.S.C. 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. 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 project. State funding covers at least 35 
percent of the cost. Our program cannot meet our veterans' needs 
without an adequate level of construction grant funding.
    In recent years, State Veterans Homes have experienced a period of 
controlled 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. From 2000 to 2010, the number of veterans aged 85 and older is 
expected to triple from 422,000 to 1.3 million. If the State Veterans 
Homes program is to fill even a part of this unmet need for long-term 
care beds in certain States, and to respond to the increase in the 
number of veterans eligible for such care nationally, it is critical 
that the construction grant program be sustained.
    The State Veterans Home program now provides about 50 percent of 
the VA's total long-term care workload. The VA recently estimated that 
nursing care beds in the State Homes are 87 percent occupied. Many of 
our Homes have occupancy rates near 100 percent, and some have long 
waiting lists. The State Veterans Homes provide long-term medical 
services to frail, elderly veterans at a cost to the VA of only $59 per 
day, well below the cost of care in a VA nursing home, which exceeds 
$400 per day.
    Although there are no national admission requirements for the State 
Veterans Homes, there are State-by-State medical requirements for 
admission. Generally, a State will demand a medical certification 
confirming significant deficits in activities of daily living (an 
assessment of basic functions) that require 24-hour nursing care. 
Moreover, no per diem is paid by the VA unless and until a VA official 
certifies that nursing home care is required. Such veterans are almost 
always chronically ill and elderly, and many are afflicted with mental 
health conditions.

                 STATE VETERANS' HOMES AS A VA RESOURCE

    The Veterans' Millennium Health Care Act (``Mill Bill''), Pub. L. 
No. 106-117, brought significant changes to veterans' long-term health 
care. Significantly, the VA is directed to provide long-term care for 
all veterans who have a 70 percent or greater service-connected 
disability or who need nursing care for a service-connected disability. 
The State Veterans Homes should play a major role in meeting these 
requirements and be treated as a resource integrated more fully with 
the VA long-term care program.
    We have proposed that our beds be counted toward the VA's overall 
long-term care census. Doing so would allow the VA to meet the Mill 
Bill's long-term care bed requirements. A nursing home bed in a State 
Veterans Home is an economical alternative to a nursing home bed in a 
VA-operated facility. Congress's goal should be to provide long-term 
care to veterans in a manner that expands the VA's capacity to provide 
services without increasing cost. Including State Veterans Homes 
nursing beds in the mandated VA long-term care totals could allow the 
VA to meet its legislative mandate, shift some of its maintenance care 
and other specialty services to the State Veterans Homes, and 
ultimately increase the capacity of the VA to provide greater short 
stay, highly-specialized rehabilitative care.
    This goal can be accomplished by the State Homes at substantially 
less cost to taxpayers. 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, which does not need 
to meet the same VA standards 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 $59.36 per day for nursing care.
    This substantially lower daily cost to the VA of the State Veterans 
Homes 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 CONSTRUCTION GRANT PROGRAM

    Under current law, there are strict limits and standards for 
funding the construction and renovation of State Veterans Homes. The 
system is working very well under the provisions of the Mill Bill, 
which establishes priorities for funding according to life/safety, 
great need, significant need, and limited need. Pursuant to these 
standards, in FY 2005, only 35 priority construction or renovation 
projects have been authorized and are underway in Wisconsin, Nebraska, 
Ohio, New Hampshire, New York, Michigan, Massachusetts, Connecticut, 
Hawaii, Alaska, Delaware, Rhode Island, Oklahoma, Florida, North 
Carolina, Colorado, Georgia, Missouri, and Minnesota. Other projects in 
these and other States have been approved initially for FY 2006 funding 
by the VA.
    Specifically, the VA has identified 10 States as having either a 
``great'' or ``significant'' need to build new State Veterans Homes 
beds immediately. These are Florida, Texas, California, Pennsylvania, 
Ohio, New York, Hawaii, Delaware, Wyoming, and Alaska. Hawaii expects 
to open its first State Home next year. Florida has five new homes in 
the planning stages, and Texas has four homes in the planning stages 
and two homes in the final stages of construction. California has three 
new homes approved. Delaware and Alaska are planning their first State 
Homes. The needs of veterans in these States require that these 
facilities be built.
    Moreover, under the requirements of the Mill Bill, the VA 
prescribes strict limits on the maximum number of State Veterans Home 
nursing beds that may be funded by construction grants. This is based 
on projected demand for the year 2009, which determines which States 
have the greatest need for additional beds. This process assures that 
additional State Veterans Home beds are built only in those States that 
have the greatest unmet need for such beds.

                     VA BUDGET PROPOSAL FOR FY 2006

    The President's FY 2006 budget would devastate the State Veterans 
Homes program and deny care to the thousands of veterans who currently 
utilize the program and the tens of thousands of veterans who will need 
the program in the future. The budget proposal would: (1) slash per 
diem payments by revising the eligibility requirements for the State 
Veterans Homes so that the vast majority of veterans suddenly would be 
ruled ineligible for per diem benefits; and (2) impose a moratorium on 
construction grants, terminating plans for many new Homes, life/safety 
projects, and renovations where a need has been justified in many key 
States under the standards of the Mill Bill.
    The change in the per diem criteria would have the most immediate 
impact on the State Homes program. Under the President's proposal, per 
diem payments for nursing care at State Veterans Homes would be limited 
to veterans in priorities 1-3 and those in priority 4 who are 
catastrophically disabled (a new and poorly-defined concept of 
disability).
    NASVH concludes, based on a poll of our members, that the 
Administration's budget proposal would 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. This analysis examined the current 
population of the State Homes. The VA has proposed grandfathering 
current residents, but that will only delay the full impact of the 
proposal for months, not years, because we estimate that most current 
residents of the State Veterans Homes will pass away or be discharged 
within 12 to 18 months.
    The President's proposed budget abrogates the Federal Government's 
commitment to the State Veterans Homes program. State taxpayers have 
paid hundreds of millions of dollars to help construct the State 
Veterans Homes with the understanding that the Homes would continue to 
serve the veterans population. However, the President's budget abruptly 
and needlessly abandons this arrangement and places the Homes in an 
untenable financial position. Simply put, it could lead to the closure 
of many State Homes.
    We applaud the Senate Veterans' Affairs Committee for rejecting the 
proposed cuts to the per diem payments. Mr. Chairman, thank you for 
stating, in your ``views and estimates'' letter on behalf of the 
Republicans on the Committee, that ``severe restrictions in per diem 
support for State homes is, in my estimation, an unsound idea'' and for 
concluding that ``I cannot endorse a cutting of per diem assistance to 
State homes to which needy veterans will increasingly turn for care.''
    Senator Akaka and your Democratic colleagues, we are grateful that 
your ``views and estimates'' letter likewise expressed support for the 
per diem program and concluded that ``It is our view that eligibility 
for per diem payments to [State Veterans Homes] should remain intact.''
    Moreover, NASVH was pleased that the FY 2006 budget resolution 
rejected the per diem cuts, thanks to the amendment offered by Chairman 
Craig and Senators Ensign, Hutchison, and Vitter and the work of many 
Senators during the conference committee.

                               CONCLUSION

    Thank you for your commitment to long-term care for veterans and 
for your support of the State Veterans Homes as a central component of 
that care. In conclusion, I will reiterate the key issues facing the 
State Veterans Homes.
    First, with respect to the President's proposal for cuts to the per 
diem, we hope to continue working with the Members of this Committee 
and the Appropriations Committee to ensure that the VA appropriations 
bill reflects the consensus that led to a Budget Resolution that 
preserves sufficient funds for continued per diem payments under 
current eligibility requirements. We also seek your assistance in 
directing the Administration not to impose unilateral changes to VA per 
diem payments through administrative means.
    Second, we believe the Committee and the Congress should reject the 
moratorium on State Veterans Homes construction grants, many of which 
fund needed renovations for life/safety issues or address demonstrated 
need in certain States for more nursing-care beds.
    Third, we believe that the State Veterans Homes can play a more 
substantial role in meeting the long-term care needs of veterans. NASVH 
recognizes and supports the national trend towards de-
institutionalization and the provision of long-term care in the most 
independent and cost-effective setting. In a letter to VA Secretary 
Nicholson dated April 5, 2005, NASVH proposed that we explore together 
creative ways to provide a true continuum of care to our veterans both 
in our Homes and in the community. We would be pleased to work with the 
Committee and the VA to explore options for developing pilot programs 
for innovative care and for more closely integrating the State Veterans 
Homes program into the VA's overall health care system for veterans.

    Chairman Craig. Ms. Ramos, thank you very much.
    Let us turn now to Josh Wiener, Ph.D., Senior Fellow, 
Program Director for Again, Disability and Long-Term Care at 
the RTI International.
    Senator Burr. Mr. Chairman.
    Chairman Craig. Yes.
    Senator Burr. Before Dr. Wiener is recognized, may I take 
this opportunity--I should have read it when I came in--to 
welcome him.
    Chairman Craig. Of course.
    Senator Burr. The Research Triangle Institute, for the 
purposes of my colleague's----
    Chairman Craig. That is what ``RTI'' stands for?
    Senator Burr. That is correct.
    Chairman Craig. Please tell us about it.
    Senator Burr. Since it is in the first part of his 
testimony, let me share with you that this is the brainchild of 
the founding fathers in North Carolina in the late 1950s at a 
part of our State which--most of us know the Research Triangle 
Park and the great work of technology that is done there. They 
saw the need early on to have a nonprofit established there 
that is multifaceted and multitalented. They enter into 
tremendous contracts with the Federal Government, with other 
countries around the world in too numerous of fashions for me 
to describe.
    But we have with us today a senior fellow, somebody who is 
well-versed in long-term care, the author of eight books, over 
100 articles, a commitment that has served on advisory boards, 
including the VA. I think it is a tremendous opportunity for us 
to hear from him today, and I welcome you, Doctor.
    Chairman Craig. Well, with that, Doctor, would you please 
proceed?

 STATEMENT OF JOSH WIENER, SENIOR FELLOW, PROGRAM DIRECTOR FOR 
    AGING, DISABILITY, AND LONG-TERM CARE, RTI INTERNATIONAL

    Mr. Wiener. Mr. Chairman and Members of the Committee, 
thank you for this opportunity to testify today on long-term 
care for America's veterans.
    Like the rest of America, the veterans population is aging 
and with it the prevalence of disability is increasing. As the 
chairman noted, the veterans' population age 85 and older, the 
population most likely to need long-term care, is projected to 
double within the next 10 years. The prevalence of disability 
among the enrolled VA population is substantially higher than 
among the non-veteran population, and sadly, injuries to 
soldiers in Iraq will add to the demand for long-term care.
    Although the large majority of veterans receive services 
outside of the VA, VA has an extensive and distinguished 
history of providing long-term care services. In this 
environment, the Administration is proposing to reduce funding 
for VA long-term care services by $378 million, about 10 
percent. If enacted, the Administration's changes will reduce 
the availability of long-term care services in the VA. More 
veterans will have to obtain services in the general community 
or go without.
    Thus, a key policy question is what long-term care services 
are available in the community, and how are they financed? In 
terms of services, there is a large supply of community nursing 
homes currently with relatively low occupancy rates, around 86 
percent. There are substantial numbers of home-health and home-
care agencies, but both institutional and non-institutional 
services in the community, as well as in the VA, are threatened 
by an increasing workforce shortage caused in large part by low 
wages and benefits.
    In terms of financing, long-term care is financed by a mix 
of public and private resources, including Medicare, which is 
primarily an acute care program, but covers nursing home care 
and home health care. It does not, however, cover long-term 
care. The nursing home care and home-health benefits under 
Medicare are geared to short-term post-hospital care and are 
very skilled and rehabilitation-oriented services. Importantly, 
Medicare services are available without a means test.
    A second factor in terms of financing is private long-term 
care insurance. This role is very small, but currently growing. 
About 9 percent of the population age 55 and older has some 
kind of private long-term care insurance. Much less than 1 
percent of the population under 55 has some kind of insurance. 
The major barrier to the growth of long-term care insurance is 
cost. A good-quality policy bought at age 65 averages about 
$2,862 per year.
    Since private insurance and Medicare do not cover long-term 
care to a significant extent, a major source of financing for 
long-term care is out-of-pocket costs by individuals. And long-
term care is expensive. The average cost of a year in a nursing 
home is about $62,000 a year.
    Medicaid, however, the Federal-State health care program 
for the poor, is the dominant source of financing for long-term 
care. Two-thirds of nursing home residents depend on it to pay 
for their care. Medicaid is a strictly means-tested program 
limited to people who are poor or people who become poor 
because of the high cost of long-term care services. States 
have great flexibility in designing and administering the 
program, so services and disability and financial eligibility 
standards vary greatly across States.
    There are also a wide variety of other Federal and State 
programs, mostly means-tested in some way, that finance 
primarily home-care services.
    So, in conclusion, first, for both veterans and general 
population, the demand for long-term care is certain to 
increase sharply over time. The United States does not have a 
coherent plan for dealing with the aging of the population. 
While Social Security and Medicare have received substantial 
attention, long-term care has been ignored.
    Overall, second, many current nursing homes have excess 
capacity that could, at least theoretically, absorb the reduced 
demand by the Department of Veterans' Affairs-funded 
facilities. Whether the excess capacity and the reduced 
Department of Veterans' Affairs capacity are in the same 
locations or are serving the same types of populations is 
unknown. Overall--and I think this is highly important--the 
growth of long-term care services in the VA and outside is 
likely to be impeded by this workforce shortage that is almost 
certainly to grow dramatically worse over time.
    Third, although the supply of home- and community-based 
services has increased in both the overall system and within 
the VA, there remains a strong institutional bias, which is 
stronger in the VA than in the general community. The VA is 
working to change this, and the Administration's proposals do 
call for an increased funding for home- and community-based 
services.
    Fourth, the current financing for long-term care and acute 
care services is highly fragmented with multiple funding 
sources and a lack of integration between acute and long-term 
care services. The potential for better integration is probably 
better in the VA than in the general community.
    Fifth, current financing of long-term care is dominated by 
public programs and that is likely to remain so in the future. 
Private-sector programs are unlikely to become a dominant 
source of financing.
    And finally, Medicare is the dominant source of funding for 
long-term care. It is strictly means-tested. Initiatives to 
reduce Department of Veterans' Affairs funding for long-term 
care is likely to increase Medicaid expenditures at a time when 
States are still experiencing fiscal difficulties.
    In conclusion, again, America does not have a serious plan 
for dealing with long-term care. It has not started a debate on 
how to deal with an aging population. It is time to begin that 
debate.
    Thank you.
    [The prepared statement of Mr. Wiener follows:]

  Prepared Statement of Josh Wiener, Senior Fellow, Program Director 
      for Aging, Disability, and Long-Term Care, RTI International

    Mr. Chairman and Members of the Committee, I am pleased to testify 
today on the subject of long-term care for America's veterans. I am 
Joshua M. Wiener, Ph.D., senior fellow and program director for aging, 
disability, and long-term care at RTI International, a nonprofit 
research organization headquartered in Research Triangle Park, North 
Carolina. I am the author or editor of 8 books and over 100 articles on 
long-term care, aging, Medicaid, disability, end-of-life care, and 
health reform in the United States and abroad. In 1997 and 1998, I was 
a member of the Federal Advisory Committee on the Future of Long-Term 
Care in the VA. The opinions that I express today are my own and do not 
necessarily represent the views of RTI International.
    Like the rest of America, the veteran population is aging, and with 
it, the prevalence of disability is increasing. In 2002, there were 
approximately 10 million veterans age 65 or older (Department of 
Veterans' Affairs, undated). Even more important for long-term care is 
that the veteran population age 85 or older is projected to increase 
from 640,000 in 2002 to 1.3 million in 2012 (U.S. General Accounting 
Office, 2003). Disability and the need for long-term care services are 
closely linked to age, with much higher needs at older ages. For 
example, almost half of the Nation's nursing home population is age 85 
or older.
    In addition, the population served by the Department of Veterans' 
Affairs has a high level of disability. According to the 2002 survey of 
veterans enrolled with the Department of Veterans' Affairs for health 
care, 51 percent of older people reported problems with the activities 
of daily living or instrumental activities of daily living, and 6 
percent reported problems with three or more activities of daily 
living, a prevalence level far higher than that of the general 
population (Department of Veterans' Affairs, 2003; Manton and Gu, 
2001). A large research literature finds that people with disabilities 
have higher levels of acute care and long-term care use than persons 
without disabilities (Alecxih, Corea, and Kennell, 1995).
    Against the backdrop of increasing need for long-term care 
services, the Administration's fiscal year 2006 budget proposes cutting 
back on Department of Veterans' Affairs long-term care services. These 
proposals include a reduction in the number of Department of Veterans' 
Affairs-provided nursing home beds, as well as a plan to limit 
geriatric nursing home care to service-connected conditions, 
catastrophically disabled persons (e.g., spinal cord injured veterans), 
and veterans who are at least 70 percent service-connected disabled. In 
addition, per diem payments and new grants for State veterans' homes 
would be further limited.
    If enacted, these changes will reduce the availability of long-term 
care services in the Department of Veterans' Affairs; veterans will 
have to obtain services in the general community and use other 
financing mechanisms or go without services. The key policy question 
is: Outside of the Department of Veterans' Affairs, what long-term care 
services are available and how are they financed, and what are the 
implications for veterans and third-party payers of using services 
outside of the Department of Veterans' Affairs system?

                               BACKGROUND

    To help meet the long-term care needs of veterans with 
disabilities, the Department of Veterans' Affairs has a long history of 
providing long-term care services. Long-term care is the help needed to 
cope, and sometimes to survive, when physical or mental disabilities 
impair the capacity to perform the basic tasks of everyday living, such 
as eating, bathing, dressing, and housekeeping (Wiener, Illston, and 
Hanley, 1994). Although not as extensively provided as other services, 
the Department of Veterans Affairs provides nursing home care (in 
Department of Veterans' Affairs-operated units, contract community 
nursing homes, and State veterans' homes), home-based primary care, 
contract home health care, adult day health care, homemaker and home 
health aide services, community residential care, respite care, home 
hospice care, and domiciliary care (Department of Veterans' Affairs, 
2005b).
    In fiscal year 2005, the Department of Veterans' Affairs will spend 
about $3.6 billion on long-term care, approximately 91 percent of which 
is for nursing home services (Department of Veterans' Affairs, 2005a). 
Although the supply of VA-financed home and community-based services 
has increased in recent years, a General Accounting Office (2003) study 
found substantial variation across the country in the availability of 
services. Variation in availability of services and restrictions on the 
amount of services make it difficult for these home and community-based 
services to function as alternatives to nursing home care. Overall, the 
Department of Veterans' Affairs finances about 3 percent of the 
nation's spending on long-term care services for older people and 
accounts for about 2 percent of the Nation's nursing home population 
(American Health Care Association, 2005a; Congressional Budget Office, 
2004). A majority of veterans receive their care outside of the 
Department of Veterans' Affairs system.

                     NON-VA LONG-TERM CARE SERVICES

    In terms of services, there are approximately 1.7 million nursing 
home beds in 16,000 facilities in the United States (American Health 
Care Association, 2005b). Current occupancy rates are at unprecedented 
low levels, averaging about 85.5 percent nationally (although rates 
vary greatly across geographic areas). In recent years, there has been 
a substantial growth in assisted living facilities, which are 
residential settings that provide personal care (e.g., help with 
eating, bathing, dressing, and other services); approximately 800,000 
persons now live in these facilities (National Center for Assisted 
Living, 2001). These facilities are overwhelmingly financed by private 
payments, although some participate in Medicaid. They are expensive, 
costing approximately $1,900 a month in 2000. Due to overbuilding, 
occupancy rates for assisted living are also relatively low.
    Approximately 6,900 home health agencies participated in Medicare 
in 2003 (Centers for Medicare & Medicaid Service, undated). An unknown 
number of other home care agencies provide a range of skilled and 
unskilled services, including personal care, housekeeping, respite 
care, adult day care, nursing, and other services.
    Both institutional and noninstitutional services face difficult 
problems of recruitment and retention, which will only get worse over 
time as the imbalance between long-term care demand and the supply of 
workers increases. These workforce problems are due to low wages and 
benefits, lack of training, the nature of the work, and the 
organizational culture (Stone and Wiener, 2001).

                    NON-VA LONG-TERM CARE FINANCING

    Outside of the Department of Veterans' Affairs, the major sources 
of financing long-term care for older people and younger persons with 
disabilities are out-of-pocket payments, private insurance, Medicare, 
Medicaid, the Older Americans Act, and State-funded programs (table 1).

  Table 1.--Long-Term Care Expenditures for Older People, by Source of
                   Playment and  Type of Service, 2004
                        [in billions of dollars]
------------------------------------------------------------------------
                                     Institutional
           Payment source                 Care      Home Care    Total
------------------------------------------------------------------------

Medicaid...........................          36.5        10.8       47.3
Medicare...........................          15.9        17.7       33.6
Private insurance..................           2.4         3.3        5.6
Out-of-pocket......................          35.7         8.3       44.0
Other..............................           2.0         2.5        4.4
                                    ------------------------------------
  Total............................          92.4        42.5      134.9
------------------------------------------------------------------------
Source: Congressional Budget Office, 2004.

     Out-of-pocket expenditures are a major source of financing 
for long-term care services. This is a consequence of the lack of 
either public or private insurance programs for long-term care that 
would otherwise cover the cost. Because services are expensive, they 
are a financial burden to most persons who use them. For example, the 
average private charge for a year in nursing home care was 
approximately $62,000 in 2002 (MetLife, 2004).
     Private long-term care insurance has been growing steadily 
since the mid-1980s but finances less than 5 percent of total long-term 
care expenditures. About 9 percent of the population age 55 or older 
has long-term care insurance, as does far less than 1 percent of the 
younger population (Johnson and Uccello, 2005). A key barrier to the 
growth of private long-term care insurance is its high cost. For 
example, the average cost of a good quality policy bought at age 65 was 
$2,862 per year in 2002 (America's Health Insurance Plans, 2004). A 
variety of studies suggest that only about 10 to 20 percent of older 
people can afford private long-term care insurance, a proportion that 
will not change greatly over the next 20 years (Rivlin and Wiener, 
1988; Wiener, Illston, and Hanley, 1994). Thus, private long-term care 
insurance is unlikely to be a major source of financing for long-term 
care.
     Medicare, the Federal health insurance program, provides 
nearly universal coverage for older people and some younger people with 
disabilities. Although primarily an acute care program (i.e., hospital 
and physician care), Medicare covers some nursing home and home health 
services, but generally of a short-term nature; long-term care is not 
covered. Specifically, Medicare covers skilled nursing facility 
services only when a beneficiary has spent 3 days in a hospital, is 
admitted to the nursing facility within 30 days of the hospitalization, 
and needs skilled nursing or rehabilitation services. Coverage is 
limited to 100 days, but the average length of Medicare-covered stay 
was only about 33 days in 2002 (Centers for Medicare & Medicaid 
Services, undated). The home health benefit is available to homebound 
beneficiaries who need intermittent or part-time skilled nursing or 
rehabilitation services. Although the home health benefit was evolving 
into a long-term care benefit during the early 1990s, the Balanced 
Budget Act of 1997 sharply reestablished the home health benefit as a 
skilled, short-term service. There is no coinsurance for home health; 
in 2005, there is a required co-payment of $114 a day for skilled 
nursing care after the 20th day in the facility.
     Medicaid is by far the dominant source of funding for 
long-term care services. It provides funding for persons who have low 
incomes or have been impoverished by the high costs of acute and long-
term care. While the majority of Medicaid funds come from the Federal 
Government and there are some national requirements (especially for 
quality of care in nursing homes), States are responsible for 
administration and have substantial flexibility in determining 
eligibility and covered benefits.
    Although nursing home and home health care are mandatory services 
and must be provided on an open-ended, entitlement basis, States vary 
greatly in their coverage of home and community-based services. 
Approximately 32 States and the District of Columbia cover personal 
care services as part of the regular Medicaid program (Burwell, Sredl, 
and Eiken, 2004). At their discretion, States may provide long-term 
care services under so-called home and community-based services 
waivers. Under waivers, States can provide a broad package of services 
that Medicaid does not routinely cover, and they can exert far greater 
fiscal control than they can under the regular Medicaid program. Unlike 
the rest of the Medicaid program, States can limit the number of waiver 
beneficiaries, and some States have waiting lists. Nonfinancial 
eligibility for waiver services is limited to persons who need nursing 
home care.
    In all but a few States, the vast majority of Medicaid funds are 
spent on institutional care rather than noninstitutional services; 
nationally, in 2004, approximately 23 percent of Medicaid long-term 
care spending for older people was for home and community-based 
services (Congressional Budget Office, 2004). This is, however, a 
substantially higher percentage than in the Department of Veterans 
Affairs programs.
    Financial eligibility standards for Medicaid are strict, 
complicated, and vary by State (Bruen, Wiener, and Thomas, 2003). 
Medicaid nursing home residents must contribute all of their income 
toward the cost of care, except for a small personal needs allowance of 
about $30 a month. Individuals may keep only $2,000 in nonhousing 
financial assets, although the home is generally an exempt asset in 
determining eligibility. However, States are supposed to recover the 
cost of Medicaid expenditures for long-term care from the estate of 
Medicaid beneficiaries, including the home. The community-based spouse 
of Medicaid nursing home residents may keep more of the couple's income 
and assets than is allowed single individuals.
    Due to the high cost of long-term care services, a significant 
proportion of Medicaid beneficiaries in nursing homes ``spend down'' 
and are impoverished by the cost of nursing home care. Approximately 
two-thirds of nursing home residents have their care paid by the 
Medicaid program. Thus, Medicaid long-term care services provide a 
safety net for the middle class as well as for the poor.
    Medicaid financial eligibility standards for persons in the 
community generally require beneficiaries to be eligible for the 
Federal Supplemental Security Income program, the cash welfare program 
for the aged, blind, and disabled. This program provides benefits at 
about two-thirds of the Federal poverty line and limits nonhousing 
assets to $2,000. A relatively few number of persons in the community 
``spend down'' to Medicaid eligibility because of high medical care 
costs. Depending on State choices, persons receiving Medicaid services 
under home and community-based services waivers may have incomes up to 
300 percent of the Supplemental Security Income level (about twice the 
Federal poverty level).
     Other Federally funded Government programs include home 
and community-based services financed through the Older Americans Act, 
the Rehabilitation Act, and the Social Services Block Grant. In 
addition, many States use their own funds to provide home and 
community-based services to persons who do not qualify for Medicaid. In 
general, these Federal and State programs have financial eligibility 
levels that are slightly above Medicaid but are small in terms of total 
expenditures.

                              CONCLUSIONS

    Several implications can be drawn for veterans (and the general 
population) from this review of long-term care services and financing:
     For both the veteran population and the general 
population, the demand for long-term care is certain to increase 
sharply over time. The United States does not have a coherent plan for 
dealing with the aging of the population.
     Overall, many current nursing homes have excess capacity 
that could absorb the reduced demand by Department of Veterans' 
Affairs-funded facilities. Whether the excess capacity and the reduced 
Department of Veterans Affairs capacity are in the same locations is 
unknown. Overall, the growth of long-term care services is likely to be 
impeded by a workforce shortage that will almost certainly grow 
dramatically worse over time.
     Although the supply of home and community-based services 
has been increasing, there is a stronger institutional bias in the 
Department of Veterans Affairs' programs than in the general community. 
However, the overall long-term care system has a strong institutional 
bias.
     Current financing for long-term care and acute care 
services is highly fragmented with multiple funding sources and a lack 
of integration between acute and long-term care services. While the 
extent to which Department of Veterans Affairs services achieve a high 
level of service integration is unknown, it provides a potential for 
integration that may be better than in the general community.
     Current financing of long-term care is dominated by public 
programs, and that is likely to remain so in the future. While private 
sector initiatives will play a larger role in the future, they are 
likely to remain a relatively small source of financing for long-term 
care.
     Medicaid is the dominant source of funding for long-term 
care. It is a strictly means-tested program. Initiatives to reduce 
Department of Veterans Affairs funding for long-term care will likely 
increase Medicaid expenditures, at least marginally, and are likely to 
be resisted by the States. This will occur at a time when States are 
still experiencing fiscal difficulties.
    In conclusion, Americans have not yet begun a serious debate about 
the future of our aging society and the role of long-term care within 
it. The demand for long-term care will only grow dramatically over 
time, within both the veteran population and the general population. It 
is time to begin that debate.

    Chairman Craig. Doctor, thank you. That is a great way of 
summing up this first panel. Before we go to 3-minute-question 
rounds of our colleagues, we have been joined by two additional 
colleagues and Members of this Committee, Senator Rockefeller 
and Senator Salazar.
    Jay, do you have any opening comment you would like to make 
prior to the question round?
    Senator Rockefeller. Mr. Chairman, I passed you a little 
note in which I pointed out my day book was yesterday. I do 
have something I want to say, and I could say it from my soul 
or I could say it in a more disciplined fashion, which will 
happen in 2 minutes when my today's book arrives.
    [Laughter.]
    Chairman Craig. Well, we will allow you the choice. This is 
May 12th.
    [Laughter.]
    Chairman Craig [continuing]. 2005.
    Senator Rockefeller. Not to me.
    Chairman Craig. Right. Senator Salazar. Ken.

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

    Senator Salazar. Thank you very much, Mr. Chairman, and 
Ranking Member Akaka. I very much look forward to the testimony 
today and to grapple with the issue of long-term care. It seems 
to me that Dr. Wiener's statement on the need to have a 
coherent plan is something that we need to make sure that we 
work on out of this Committee and that the Veterans' 
Administration works with us on that issue. I very much look 
forward to the testimony and figuring out how we move forward 
together on dealing with this major challenge.
    Thank you.
    Chairman Craig. Ken, thank you. We have also been joined by 
our colleague----
    Senator Salazar. Mr. Chairman, I do have a longer statement 
that I would submit for the record.
    Chairman Craig. Fine. We will allow it to become part of 
the record. Thank you.
    [The prepared statement of Senator Salazar follows:]
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
    Thank you Chairman Craig and Senator Akaka for calling this 
important hearing.
    It is a brave step because many in this administration would like 
to see the issue of VA long-term care swept under the rug.
    The VA is already having a difficult time providing long-term care 
to veterans, and the administrations budget request would make the 
situation much much worse. It would literally decimate State nursing 
homes and force thousands of elderly veterans out in the cold.
    As I was studying this issue, I was struck by the differences 
between what we are talking about here in Washington, and what is 
happening on the ground in Iraq today.
    Earlier this week, members of 1st Platoon, Lima Company, of the 
Marines' 3rd Battalion, 25th Regiment were involved in a fierce 
firefight in Iraq about 15 miles east of the Syrian border. While 
sweeping for insurgents, the platoon was ambushed and one of their 
members was fatally injured. Rather than leaving their man behind, the 
Marines stayed. They fired grenades, artillery rounds, 500-pound bombs 
and a rocket at the enemy. They launched five separate assaults and 
lost another Marine in the process. They gave everything they had to 
complete their mission and not leave their comrade behind.
    Our troops in Iraq are offering us that kind of bravery and 
dedication every day in Iraq. The least we can do for them is ensure 
that we will not leave them behind when they return home.
    But that is exactly what we are doing. Our greatest generation of 
Americans is aging rapidly. These are the soldiers who refused to leave 
men behind at Normandy and Guadal canal. These are our fathers and 
grandfathers.
    In 10 years, the number of vets who are 85 or older is expected to 
increase from approximately 870,000 to 1.3 million. Compare 1.3 million 
veterans to the 33,000 people the VA now cares for in all of its 
nursing home care. Right now, the VA is unable to care for a drop in 
the bucket. And the Administration is doing everything it can to reduce 
the VA's capacity to handle long-term care.
    Today, we are going to hear very different perspectives on how the 
VA is faring and how the Administration's budget request would impact 
care.
    Dr. Perlin, in his prepared remarks offers one perspective. He says 
that the VA is ``meeting current demand and will meet all of the 
projected demand for nursing home care'' within current capacity. 
Perlin says that the Administration's budget ``goes beyond the 
requirements'' of the 1998 Millennium Bill.
    All the other witnesses will offer a dramatically different view. I 
agree vehemently with Ms. Alvarado-Ramos, Mr. Cowell and Mr. Mooney 
that this Administration's budget would be devastating for our 
veterans. I share their concerns about proposals to reduce per-diem 
payments, eliminate construction grants and eliminate minimum capacity 
requirements. I share their concern that the VA's commendable move 
toward expanding non-institutional care should not be a smokescreen for 
reducing desperately needed nursing home care.
    By holding this hearing we will be shedding light on the real 
challenges we face. And I hope we will start to quantify what resources 
we need to ensure that no elderly veteran is left behind.

    Chairman Craig. We have also been joined by our colleague 
John Thune. If you have any opening comments prior to the 
questioning round, we have just completed the testimony of this 
first panel.
    Senator Thune. Thank you, Mr. Chairman. I will wait till we 
get into questions, but I appreciate your rightly focusing on 
this very important issue and appreciate the panelists being 
here to provide insights.
    Thank you.
    Chairman Craig. Thank you.
    Let me start. Dr. Perlin, it is my understanding that 
approximately 50 percent of VA's long-term care patients are 
cared for in beds provided by State veterans homes and that VA 
spends only 15 percent of its long-term care budget on this 
care. Why would VA find it advantageous to reduce expenditures 
to these homes when clearly they appear to provide the best 
bang for the buck in VA's long-term care program?
    Dr. Perlin. Well, Thank you, Mr. Chairman, for that 
question. First of all, I want to acknowledge a very positive 
and obviously longstanding relationship with the State 
veterans' homes. They are phenomenal partners and really create 
very positive environments for America's veterans.
    The issue is not to necessarily reduce that relationship in 
any way. It is really a question of focus on the mission, core 
mission of serving those veterans with service-connected 
disabilities and being able to meet their needs. In fact, the 
State veterans' homes with a census this year to approach 
approximately 18,500, all but 922 are other than priority 1-A, 
or those individuals who are 70 percent or greater service-
connected.
    The relationship is tremendously important, though, because 
the State veterans' homes are a wonderful complement to VA's 
nursing facilities which provide care to those individuals who 
do have unique needs, who need post-hospital acute 
rehabilitation, who need help with spinal cord injury, 
ventilator dependence, mental illness, individuals who require 
a greater level of care and a skill set that is unique offered 
in VA. So it really comes down to a policy question of being 
able to meet the needs effectively for those individuals with 
service-connected disabilities as a key priority.
    Chairman Craig. Is consistency among all programs truly 
worth sacrificing this, I think, tremendous low-cost, high-
impact program?
    Dr. Perlin. I would plead the equity of access is 
tremendously important, but the State veterans' homes stand on 
their own merit. As mentioned, they are a wonderful adjunct in 
terms of providing care for veterans, environments that are of 
high quality, quality that we evaluate, and environments that 
have by definition the camaraderie of fellow service members.
    Chairman Craig. Your testimony notes that VA has greatly 
expanded its non-institutional care program over the past 
several years, and I commend you all for that. However, it is 
my understanding that the level of non-institutional care 
services varies widely from network to network, and in some 
cases even hospital to hospital. For example, some facilities 
limit the number of days per year a veteran can receive adult 
day health care. Others allow unlimited days, but restrict 
total populations. Is there a more nationalized approach to 
service availability than I have just suggested; or, if not, 
should there be one, and what do you believe are important 
considerations in developing such a policy?
    Dr. Perlin. Mr. Chairman, I do think it is fair to say that 
there has been and continues to be some inconsistency in 
availability of non-institutional care services across all of 
VA, across networks, even from hospital to hospital. That is 
changing and changing rapidly following the GAO report, which 
helped to identify the magnitude of some of this inconsistency. 
We have been working to invest heavily in increasing the non-
institutional care services. In fact, for the year just 
completed, there has been almost 20 percent growth, and we are 
on a path of 18 percent increase in funding and capacity in 
non-institutional care such that all needs are consistently met 
for all veterans by 2011.
    In the near term, though, to reduce some of the 
disparities, we are increasing those areas that do have the 
greatest limitations, and that is the primary focus.
    Chairman Craig. OK. On the same note, GAO has pointed out 
that availability of different services--adult health care, 
home-based primary care, home respite--is inconsistent across 
differing regions of the United States.
    First, has there been an improvement since GAO first 
leveled the criticism? And second, do you think there are some 
areas of the country, such as rural versus urban or east versus 
west, that will lag behind others in availability of non-
institutional services; and if so, why?
    Dr. Perlin. To the first part of the question, sir, I think 
GAO was correct in terms of some of the inconsistency, and your 
comment whether there has been progress, the answer is 
absolutely. In fact, I was going to testify, on the basis of 
these notes, that we opened our 100th home-based primary care 
program--Dr. Burris told me this morning that the number is 
actually 102. That increase in home-based primary care is from 
77 to 102 programs in less than the last 5 years.
    As to your important question about access of services for 
rural veterans, this is one of the areas where we hope very 
much to work with this Committee in terms of using technologies 
based on our electronic health record and extending that 
information to the patient's home to allow support and 
monitoring and safe haven for patients when they may be 
geographically isolated from population centers or some of the 
inpatient facilities. So absolute focus in that area.
    Chairman Craig. Thank you. My time is up.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    We seem to want to press for the identification of 
services. I would like to ask each of you this question: Which 
veterans should be ensured long-term care? Dr. Perlin.
    Dr. Perlin. Ranking Member Akaka, that is really, I think, 
the fundamental policy issue, is what can VA provide in terms 
of long-term care services. Every morning I walk into our 
building and the inscription that dictates our mission, to care 
for those who have borne the battle, dictates what we do as 
doctors, nurses, individuals who are not only caring about 
veterans, but passionate about veterans. Our instinct is to do 
as much as we can for everyone. But the fact of the matter is 
that we have challenge right now despite the fact that actually 
there are two veterans for every veteran that the statute says 
we should be providing long-term care for, we go beyond that 
mission. And I think it is impossible that we can be all things 
to all people and continue to deliver accessible high-quality 
care to those who have borne the battle.
    The statutes that authorize long-term care provide that 
care, priority 1-A, or those that are 70 percent service-
connected or greater. And in 2004, our average daily census--
which is more than people; it is the number of people in beds 
on any given day--was 23,965; 8,000 were priority 1-A. Sixteen 
thousand of that average daily census were other than priority 
1-A, or 70 percent service-connected or greater. So even today, 
and certainly even with the President's or VA's proposed budget 
of providing care not only to priority 1-A, but also priority 1 
through 3, that is all veterans with compensable service-
connected disability and those individuals with special needs, 
such as spinal cord injury, serious mental illness, hospice, 
respite, and post-hospitalization care, we are well beyond that 
statutory mandate.
    That said, we want to be humane and practical and 
contemporary in our approach. And Dr. Wiener's testimony 
identifies that we have traditionally an institutional bias and 
the movement to the community as to the least restrictive 
environment and home care. And we want to be pragmatic as well, 
practical, in making sure that we don't back up our acute care 
hospital by not having a place where patients can recover in a 
less acute environment. So it raises that fundamental policy 
question that you ask: Are we really saying that we are 
guaranteeing long-term care for all? If so, it is really beyond 
what we would be able to practically offer and it is beyond 
what veterans would request in the sense that they make this 
choice based on geography, having a loved one close by.
    So regardless of outcome on this policy question that VA 
and this Committee are debating today, I think we have an 
obligation to clarify for veterans what it is that we will do 
so that they can plan accordingly.
    Senator Akaka. Thank you, Mr. Secretary.
    Your thoughts, Ms. Ramos.
    Ms. Alvarado-Ramos. In respect to the veterans who are in 
priority 1-A, as an example, the State Association of Veterans' 
Homes and our homes have gone on the record with the VA in 
that, as an alternative to care to veterans who are in those 
priorities that the VA has an obligation to provide long-term 
care, the State veterans home system is an absolutely more 
economical alternative and could save the VA significant 
amounts of dollars should those veterans be taken care of in 
our homes under those conditions.
    Now, there have been issues because of the State homes 
program being left out of the language in the Mill Bill that 
addresses the issue of the 70 percenters, that we cannot enter 
into a contractual relationship with the VA to be able to 
provide such care. And this is outside of the per diem program. 
So there are opportunities for the VA to extend the reach of 
its dollar by continually looking at the State veterans' home 
system as a partner and as a viable alternative to be able to 
extend themselves and be able to provide more care to more 
veterans in those exact priorities.
    Senator Akaka. Dr. Wiener.
    Mr. Wiener. I am not sure which group should get priority, 
but I think one thing is very clear. That is that the aging of 
the veterans population, the sort of self-selection into the VA 
by people with higher levels of disabilities, and the new 
levels of disabilities that we have by injuries being caused by 
the war in Iraq mean that the demand for long-term care is 
increasing and it is going to continue to increase. And I would 
urge the VA to try to increase its commitment to long-term care 
services rather than decrease it, because that is where the 
need is going to be. People with disabilities have high acute 
care costs, they have high long-term care costs, and that ought 
to be where the VA puts its focus.
    Senator Akaka. Thank you, Mr. Chairman. My time has 
expired.
    Chairman Craig. Thank you. Senator Burr.
    Senator Burr. Thank you, Mr. Chairman.
    Dr. Perlin, you said in your statement that home-based care 
has increased at, I think, 11 percent and that it had 
maintained an incredible increase in comparison to everything 
else. Do you see that that percentage will continue, and will 
the differentiation between that and true long-term care, will 
that be maintained? Is that where you see the largest growth 
areas of percentage?
    Dr. Perlin. Senator, thank you very much for that question. 
We agree that the non-institutional growth will be maintained. 
It is actually 19 percent last year and in fact will be 
increasing 39 percent in budgeting between 2004 and 2006. So we 
intend to maintain and really push that.
    The reason for that is, just as Dr. Wiener is suggesting, 
is that the needs increase. The question is how do we best meet 
those needs. We see that the needs are for some institutional 
care, we see that there are needs for different levels of 
institutional care, some care that is more generally 
supportive, some care that is intensely clinical and 
rehabilitative, some care that meets special needs--and some 
care that offers veterans, or any older American, the choice or 
the opportunity to remain in their community. And that 
individual, where in the past the default has been 
institutional care, it has been one-size-fits-all when that is 
really not what is needed. And for many of our World War II 
veterans, that population that is reaching that age of 85, the 
disruption that that singular choice would offer is not just to 
aging successfully in their community, it is disrupting a 
spousal relationship of even 60 years.
    So it is an area that, as you indicate, we will continue to 
invest very aggressively in.
    Senator Burr. The Chairman brought up the issue of 
geography and how that affects maybe the structure of things. 
North Carolina is the largest growing veterans population as a 
percentage in the country. Is the VA planning for the long-term 
care explosion that potentially will happen in a State like 
North Carolina that we can track today?
    Dr. Perlin. Absolutely. We recognize that North Carolina is 
one of the States that is growing at the fastest rates. And a 
lot of retirees are going there, so the issue has accelerated. 
In fact, Dr. Burris, Mr. Klein, who are with us here today, 
have done actuarial modeling, for the first time basing 
projections on actuarial data based on the number of veterans 
in a region, to being to project and help us rationally 
identify where we need to put resources, be they non-
institutional or institutional long-term care.
    Senator Burr. Let me turn to Dr. Wiener for a second since 
we have the knowledge of not just a perspective on VA, but a 
perspective on long-term care, big picture.
    As Medicare and Medicaid reimbursements are continuing to 
be cut, as they continue to be cut, clearly to meet the need of 
long-term care in the future there has to be capital that comes 
in and builds the infrastructure for individuals. When you have 
such a large proportion that is funded either by Medicaid, in 
the case of the State program, or Medicare, the services that 
come in for the acuity issue, what does that do to the capital 
for the future expansion of long-term care facilities in this 
country?
    Mr. Wiener. Well, the access to capital will depend on how 
much reimbursement is cut and what kind of reimbursement 
systems States adopt. Clearly private sector, private insurance 
pays a higher rate than does Medicaid. But the history for the 
last 25 years has been a slowing increasing percentage of 
nursing homes that are Medicaid as the cost of nursing home 
care has gone up faster than incomes. So currently, about two-
thirds of nursing home residents have their care paid for by 
Medicaid, about another 9 or 10 percent are paid for by 
Medicare. So it is three-quarters by public programs. And if 
you add in VA, it gets even higher.
    So the access to capital is really going to depend very 
heavily on what happens to those public programs. As I said in 
my testimony, I expect private insurance to increase, but there 
is such a strong barrier because of affordability, unless there 
are extremely aggressive subsidies which are in themselves very 
expensive, I don't expect private long-term care insurance to 
be a major source of financing.
    Senator Burr. Are we on a pace in America to be able to 
provide all the long-term care slots that you project we might 
need in the next decade, two decades?
    Mr. Wiener. Well, that is really a decision largely to be 
made by the people here in this room and your colleagues. 
Because my projection is that at the height of the baby boom 
generation about 2.5 percent of the gross domestic product will 
be for long-term care for older people. That will be about 50-
75 percent higher than it is now. Is that affordable? Well, 
that is up to you to decide. It is not, in my view, the end of 
civilization as we know it, but it certainly will be an 
additional burden that will exist whether we finance care 
publicly or privately.
    Senator Burr. Thank you, Doctor.
    Thank you, Mr. Chairman.
    Chairman Craig. Thank you very much.
    Senator Rockefeller.
    Senator Rockefeller. Thank you, Mr. Chairman.
    Dr. Wiener, I want to put my questions to you. The Under 
Secretary for Health has indicated that what we did back in 
1999 to implement sort of outpatient long-term care, which had 
never been done before by the Government for any purpose at 
all, actually didn't get started, and he talked about it took a 
long time to start because there was resistance to it. He says 
it is going up by 19 percent and will be 37 percent at some 
point. But that is from a base of virtually zero, from my 
observations.
    Now, the question that Senator Burr asked, I think, is the 
main question: What is our state of mind for long-term care? 
And the state of mind for long-term care is that we have no 
long-term care policy at all. You either get it through 
Medicaid, which we are cutting, and those cuts last over 10 
years, they will keep accumulating, getting worse. In West 
Virginia, and I am sure in your State too, virtually all of our 
budget problems are involved either with public employees 
health insurance, which is separate but basically Medicaid, and 
we are having to cut, I think, $165 million out of our Medicaid 
budget this year.
    So we are building a State nursing home. And I can really 
foresee a situation where it will open and there won't be many 
people there to take care of anybody. I mean, we did a--in the 
late 1980s, do you remember the Pepper Commission?
    Mr. Wiener. I certainly do, sir.
    Senator Rockefeller. Well, it ought to be a bible. Because 
we passed--and this was during the Reagan Administration, a 
preponderance of Republicans on the committee, I was chairing 
it--we passed 11-4 a national long-term care policy. Assets, 
all of those things taken into account. But to me, the greatest 
dilemma--I mean, I think ever since the Clinton health care 
effort failed, we have walked away from health care in this 
country. We have done it for veterans. Veterans, it is tragic 
to say, but it is somewhat easier to do it for veterans because 
people don't pay as much attention to them as we ought to.
    But there isn't really--I mean, for example, long-term care 
involves Alzheimer's, it involves all kinds of mental health. I 
don't think that you could answer me that you are doing 
anything about Alzheimer's.
    Dr. Perlin. Do you want to talk about the Alzheimer's?
    I asked Dr. Burris to talk about some of the Alzheimer's 
programs, both in terms of research----
    Senator Rockefeller. But I asked you. You are in charge.
    Dr. Perlin. I would be happy to. In fact, we have 
Alzheimer's programs as a unit. In fact, a large part of our 
research portfolio, which I am pleased to say is about $1.651 
billion----
    Senator Rockefeller. Well, you are talking too fast. You 
got into polio?
    Dr. Perlin. Our--no, our research portfolio----
    Senator Rockefeller. Oh, portfolio.
    Dr. Perlin [continuing]. Includes a great deal of attention 
to issues that are really related to aging. Because, as has 
been noted, as this discussion identifies, the challenges the 
veterans face are not dissimilar from the challenges that 
America faces in terms of diseases of later years.
    Senator Rockefeller. Are you telling me you are doing 
research on it or are you----
    Dr. Perlin. We have both----
    Senator Rockefeller. I am not aware of any services you are 
providing for Alzheimer's or mental health.
    Dr. Perlin. For Alzheimer's or mental health? Sir, we have 
approximately $2.2 billion in specialized mental health 
services, $3 billion, including pharmaceuticals for mental 
health, and $10 billion----
    Senator Rockefeller. Under long-term care?
    Dr. Perlin. No, not under long-term care, under long-term--
--
    Senator Rockefeller. That is what I am talking about, long-
term care.
    Dr. Perlin. Under long-term care, sir, we have specific 
programs in Alzheimer's and for veterans with cognitive 
decline, and the geriatrics evaluations and management 
programs, the GRECs, the Geriatric Research, Education, and 
Clinical Centers, of which there are a number, and these 
programs are pervasive throughout the entire country.
    Senator Rockefeller. Well, you have either done an 
incredible job in 3 months or you fooled me entirely.
    Dr. Wiener, how would you react to that?
    Mr. Wiener. Well, the VA has--I mean, you can't really 
separate long-term care from Alzheimer's disease. I mean, half 
of the people in nursing homes nationally have some kind of 
cognitive impairment most likely due to Alzheimer's disease. So 
I think a lot of long-term care is treatment for people with 
Alzheimer's disease. I can't speak specifically on programs 
within the VA that address Alzheimer's disease.
    Senator Rockefeller. But the Under Secretary has talked 
about ``pervasive programs'' for Alzheimer's and long-term 
care. That comes as news to me. Do you have any view on that? 
You are the third party looking in here.
    Mr. Wiener. Well, as I said, long-term care and Alzheimer's 
disease are not very separable. If you are providing long-term 
care services, you are probably providing services to people 
with Alzheimer's disease.
    Senator Rockefeller. Yeah, but don't--we need to stop 
there, because Alzheimer's requires specialized nursing. Am I 
right?
    Mr. Wiener. Well, there are many issues related to 
Alzheimer's disease that are separate from people with just 
pure physical disabilities, but again, half of the people in 
nursing homes nationally have some kind of cognitive impairment 
and probably have Alzheimer's disease. And they are not 
receiving specialized treatment.
    Senator Rockefeller. Well, Mr. Chairman, I am not sure 
where I got on that, but my--I would just say to you my concern 
is that this Nation is resolutely--and, you know, because it is 
endlessly expensive. And endlessly endless, long-term care. It 
is the great need that we have not met, we will not face. As I 
say, some of us got this done in 1999 for the Veterans' 
Administration and for years they just kind of pushed it aside. 
And now they have done some things and, according to the Under 
Secretary, it is pervasive. I can't really make out what Dr. 
Wiener is trying to tell me on this. But put this member down 
as very skeptical, very concerned, and very worried.
    Thank you.
    Chairman Craig. Thank you.
    Ms. Alvarado-Ramos. Mr. Chairman, may I please address that 
issue for a second?
    Chairman Craig. Certainly.
    Ms. Alvarado-Ramos. Because, at least in my experience 
within Washington State, I am working with VISN 20, I must say 
that the geriatrics program has assisted our facility 
significantly when it comes to the issue of mental health and 
when it comes to the issues of Alzheimer's and some training 
from the VA staff with our staff. I cannot speak entirely for 
the rest of the Nation because I don't know what the rest of 
that experience is, you know, but the GREC program that the VA 
has, in the State of Washington particularly, is exceptional.
    Chairman Craig. Thank you for that comment. I can 
understand the frustration that the Senator has. I think we 
have an intern geriatrics program at the center in Idaho also, 
where University of Washington students study, and there is a 
great emphasis now being placed. It is a growing new emphasis, 
but it is not unlike that of the non-VA facilities and non-VA 
services. How much money have we put into Alzheimer's research 
here in the last 5 years? A good deal more than we did 5 years 
prior. And I agree with you, though, we are just touching the 
edge of it and the kind of work that needs to go on to 
understand it or even to resolve the issue.
    So Senator Salazar. Ken.
    Senator Salazar. Thank you, Mr. Chairman.
    Dr. Perlin, I have a question of you, and that is I would 
like you to think and describe to us what would be your 
coherent plan for long-term care. I hear Dr. Wiener talking 
about how he doesn't think that we have a coherent plan for 
dealing with the aging population, and that would include our 
aging veterans' population. I would like you to comment on it 
in this particular context.
    And let me also say, I think when you hear the questions 
from me or Senator Rockefeller or any other Members of this 
Committee, it is because we care, we confirmed you with, I 
think, a unanimous vote and it is because we have great faith 
in your interest and passion for these issues. But at the same 
time, it seems to me that what we really need to know is where 
the plan is for the Veterans' Administration with respect to 
these critical issues for veterans, and we need to know what we 
ought to be doing on the one plane and then the reality that we 
have to deal with on the budget plane on the other hand.
    For example, in my own State, with the State veterans' 
nursing homes that were on the chopping block in the 
President's budget and the VA's budget, we would have had--in 
the little town of Walsonburg--93 out of 100 residents in a 
State veterans' nursing home would have basically been kicked 
out because the budget wouldn't have been there to continue the 
funding for that nursing home. Because of the action of Senator 
Craig and others on this Committee, we were able to restore the 
funding. But to me, what was happening there in Walsonburg did 
not symbolize or speak to me about coherency within the plan of 
the VA with respect to long-term care. It seems to me that that 
decision was really being driven by budget realities and budget 
cuts that you were facing.
    So I would like you to step back and tell me and tell this 
Committee what you would see as the coherent plan with respect 
to dealing with long-term care for veterans.
    Dr. Perlin. Thank you, Senator, for the question and thank 
you, and Senator Rockefeller, as well, for your passion and 
advocacy for long-term care for veterans and the advocacy for 
mental health care, the advocacy of this Committee. I take the 
questions as an expression of that absolute passion and 
dedication. I appreciate through your vote of confirmation that 
is seen as a passion that is central to why we are in VA to 
begin with.
    The view for a coherent system, what would it look like? It 
would be a system where on the--of those individuals with 
cognitive disability, like Alzheimer's disease, particularly if 
it were very advanced--where we have specialized services to 
meet those needs; where we have, on the side of intense care, 
facilities for individuals who do have those special needs, 
like spinal cord injury, like ventilator dependence. It would 
have a system that complemented acute hospital care and 
provided rehabilitation for the individual who is going to get 
back to function with some restorative care--the individual 
after a stroke, the individual after a hip replacement. It 
would have components that are available as well for patients 
who don't have a very positive trajectory in terms of 
longevity, but for patients whose health is going to 
deteriorate, to have the hospice, the palliative care to make 
veterans as comfortable as possible. It would have the 
expression particularly of these features not only in the 
institution, but in the home. So, particularly for the veteran 
who has reached the end of his or her life and is dying, if 
their choice is and they can be supported effectively in the 
embrace of their family, that we can do that.
    It would then be complemented by a level of care that would 
be supportive and having good maintenance for those individuals 
who aren't so needing of clinical service that they have to be 
in an almost hospital-like environment, but an environment that 
resembles what in the broader health care environment are being 
described as greenhouses, environments that are very homelike, 
where individuals with some mental limitation or some physical 
limitation can live as normal and as functional a life in as 
residential a setting as possible.
    And then the other final component of that is for those 
individuals who really don't need that level of support, who 
want to maintain the social-spousal-community relationship. It 
could be supported through technology or assistance in their 
home with home health and that sort of thing. In fact, we have 
gone from about 19,800 census in 1998 to about 36,000 as of the 
beginning of 2005, veterans being supported in that way. So I 
see it as all of those different elements.
    Senator Salazar. Let me ask you, if I may, Dr. Perlin, with 
respect to that vision, which I find commendable in the 
components of that plan, has the VA looked at the cost factors 
associated with that plan, and would you be prepared to provide 
that information to this Committee?
    Dr. Perlin. Yes. I think we could take a breakout of what 
different elements cost and be able to provide that information 
to you. I think' in our proposal, we provided an articulation 
of, really, what that vision provides if care were provided to 
priority groups 1 through 3, those individuals with special 
needs and those individuals who need recovery after a 
hospitalization.
    Senator Salazar. Mr. Chairman, I know my time is up, but it 
seems to me that it would be very useful for our Committee to 
have the components of the plan that Dr. Perlin articulated 
looking long-term, but also with respect to each of those 
components, to have some cost figures associated with those 
projections. At the end of the day, the decisions that we are 
making here, the decisions that the VA and the President make 
on the budget, really drives what kinds of services we are 
going to be able to provide, whether it is the patients with 
Alzheimer's or other veterans that fall into any one of the 
categories that you describe. And I think it would be important 
for us to know if we were able to implement the coherent plan 
that you articulated, what are the costs associated with that 
and also what are the current gaps between what we are funding 
and what it would take to be able to effectively implement that 
plan.
    I think that would be, at least for me personally, Mr. 
Chairman, it would be something that I would find very useful.
    Chairman Craig. Well, thank you. I think that is a very 
valuable suggestion.
    I have several more questions that I would like to ask. 
Senator Thune has stepped out for a moment. We will get to him 
when he comes back.
    Ms. Ramos, let me go to you. Last year Congress passed 
Public Law 108-422, which made clear that per diem payments 
from VA for the care of veterans in State homes were not to be 
considered a third-party offset to Medicaid payments. Has the 
change had an intended effect on the offset that was occurring 
in homes throughout many States?
    Ms. Alvarado-Ramos. There hasn't been very much change as 
far as additional States taking advantage of that particular 
law. We have about 19 States that do have Medicaid as one of 
its components to be able to defray the cost of long-term care 
in our facilities, Washington State being one of them. But the 
fact is that the addition of the Medicaid system into a home 
places a significant administrative burden upon the facility 
because there is already a VA system, inspection system rules 
and requirements, so therefore States, unless they absolutely 
have to, they are not going to go into the Medicaid system even 
though the law made available the opportunity for the per diem 
not to be offset.
    Chairman Craig. Is there any concern that this change will 
force many States that have not been Medicaid providers to 
adopt a Medicaid standard because the fiscal incentive is too 
great?
    Ms. Alvarado-Ramos. There are some States that are 
considering it, and I foresee that some will become Medicaid in 
the future. As you know, though, Medicaid funding has been 
reduced and likely is going to continue to be reduced, and 
those bring a very significant issue when it comes to veterans 
who presently are being cared for in our homes being placed 
into the Medicaid system, because right now they are 
overburdened. So for States to be able to take care of this 
additional burden that traditionally has been cared for by the 
per diem and the State contribution and the resident 
contribution, it would require for Medicaid to add additional 
dollars to be able to take care of this new population to the 
community nursing home.
    Chairman Craig. Thank you.
    Dr. Wiener, you have stated that only 10 to 20 percent of 
older people can afford long-term care insurance and that long-
term care insurance is unlikely to be a major source of 
financing for long-term care. However, as the market for long-
term care insurance grows, it becomes--or it should become--
more affordable. It seems that one of the keys to affordability 
is to increase the number of younger people who make this 
investment, and Congress is nibbling around the edges of how 
you might incentivize that. Should we explore ways to increase 
the number of younger veterans who purchase long-term care 
insurance?
    Mr. Wiener. Well, purchase of long-term care insurance at 
younger ages is clearly cheaper than at older ages, but it 
still can be a substantial amount of money. A good-quality 
policy bought at age 50 is still around $1,000 to $1,500 a year 
and is basically for a population that is concerned with other 
things--their general retirement, mortgage payments, saving for 
their general retirement, paying for college education for 
their kids. And so part of the dilemma for private long-term 
care insurance is that the age where it is more affordable you 
are not all that interested in it, but at the ages when you are 
older, when you are more interested because you see the risk, 
it becomes unaffordable.
    So private long-term care insurance faces that kind of 
dilemma. My own research suggests that if people bought it at 
younger ages, for a much higher percentage of the population it 
would be affordable. But I have also done analyses that have 
looked at the effects of tax incentives, and in general, unless 
they are extraordinarily large, my research shows that they 
have a relatively small impact on the number of people who buy 
policies. But it costs a substantial amount of money, because 
everyone who would have bought a policy without the incentive 
would get the tax savings.
    Chairman Craig. Do you have any published information of 
your research in those areas?
    Mr. Wiener. Yes, I would be happy to submit that for the 
record.
    Chairman Craig. I wish you would. I find it fascinating, 
and I think all of us are extremely concerned about this issue. 
The question is how do you get America to move in that 
direction. Obviously, it is affordability. And at the same 
time, it sounds like incentivizing doesn't always work that 
well in this situation.
    Mr. Wiener. That is correct, sir.
    Chairman Craig. Thank you very much.
    [Witness failed to provide requested publication for the 
record.]
    Senator Burr, do you have any further questions? Senator 
Rockefeller?
    Senator Rockefeller. Mr. Chairman, I always appreciate the 
way you phrase questions and probe. It is always very balanced 
and fair. I try to praise you every meeting I come to.
    [Laughter.]
    Chairman Craig. That is why I like you to attend. Thank 
you.
    Senator Rockefeller. But, you know, I run out of things 
that I can say after awhile.
    Chairman Craig. I will give you some.
    Senator Rockefeller. No, you don't need to. You are just 
very, very good.
    Let me go at this in a little bit different way, Dr. 
Perlin. A number of years ago we had a hearing on this 
committee about mental health. And I asked the VA to tell me 
how much it would cost to do mental health the right way, 
whatever that would mean, for all veterans. And then it took 
about 2 years for the VA to tell me at another hearing, OMB 
won't let us give you a number.
    Now, we all know this is what we are talking about. And I 
am not saying there is anything you can do about that because 
that is the way Government is set up--you come in, you think 
you are going to run something, and then you are told what you 
can do and it is frustrating for you and you do the best you 
can. I know that.
    But this is a little about what Senator Salazar was talking 
about, is the cost, what is the cost of long-term care. Is it 
not true, for example, that in the CARES Commission, in the 
body of it, that there really is no long-term care strategy 
being addressed in that CARES Commission? I believe that is 
true.
    Dr. Perlin. When the CARES Commission draft report first 
came out for review, the actuarial modeling had not been 
completed. That is, if not completed, nearing completion at 
this moment and, as I mentioned, based on actuarial. So 
technically it didn't have the benefit of all the information. 
It does now.
    Senator Rockefeller. And so what is happening now?
    Dr. Perlin. Well, exactly. That actuarial information is 
what we will use to look at the demographics, the veterans, the 
aging populations, large-growth States like North Carolina, and 
try to come to, you know, a rational approach to meeting all 
the veterans' needs, from those with very substantial, intense 
health care needs, to those that just need more modest support, 
and align the resources with the need.
    Senator Rockefeller. OK. If the per diem for State 
veterans' homes is being cut--and I forget what the figure is; 
it is $283 million or something of that sort in this year's 
budget, the per diem match. And this gets back to the whole 
question of how whatever it is--I mean, you say that everything 
is wonderful in the State of Washington.
    Ms. Alvarado-Ramos. Just when it came to the issue of this 
mental health-specific issue that you asked about, sir.
    Senator Rockefeller. OK, but is this going to affect you?
    Ms. Alvarado-Ramos. The per diem? Absolutely.
    Senator Rockefeller. Medicaid cuts?
    Ms. Alvarado-Ramos. And the Medicaid cuts. Everything 
affects our home operations, but specifically when it comes to 
the long-term policy proposed, you know, in prioritizing, 80 
percent of our residents would be ineligible for per diem and 
therefore we would have to find some other ways of placement.
    Senator Rockefeller. There we go. The point I was not 
making well.
    Ms. Alvarado-Ramos. And the 80 that falls out are probably 
the poorest and most needy and medically compromised residents 
who may not be service-connected, yet they require 24-hour 
nursing home care.
    Senator Rockefeller. Which is--and now you have made 
another point for me, and that is that the service-connected 
factor runs for a substantial--for millions of American 
veterans, into potentially lack of coverage for long-term care, 
mental health, Alzheimer's, et cetera. When I say 
``Alzheimer's,'' I am not just talking about Alzheimer's. I am 
talking about the whole range of diseases that are like that.
    Ms. Alvarado-Ramos. Dementias.
    Senator Rockefeller. Yes. Yes.
    So in my final 3 seconds, what are we going to do, Dr. 
Perlin, about this per diem crisis and the 80 percent factor?
    Dr. Perlin. Well, I think we have received and appreciate 
the views of this Committee. This Committee has spoken in a 
bipartisan fashion. Chairman Craig and Ranking Member Akaka 
have identified that this Committee does not support that 
proposal. So we hear that message.
    Senator Rockefeller. Thank you.
    Chairman Craig. One last question of Dr. Wiener. It deals 
with nursing home populations. And you talked about the 
availability of nursing home beds today. Let me give you these 
figures and then ask you the question.
    In my home State of Idaho, capacity is slightly lower than 
the national average. However, it continues to increase at a 
very significant rate. For example, 75 percent capacity, 2003; 
79 percent capacity, 2004; today it is at 83 percent. The data 
suggest that occupancy rates may be increasing due to the fact 
that every year a few facilities reduce their numbers of 
licensed beds.
    Is this the national trend? If so, would nursing homes 
still be available to absorb the veterans that would no longer 
qualify for care at VA-funded facilities? What are the trend 
lines on those bed availabilities?
    Mr. Wiener. Well, I have been involved with long-term care 
for 30 years, and for the vast majority of that time nursing 
home occupancy rates have nationally been in the very high 80s 
or low 90s, and in a number of States it has been 95, 96 
percent. And what is sort of historically unique is that in 
recent years occupancy rates have been falling and in general 
the level of nursing home residents has stayed, nationally, 
remarkably stable over the last 5 years or so. So as you noted, 
occupancy rates are partly a function of how many beds you make 
available, and you can----
    Chairman Craig. That is true.
    Mr. Wiener [continuing]. Increase your occupancy rate just 
by reducing the number of beds you make available. But in 
general, occupancy rates have fallen somewhat in recent years. 
Obviously, in some States, and your State may be an exception, 
but in general occupancy rates have fallen. So there are empty 
beds available. Whether they happen to be in the locations 
where State homes would be, whether they serve the same kinds 
of residents, whether the finances would match up, I certainly 
couldn't say. But there are substantial numbers of empty beds 
for nursing homes in this country.
    Chairman Craig. Well, thank you all very much for your time 
with us. As we stated at the beginning of this hearing, this is 
an open discussion that will go on as we increase our awareness 
of the situation of long-term care for veterans and as we look 
at other areas for the other aging populations of our country. 
So this is a work in progress, and we thank you very much for 
your time.
    Let me ask our second panelists, then, to come forward.
    Our second panel is made up of Fred Cowell, Associate 
Director for Health Policy, Paralyzed Veterans of America; and 
Mr. Donald Mooney, Assistant Director for the American Legion.
    So Fred, we will let you lead off. Thank you for being 
here.

STATEMENT OF FRED COWELL, ASSOCIATE DIRECTOR, HEALTH ANALYSIS, 
                 PARALYZED VETERANS OF AMERICA

    Mr. Cowell. Thank you, Mr. Chairman.
    Mr. Chairman and Members of the Committee, my name is Fred 
Cowell of the Paralyzed Veterans of America. PVA is pleased to 
offer its views concerning access to and the availability of 
long-term care services for America's veterans.
    Mr. Chairman, three serious proposals are currently merging 
together that have the potential to seriously reduce VA's 
capacity to provide nursing home care to aging veterans. First, 
VA's fiscal year 2006 budget would reduce funding for VA 
nursing home programs by approximately $450 million and force 
VA to reduce its average daily census by about 4,000 patients. 
Second, VA is requesting Congress to repeal the nursing Home 
capacity mandate contained in the Veterans Millennium Health 
Care and Benefits Act. And third, the Administration's 2006 
budget proposal would place a moratorium on grants for new 
construction and reduce the per diem rate VA pays to State 
veterans' homes for the care of aging veterans.
    Mr. Chairman, these three proposals come at a time when 
America's aging veterans population is projected to 
significantly increase over the next decade. The General 
Accounting Office has projected the number of veterans age 85 
and over will increase from 870,000 to 1.3 million over the 
next decade. This group of aged veterans will have a very 
significant demand for VA nursing home care services. Taken 
together, these three issues have a potential to create VA's 
long-term care perfect storm. If passed, these proposals will 
have negative consequences for aging veterans well into the 
21st century.
    Regarding eligibility, PVA supports the budget proposal to 
extend long-term care eligibility to veterans with catastrophic 
disabilities. Today, aging veterans with spinal cord injury or 
disease are at a serious disadvantage when it comes to the 
availability of specialized VA nursing home care. Currently, VA 
operates only four designated spinal care injury long-term care 
nursing home facilities, and none of these are located west of 
the Mississippi River. And taken together, these 4 facilities 
only provide 154 available beds, and of those only 115.6 were 
actually staffed in March of this year.
    VA's CARES initiative has proposed to increase its 
designated spinal cord injury nursing home capacity by 100 
beds. But only 30 of these beds will be on the West Coast. The 
addition of 100 beds is a step in the right direction, but 
these improvements are not yet a reality, and funds are needed 
for their activation.
    For veterans with catastrophic disabilities, care in VA 
nursing homes is often their only hope. VA has the expertise to 
provide quality care to these veterans. Community nursing homes 
simply don't have the expertise or want patients with high 
acuity needs. Veterans with spinal cord injury are often denied 
care in these private sector facilities.
    Mr. Chairman, VA needs to maintain and expand its capacity 
to provide nursing home care for catastrophically disabled 
veterans.
    On State veterans' homes, since 1998, State veterans homes 
have been handling a larger and larger share of VA's nursing 
home care workload. Currently, 50 percent of VA's nursing home 
care workload is provided in State veterans homes. PVA believes 
that these State veterans' homes are a valuable asset and 
should be protected. In addition to providing quality care, 
State veterans homes are a good value for VA. The GAO has said 
VA pays about one-third the cost of care when it refers 
patients to State veterans homes.
    Mr. Chairman and Members of the Committee, PVA calls upon 
Congress to chart a course for VA nursing homes that avoids the 
pending storm. We request that VA's budget proposal to cut its 
nursing home program be denied. We ask you to approve long-term 
care eligibility for veterans with catastrophic disabilities. 
We ask Congress to maintain the nursing home capacity mandate 
contained in the Mill Bill. And finally, we request that State 
veterans homes be spared cuts in construction and per diem 
funding.
    Mr. Chairman, that concludes my remarks and I would be 
happy to answer any questions you may have.
    [The prepared statement of Mr. Cowell follows:]

Prepared Statement of Fred Cowell, Associate Director, Health Analysis, 
                     Paralyzed Veterans of America

    Mr. Chairman and Members of the Committee, The Paralyzed Veterans 
of America (PVA) is pleased to present its views concerning access to, 
and the availability of, long-term care services for our Nation's 
veterans. My testimony also contains analysis provided by the veterans' 
service organization, authors of The Independent Budget for fiscal year 
2006.
    The focus of the testimony first looks at board, long-term issues 
affecting all veterans. Second, the testimony addresses the unique 
long-term care situation of veterans with spinal cord injury or 
dysfunction.
    The fiscal year 2006 VA budget has proposed to restructure Veterans 
Health Administration (VHA) institutional long-term care services. The 
most significant impact of the proposed change is to shift the burden 
of long-term maintenance care for certain veterans whose conditions do 
not make them candidates for rehabilitation, to other payers, and 
eventually to Medicaid, the single biggest U.S. payer for nursing home 
care. The veterans primarily affected by this proposed policy would be 
those without compensable service-connected disabilities and who have 
no rehabilitation potential. The VA has indicated an intention to 
increase other long-term care programs such as palliative, hospice, 
respite, home-based primary and adult day care. The two changes, 
shifting maintenance care elsewhere, and increasing other programs, 
would produce $209 million in net savings in fiscal year 2006 and 
reduce VA's average daily census in VA nursing homes by about 4,000 
patients.
    According to VHA estimates the system--in-house, contract, and 
State beds combined--has 35,878 beds today. Based on actuarial 
projections and assuming continuation of current policy, VA will need 
45,445 beds in 2013 and 43,042 beds in 2023 (95 percent occupancy 
rate). Under its proposed change in policy, VA's 2013 need will be 
22,228 beds and 23,245 beds in 2023 (VA Office of Strategic 
Initiatives, March 2005). Thus, VA' s proposed change in policy will 
save funds and reduce VA's need to maintain beds while the patients who 
would have occupied these beds are shifted to other VA programs and to 
another Federal payer, primarily Medicaid.
    This proposal comes during a time when the President has proposed 
to reduce the growth of Medicaid spending. The National Governors 
Association has reported that Medicaid programs nationwide are in 
financial crisis. Adding an additional burden to Medicaid at a time of 
crisis in that program is not well considered, especially given VA's 
expertise, quality and proven cost-effectiveness in providing care to 
enrolled veterans.
    The veterans' service organization community is unclear on whether 
this proposed shift in policy is well considered by the Administration. 
Every report VA has issued on long-term care for the past two decades 
and more demonstrated that the oldest veterans among us, those from 
World War II and the Korean War, will present massive needs for long-
term care near the end of life. VA leads the Nation in the study of 
aging, the establishment of clinical approaches, research, education 
and new treatment models to deal with diseases of old age. VA has 
established 130 VA nursing home care units, and has aided the States in 
establishing and sustaining 128 State homes for the long-term care of 
elderly veterans. As we begin to reach that pinnacle moment when 
veterans from the Greatest Generation begin calling on the VA system to 
address their end-of-life needs, VA is proposing to shift the burden 
and move into a type of niche market where it provides care to only 
that subset physically amenable to rehabilitation.
    The VA's Capital Asset Realignment for Enhanced Services (CARES) 
process was designed and executed to review out-year needs for VA 
capital investments based on the study of health care markets 
nationwide. Phases I and II of the CARES process are complete; yet, VA 
was not able to make any decisions with respect to its capital needs 
for long-term or mental health care programs because its projection 
models were seen as insufficient to the task of clearly demarcating or 
confidently predicting those requirements for the future. We seriously 
question whether a policy proposal with such profound effects as the 
one VA has made in its budget should go forward before VA has clearly 
reviewed its capital asset planning needs in the long-term care arena. 
We say no.
    GAO has reviewed VA's long-term care programs on a number of 
occasions. On May 22, 2003, GAO testified before the House Veterans' 
Affairs Committee concerning its review of non-institutional long term 
care programs. GAO found a high variation in availability of six VA 
programs: respite, home-based primary care, geriatric evaluation, adult 
day care, homemaker/home health aide services and skilled home health 
care. VA claims to have increased these and similar programs by 25 
percent since this review was completed, and proposes to increase them 
by 18 percent more in fiscal year 2006. Until it can be verified that 
these non-institutional programs are increased and functioning at a 
level of satisfaction to veterans who would need these services, it 
seems an unwise decision to close institutional care beds that 
presumably are needed by these patients who cannot now avail themselves 
of home-based and other alternatives. Also, given the personal 
circumstances and social conditions of many veterans who enroll in VA 
health care, there may be no permanent residence in which to introduce 
alternative care programs for some.
    We are also concerned about the status of VA's partnership with 
State homes. This historic relationship provides a superb example of a 
Federal-State partnership in long-term care burden sharing. The State 
home program has grown under both Republican and Democratic 
Administrations, and has carried strong bipartisan support by the 
Congress. VA's policy proposals would extend to the State homes as 
well, severely restricting the number of veterans placed in State homes 
and reducing payments to them by $293 million in fiscal year 2006. We 
are unsure why VA would want to remove a placement resource that has 
worked well in the past for tens of thousands of veterans who need 
long-term residential placement but could not be accommodated in VA 
beds.
    Despite an aging veteran population and Congressional passage of 
Public Law 106-117, the ``Veterans Millennium Health Care and Benefits 
Act'' (Mill Bill) VA has continuously, failed to maintain its 1998 VA 
nursing home required average daily census (ADC) mandate of 13,391. 
VA's average daily census (ADC) for VA nursing homes has continued to 
decline since 1998 and is projected to decrease to a new low of 9,795 
in fiscal year 2006. VA is serving fewer and fewer veterans in its 
nursing home care program despite the minimum 1998 level set by 
Congress.
    Now, VA is asking Congress to eliminate the mandatory ADC 
requirement contained in the ``Mill Bill.'' This request by VA is not 
driven by current or future veteran nursing home care demand. In fact, 
the General Accounting Office (GAO) reported ``the numbers of aging 
veterans is increasing rapidly, and those who are 85 years old and 
older, who have increased need for nursing home care, are expected to 
increase from approximately 870,000 to 1.3 million over the next 
decade.''
    PVA strongly feels that the repeal of the capacity mandate will 
adversely affect veterans and is a step toward allowing VA to reduce 
its current nursing home capacity. This is not the time for reducing VA 
nursing home capacity with increased veteran demand looming on the near 
horizon.
    PVA is pleased to see an extension of eligibility for VA nursing 
home care that covers veterans with catastrophic disabilities contained 
in the Administration's 2006 VA budget proposal. In the past, VA has 
done a good job of recognizing the complex nursing home care needs of 
veterans with spinal cord dysfunction SCD) and has provided care as 
resources were available. Providing eligibility to VA nursing home care 
for catastrophically disabled veterans will greatly improve VA access 
to these services for veterans who desperately need them and who have 
great difficulty in being admitted to private sector community nursing 
homes.
    Mr. Chairman, there are unique advantages of VA nursing home care 
as compared to private sector care. Because VA nursing homes are most 
often co-located with a VA medical center they offer prompt access to 
VA acute medical treatment for elderly veterans. When veterans living 
in VA nursing homes require acute medical treatment their care is 
easily facilitated and efficiently coordinated between VA providers. 
Also, VA nursing homes provide a higher quality of care that that 
provided in private sector facilities. Patient surveys indicate that VA 
care is superior to the care provided in community nursing homes. VA 
and Congress must do everything in their power to maintain VA nursing 
homes as a valuable Federal asset.
    For veterans with catastrophic disabilities, care in VA nursing 
homes is often their only hope. Community nursing homes simply don't 
want patients with high acuity requirements. Veterans with spinal cord 
injury are often denied care in these private sector facilities. VA 
must maintain and expand its capacity to provide nursing home care for 
catastrophically disabled veterans.
    Mr. Chairman, thousands of veterans with spinal cord injury or a 
disease of the spinal cord (SCD) are at a serious disadvantage when it 
comes to the availability of specialized VA long-term (nursing home) 
care in their geographical area. Currently, VA operates only four 
designated spinal cord injury nursing home care facilities. These 
facilities are located at: Castle Point, New York; Brockton, 
Massachusetts; Hampton, Virginia; and the VA residential care facility 
at the Hines VAMC in Chicago, Illinois. As of March 2005, all of these 
facilities taken together only provide a total of 154 available beds 
and of those only 115.6 are actually staffed beds. As you can see the 
number of available nursing home care beds for these catastrophically 
disabled veterans is extremely low and none of these facilities are 
located west of the Mississippi River. Veterans with SCD who live west 
of the Mississippi River have no access to these specialized long-term 
care services unless they are willing to go on waiting lists, and leave 
their families and their home communities.
    While VA's Capital Asset Realignment for Enhanced Services (CARES) 
initiative has proposed to increase VA's capacity for SCD long-term 
nursing home care by adding 100 additional beds at four locations (30 
beds at Tampa, Florida; 20 beds at Cleveland, Ohio; 20 beds at Memphis, 
Tennessee; and 30 beds at Long Beach, California) much work remains to 
be done. And, as you can see, only one of these proposals will add new 
VA nursing home beds on the west coast. Additional specialized VA 
nursing home care capacity is severely needed especially in the western 
portion of the country.
    A shortage in specialized SCD VA nursing home capacity is already a 
problem because of waiting lists for care and future demand for 
services. For example, the CARES long-term care projections (revised 
December 2004) for spinal cord injury indicate a VA gap in the number 
of VA available and designated beds versus the number of VA projected 
beds. VA's spinal cord injury long-term care data says, VA will require 
705 long-term care beds in 2012 and 1,358 in 2022. While the 100 beds 
recommended and proposed in CARES is a step in the right direction 
these improvements are not yet a reality and funds are needed for their 
activation.
    In conclusion, three long-term care proposals are merging together, 
simultaneously, that would contribute to a serious loss of capacity for 
veterans who need long-term care. First, VA's 2006 budget proposal 
would reduce the funding for VA nursing home care programs by 
approximately one half billion dollars. Second, VA's request to repeal 
the nursing home capacity mandate contained in the ``Mill Bill'' opens 
the door for VA to further reduce its nursing home capacity. Third, the 
Administration's Budget contains a proposal that would place a 
moratorium on grants for new construction and reduce the per-diem rate 
VA pays to State Veteran's Homes.
    These three effects come at a time when America's aging veteran 
population will significantly increase over the next decade. Taken 
together these three issues create the conditions necessary for ``VA's 
Long-Term Care Perfect Storm.'' This Perfect Storm will have negative 
consequences for aging veterans by reducing VA's nursing home capacity 
and damaging State Veterans' Homes, at a time of increasing demand, 
well into the 21st century.
    Mr. Chairman, and Members of the Committee, PVA calls upon you to 
chart a course for VA's long-term care programs that avoids this 
pending storm. We request that VA's budget proposal to cut its 
institutional long-term care programs be denied. We ask Congress to 
maintain the ADC capacity mandate in the ``Mill Bill.'' And finally, we 
request that the State Veterans Homes be spared cuts in construction 
and per-diem funding.
    Thank you for this opportunity to present our views and concerns.

    Chairman Craig. Fred, thank you very much.
    Donald, welcome before the Committee. Please proceed.

 STATEMENT OF DONALD L. MOONEY, ASSISTANT DIRECTOR, VETERANS' 
    AFFAIRS AND REHABILITATION DIVISION, THE AMERICAN LEGION

    Mr. Mooney. Mr. Chairman and Members of the Committee, 
thank you for this opportunity to express the American Legion's 
view of current legislative proposals concerning the Department 
of Veterans' Affairs long-term care programs.
    The American Legion is disturbed by VA's continuing efforts 
to limit its responsibility to America's aging veterans. This 
year's VA budget contains three legislative proposals that 
would further those efforts. The President's fiscal year 2006 
VA budget request would repeal the provision of the Millennium 
Act requiring VA to maintain its nursing home care unit bed 
capacity at the 1998 level of 13,391. This black-letter law is 
referred to in VA's budget request as a baseline for comparison 
and in this capacity has significantly eroded rather than been 
maintained. VA had 12,239 beds in 2003 and 12,245 in 2004. The 
President's budget request only projects 9,975 in fiscal year 
2006, a 27 percent decrease from the Millennium Act mandate.
    The American Legion believes that VA should comply with the 
intent of Congress to maintain adequate nursing home capacity 
for those disabled veterans who are the most resource-intensive 
groups--clinically complex, special care, extensive care, and 
special rehab case mix groups. They are entitled to the best 
care that VA has to offer and they should not be dumped onto 
Medicaid, as is now the trend.
    VA's budget request would have modified eligibility for 
long-term maintenance care to veterans in priority groups 1 
through 3 and catastrophically disabled priority group 4 
veterans. All other enrolled veterans would be entitled only to 
short-term care. Currently, VA is only required to furnish 
nursing home care to veterans who are 70 percent or higher 
service-connected disabled and to those veterans who require it 
because of a service-connected condition. According to VA's 
database, VetPop 2001 adjusted based on the U.S. census, there 
were 328,000 such veterans in 2000. VetPop 2001 projects the 
number to increase to 462,000 by 2010, and 533,000 by 2020. 
This represents 29 and 39 percent increases over 2000, 
respectively. These new criteria would open eligibility to an 
even larger pool of veterans.
    The fiscal year 2006 VA budget request anticipates a 
reduction of 1,098 registered nurses, 665 licensed practical 
nurses and nursing assistants, and 766 technicians and allied 
health professionals. The American Legion is incredulous that 
VA would consider eliminating nearly 1,800 nursing positions at 
a time when VA is in the midst of a national nursing shortage 
crisis.
    The effect of the proposed new criteria on State veterans' 
homes has been established, and the American Legion thanks the 
Committee for rejecting them this year. State veterans' homes 
have been a successful cost-sharing program between VA, the 
States, and the veteran. Veterans in State homes tend to be 
without family, indigent, and requiring of aid and attendance. 
One State veterans' home has estimated that the changes in 
eligibility criteria proposed would cut its average daily 
census by 80 percent cost the facility $2 million per year. 
This proposal would have spelled financial disaster for many 
State veterans' homes and could well have resulted in a new 
population of homeless elderly veterans on our streets, 
especially in States with low Medicaid nursing home rates. It 
also has been suggested that a surge in claims for service-
connection would have ensued as State homes scrambled to 
qualify veterans under the new criteria.
    The American Legion opposes the application of the proposed 
nursing home eligibility criteria to the State veterans' home 
per diem grant program, and we support increasing the amount of 
authorized per diem payments to 50 percent of the cost of 
nursing home and domiciliary care provided veterans in State 
homes and full reimbursement for veterans with 70 percent or 
greater service-connected disability.
    Finally, the fiscal year 2006 VA budget request contains no 
funding for State extended care facility grants programs. 
Instead, VA would impose a one-year moratorium on grants for 
new construction while VA completes a national infrastructure 
assessment study of its institutional long-term care. While the 
American Legion agrees that this study is long due--it had been 
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 great and significant need. The American Legion 
recommends $124 million for the State extended care facilities 
grants program in fiscal year 2006.
    Thank you for this opportunity to present my testimony on 
these issues. This concludes the American Legion's testimony.
    [The prepared statement of Mr. Mooney follows:]

 Prepared Statement of Donald L. Mooney, Assistant Director, Veterans' 
        Affairs and Rehabilitation Division, the American Legion

    Mr. Chairman and Members of the Committee:
    Thank you for the opportunity to express The American legion's 
views on current legislative proposals concerning Department of 
Veterans Affairs' (VA) Long-Term Care programs. This hearing could not 
have been scheduled at a better time as many World War II and Korean 
War veterans age into a population that exceedingly relies on geriatric 
care facilities and professionals.
    The American Legion is disturbed by VA's continuing efforts to 
abdicate its responsibility to America's aging veterans. This year's VA 
budget request contains three legislative proposals that would further 
those efforts. The first would repeal language in the Millennium Health 
Care Act that requires VA to maintain its own nursing home bed 
inventory at the 1998 level of 13,391. The second would change 
eligibility criteria for VA nursing home care and deny State Veterans 
Homes per diem to all but veterans in Priority Groups 1 through 3 and 
catastrophically disabled Priority Group 4 veterans. The third would 
cut all funding for the State Veterans Homes Construction Grants 
Program for fiscal year 2006. The American Legion opposes all these 
measures.

                  IMPOVERISHMENT AMONG AGING VETERANS

    There is currently a substantial aging veterans' population that is 
now and will continue to present significant demands on the Veterans' 
Health Administration's (VHA's) budget well into the 21st century. The 
ages of Word War II and Korean War veterans range from 65 to well over 
90 years old. The vast majority of these veterans live on fixed incomes 
with medical expenses exceeding their disposable income, especially 
those requiring maintenance medications to sustain their quality of 
life. Medical care quickly becomes a hardship for these veterans and 
their families. We do not need to remind the Committee that in such 
cases, many decisions are made about whether to buy heating fuel, food, 
electricity or telephone service or to pay for medicines and care 
required to merely to stay alive. The American Legion believes that it 
is a national disgrace that veterans who stormed the beaches of Europe 
and the Pacific, stopped the advance of communism in Korea, were held 
prisoners of war, suffered frostbite, contracted malaria and a host of 
other tropical diseases, not to mention exposure to ionizing radiation, 
are forced to make such decisions. How do we, as a Nation, now repay 
them for their sacrifices of body and psyche, of friends lost, and 
opportunities forsaken? We do so by keeping former President Lincoln's 
promise--``. . . to care for him who shall have borne the battle . . . 
.'' VA should, at a minimum, meet the mandates for long term care set 
forth in the Millennium Health Care Act and provide care for America's 
veterans at the end of their lives, when they are the most vulnerable 
and in greatest need.

                 VA NURSING HOME CARE UNIT BED CAPACITY

    The President's fiscal year 2006 VA budget request contains a 
legislative proposal to repeal the provision of the Millennium Act 
requiring VA to maintain its Nursing Home Care Unit (NHCU) bed capacity 
at the 1998 level of 13,391. The language in the budget request refers 
to this mandate as ``a baseline for comparison.'' The Millennium Health 
Care Act requires VA to maintain its in-house bed inventory at the 1998 
level; however, this capacity has significantly eroded rather than been 
maintained. In 1999 there were 12,653 VA NHCU beds, 11,812 in 2000, 
11,672 in 2001 and 11,969 in 2002. VA estimated it had 12,239 beds in 
2003 and 12,245 in 2004. The President's budget request projects only 
9,975 in fiscal year 2006, a 27 percent decrease from the Millennium 
Act mandate. VA claims that it cannot maintain both the mandated bed 
capacity and implement all the non-institutional programs required by 
the Millennium Act.
    According to VA's FY 2002 Annual Accountability Report Statistical 
Appendix, in September 2002, there were 93,071 World War II and Korean 
War era veterans receiving compensation for service-connected 
disabilities rated 70 percent or higher. The American Legion believes 
that VA should comply with the intent of Congress to maintain a minimum 
LTC nursing home capacity for those disabled veterans who are in the 
most resource intensive groups; clinically complex, special care, 
extensive care and special rehabilitation case mix groups. The Nation 
has a special obligation to these veterans. They are entitled to the 
best care that VA has to offer and they should not be dumped onto 
Medicaid, as is now the trend. Providing adequate inpatient LTC 
capacity is good policy and good medicine.

            VA PROPOSAL TO CHANGE LONG TERM CARE ELIGIBILITY

    VA's budget request for fiscal year 2006 contains a legislative 
proposal that would modify eligibility 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.
    Currently, VA is only required to furnish nursing home care to 
veterans who are rated 70 or higher service-connected disabled and to 
those veterans who require it because of a service connected condition. 
According to the U.S. Census, there were 328,363 such veterans in 2000. 
VETPOP2001 Adjusted projects this number to increase to 462,581 by 2010 
and 533,695 by 2020, representing 29.1 percent and 39.5 percent 
increases over 2000, respectively. An examination of the VA Long-Term 
Care Fact Sheet shows that State Veterans Homes ADCs will have risen 
between 1999 and 2004 (estimated) by approximately the same number of 
veterans as the decline in VA's NHU ADC.
    VA may also furnish nursing home care to veterans who have service 
connected disabilities less than 70 percent, who were discharged from 
active duty because of an injury or illness incurred, were disabled due 
to VA medical care or vocational rehabilitation, were veterans of the 
Mexican border period or World War I, were exposed to toxic substances 
or radiation or are unable to defray the costs of care. Subject to 
resource and facility availability, VA may also furnish nursing home 
care to veterans who agree to make payments.
    The FY 2006 VA Budget request anticipates a reduction of 3,299 full 
time equivalent (FTE) employees based on the proposed new Nursing Home 
eligibility criteria (PGs 1-3 and catastrophic 4s only) being enacted. 
Eliminated under the proposal are; 1098 registered nurses (RNs), 665 
licensed practical nurses (LPNs) and nursing assistants (NAs), and 766 
technicians and allied health professionals. New mental health 
initiatives would, however, add 627 FTE, resulting in a net reduction 
of 2,672 FTE VHA-wide. Obligations by object reflect a flat 
appropriation for fiscal year 2006 over fiscal year 2005 ($3.49 billion 
for RNs and 1.05 billion for LPNs and NAs--no change). The American 
Legion is incredulous that VA would consider eliminating nearly 1800 
nursing positions at a time when VA is in the midst of a national 
nursing shortage.

       EFFECT ON THE STATE VETERANS HOMES PER DIEM GRANTS PROGRAM

    Since 1984, nearly all planning for VA inpatient nursing home care 
has revolved around State Veterans Homes (SVH) and contracts with 
public and private nursing homes. The reason for this is obvious; VA 
pays a per diem of only $59.48 (fiscal year 2004 rate) for each veteran 
it places in SVHs, compared to the $354.00 VA says it cost in fiscal 
year 2002 to maintain a veteran for one day in its own Nursing Home 
Care Units (NHCUs). VA NHCUs employ experienced nursing staff paid 
salaries comparable with State or regional locality pay rates and VA 
tends to fill vacancies with registered nurses rather than less skilled 
workers, such as nurses aides. In fiscal year 2001, 79 percent of 
veterans served in VA NHCUs were in the clinically complex, special 
care, extensive care and special rehabilitation case mix groups. These 
groups are the four highest resource intensive categories, resulting in 
a higher cost of care. SVHs, on the other hand, are required to provide 
the same levels of care to an increasing Average Daily Census for the 
VA per diem, plus whatever Medicaid, private insurance and veteran co-
payments are available. Any shortfall in SVH operating revenue must 
come from private donations and State treasuries.
    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 the changes in eligibility criteria contained in the 
fiscal year 2006 budget proposal would cut its Average Daily Census by 
80 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 low 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 opposes the application of the proposed nursing home 
eligibility criteria to the State Veterans Homes per diem grant program 
and 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

 VA PROPOSAL TO ZERO-OUT THE STATE VETERANS HOMES CONSTRUCTION GRANTS 
                           PROGRAM IN FY 2006

    Under the provisions of Title 38, United States Code (US.C.), VA is 
authorized to make payments to States to assist in the construction and 
maintenance of SVHs. Today, there are 109 SVHs in 47 States with over 
23,000 beds providing nursing home, hospital, and domiciliary care.
    The Grants for Construction of State Veterans Homes provides 
funding for 65 percent of the total cost of building new veterans homes 
and about 3,500 beds per year are planned for the next 4 years. VA has 
not been able to keep pace with the number of grant applications; and 
currently there is over $120 million in unfunded new construction 
projects pending. Recognizing the growing long-term health care needs 
of older veterans, it is essential that the State Veterans Home Program 
be maintained as a viable and important alternative health care 
provider to the VA system.
    The 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. 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. The American Legion recommends $124 million 
for the State Extended Care Facility Grants Program in fiscal year 
2006.

                       MANDATORY FUNDING FOR VHA

    The American Legion believes that the current discretionary 
appropriations mechanism that funds VA's Long-Term Care programs 
remains inadequate to meet the growing demands of the veterans' 
community. The American Legion believes that without significant 
budgetary reform, VA will continue to shift the burden of Long-Term 
Care onto families, communities and other Federal programs. The 
American Legion continues to advocate mandatory funding for VA medical 
care. This budgetary move would enable VA to meet its obligation to 
provide geriatric and other health care services for aging and service-
connected disabled veterans. The passage of the Veterans Millennium 
Health Care and Benefits Act (Pub. L. 106-117) charged VA to provide 
quality Long-Term Care through VA or by contract. The American Legion 
believes once VA accepts a veteran as a Long-Term Care patient, no 
matter when or under what provision of law, the long-term care of that 
veteran should be provided through VHA.

                               CONCLUSION

    Mr. Chairman and Members of the Committee, as a Nation at war; we 
are reminded of the hardships and sacrifices of a small portion of 
America--our veterans. On Memorial Day, across the Nation, we will 
praise veterans--past, present, and future. The thanks of a grateful 
Nation will echo in national veterans' cemeteries and in the halls of 
VA medical facilities. But regrettably, there are thousands of veterans 
waiting for access to VA's quality health care and even worse, hundreds 
of thousands of Priority Group 8 veterans will not even be allowed to 
enroll--regardless of their medical conditions. It is a sad commentary 
that when frail, elderly veterans become financially destitute, they 
may enroll as Priority Group 6 veterans and join their colleagues on 
the waiting list. Under the Administration's current proposals, even 
this limited opportunity for a dignified end-of-life would be 
foreclosed.
    The American Legion believes there are better alternatives in 
meeting the health care needs of America's veterans:
     VA medical care should be funded as mandatory, rather than 
discretionary appropriations;
     VA should be recognized as a Medicare provider and be 
authorized to collect and retain third-party reimbursements for the 
treatment of allowable nonservice-connected medical conditions of 
enrolled Medicare-eligible veterans; and
     VA should be authorized to offer a premium-based health 
benefit packages (to include specialized services) to veterans with no 
private or public health insurance to meet their individual health care 
needs.
    Thank you for the opportunity to present testimony on this critical 
issue. This concludes The American Legion's testimony.

    Chairman Craig. Donald, thank you very much.
    Fred, VA's own testimony states rather clearly that VA does 
not believe it can care for all 25 million American veterans in 
need of institutional nursing home care.
    In fact, VA's proposal suggests it does not believe it can 
provide those services to its 7 million enrollees who may need 
the care. Do you agree with either of these VA assessments? And 
more importantly, do you believe that VA's resources are best 
used building new nursing homes in an effort to meet all 
possible needs or look at alternative care forms?
    Mr. Cowell. Well, Mr. Chairman, I think it is a matter of 
priorities and I think the country has to decide are aging 
veterans worth the dollars that the country would provide to 
maintain the care for people who have, as was so elegantly 
phrased earlier by Dr. Perlin, who have borne the battle--and, 
I would point out, the people who bore the battle but, by the 
grace of God, came home whole but had nevertheless made a 
commitment at a time of national emergency. And irrespective of 
whether or not they were disabled in military service, they 
made that commitment and thought that they would receive these 
services when they returned home.
    I think the financial piece of this is something that the 
Congress is going to have to come to grips with. We know that 
the Congress would like to provide as many services as possible 
to all veterans, and we think there is much work to be done. We 
are seriously concerned with the cuts in the nursing home 
program at a time when increased demand is looming on the 
horizon. We think VA needs to take another look at this. We 
would ask that the Congress not provide for these budget cuts. 
It just seems like at a time when veterans are aging and need 
care the most, the VA is proposing to cut back these services, 
and we don't think it is good planning.
    Chairman Craig. The priority system, passed as part of the 
Eligibility Reform Act of 1996, placed a higher focus and 
emphasis on care for service-connected disabled veterans and 
those with catastrophic disabilities. Yet each of you has 
strongly opposed VA's efforts to focus its non-rehabilitative 
nursing home care programs on that very population. So I am 
asking this of both of you: Do you believe that the priority 
system should not apply to the provision of nursing home care 
services, and would some other criteria be more appropriate?
    Fred? Don?
    Mr. Cowell. Go ahead.
    Mr. Mooney. Mr. Chairman, the American Legion believes that 
the Health Care Eligibility Reform Act was an appropriate 
measure for VA to prioritize its patient population. We 
supported that law when it was fielded back in the 1990s. We 
have never suggested that all veterans should be entitled to VA 
care--or free VA care, I should say. We have supported the idea 
of veterans buying into the VA health care system, those 
priority groups 7 and 8 that don't qualify for free care under 
the Health Care Eligibility Reform Act. We have never advocated 
that all 25 million veterans be eligible for VA care.
    Chairman Craig. Fred.
    Mr. Cowell. I think we supported the eligibility reform 
bill as well, and we thought it made a good attempt at trying 
to categorize veterans based on service connection and their 
financial ability to pay for health care, and we don't think 
that should be overlooked. I would also like to point out that 
the Mill Bill for the first time created eligibility for 
nursing home care veterans at all. Previously it was always 
done as resources were available. And it moved to cover 
service-connected conditions. It required nursing home care for 
veterans who were 70 percent service-connected. We think that 
was a good first choice.
    It also grandfathered in a number of veterans who were not 
in those categories but who were currently residing in VA 
nursing home care facilities. I am troubled when I hear Mrs. 
Ramos talk about people who are currently residing in State 
veterans' homes now, who may not meet that criteria, could no 
longer receive funding--and where would they go? If Medicaid 
funding is going to cut private sector nursing home care 
funding and VA is going to reduce its nursing home capacity, 
and this hit on State veterans' homes is going to reduce and 
perhaps even close some State veterans' homes, I just don't 
see, at a time when increasing demand is right upon us, how we 
are going to care for these people. And I know it is a tough 
problem and I know you are wrestling with it. But I just think 
the proposals that are coming together at this time are just 
wrongly placed and wrongly timed.
    Chairman Craig. Thank you, Fred.
    Senator Akaka, questions?
    Senator Akaka. Thank you very much, Mr. Chairman.
    As we have heard from previous witnesses. VA says that they 
have lagged behind in large-scale implementation of overall 
long-term care programs because they don't have enough 
resources to meet the Millennium Bill bed census requirements 
and expand non-institutional services at the same time.
    What are your views of VA's claims? And what more do you 
think the Veterans' Health Administration could be doing to 
achieve a balance between capacities in these two areas?
    Mr. Cowell. Would you like me to respond, Mr. Senator?
    Senator Akaka. Please.
    Mr. Cowell. PVA--I don't think there is any veterans' 
service organization that has been more supportive of 
expansions in home- and community-based care. And I think all 
veterans' service organizations and all veterans understand, if 
veterans had a choice, obviously they would prefer to remain 
home as they grow older. I don't think anyone looks forward to 
going into a nursing home. I think the expansions in the non-
institutional care programs are well-founded and I think they 
will serve a number of veterans well.
    But I think it is naive of us to think that all veterans 
who need expansive care can get that care in their own home 
settings. I think the number of programs that VA has provided, 
as the GAO has pointed out, in non-institutional programs have 
been unevenly applied across the system. A veteran in one State 
may receive a full range of programs and a veteran in another 
State may find very limited services available. I think VA 
needs to do a better job in trying to regulate the 
Administration of their programs and make sure that they are 
available to all veterans across the country.
    Senator Akaka. Mr. Mooney.
    Mr. Mooney. Yes, sir. The American Legion feels that the--
Could you repeat the question, sir? I am sorry.
    Senator Akaka. Yes, the question was what are your views of 
VA's claims and what more do you think the Agency could be 
doing to achieve a balance between capacities in these areas?
    Mr. Mooney. The aging in place concept of long-term care 
was established in Denmark and the Scandinavian countries back 
in the early 1970s and it has taken hold in the long-term care 
industry in the United States just in the last 10 or 15 years. 
VA is trying to catch up with that. We agree that the 
institutional long-term care should be the choice of last 
resort for elderly veterans. We supported the Millennium Act 
and we would like to see adequate funding given to VA to be 
able to implement all the pieces of the Millennium Act, both 
institutional and non-institutional, to get the programs that 
they have now fully implemented and get the population that is 
going to explode here shortly under control, so that they have 
an idea of what their resources are going to be.
    Senator Akaka. Mr. Mooney, in your testimony you touched on 
the financial hardships faced by many veterans as they get 
older and are forced to live on fixed incomes. I, too, am 
concerned about the overall lack of access to and affordability 
of long-term care. I would like you to expand on this point and 
tell us more about just how costly and how difficult it can be 
for older veterans to try and find long-term care in the 
private sector.
    Mr. Mooney. Oh, I don't think it is limited to veterans. I 
think the elderly in general have problems keeping up their 
utility bills and buying food and paying the rent and the heat, 
and they have to make a judgment as to whether they are going 
to do those things or whether they are going to get medical 
care. There is a lot of evidence that the veterans tend to be 
less well off than the average person. It is a given that they 
are going to be in the same situations.
    Senator Akaka. Thank you very much, Mr. Chairman. My time 
has expired.
    Chairman Craig. Thank you very much.
    Senator Obama, any questions of this panel?

            OPENING STATEMENT OF HON. BARACK OBAMA, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Obama. Mr. Chairman, thank you very much. I 
apologize for missing the first panel. We have a Bolton hearing 
going on right now and, as you know, that is taking a lot of 
time in the Foreign Relations Committee.
    I had the opportunity to review the testimony. I think the 
questions that were asked by the Chairman and the Ranking 
Member were on point. I would just point out that long-term 
care is especially important to the State of Illinois. I am 
proud to say that Illinois was the first State in the Union to 
have a State veterans' home. We are proud of being a pioneer in 
veteran long-term care. That proud legacy of care is threatened 
by the passage of the recent Federal budget, but I am thankful 
that this Committee turned back some of the cuts that had been 
proposed with respect to reimbursement systems that would have 
a severe impact on the State of Illinois.
    So I just appreciate the Chairman and the Ranking Member 
hosting this important hearing. I thank the witnesses and will 
continue to monitor the situation carefully.
    Chairman Craig. Gentlemen, thank you both very much for 
your presence and your testimony and, obviously, the commitment 
of your organizations to America's veterans. This hearing was 
intended to be a dialogue to begin to build a record to look at 
the broader aspects of long-term care, and also the current 
commitment, or lack thereof, of the Veterans' Administration as 
it relates to long-term care directed by current laws that this 
Congress has enacted. And we will stay with this as the issue 
grows and work with all of you to make sure that we can do as 
much as is possible to do under our current constraints. At the 
same time, as you both have recognized and we appreciate that, 
this Committee is willing to push the limit and get beyond that 
where necessary and important to do so.
    We also thank our State homes people for being with us 
today. That is sometimes, at least at the Federal level, a 
forgotten--but if you are at the State level, a clearly 
recognized and necessary service to America's veterans, and we 
appreciate their presence, too.
    So thank you all very much for being here today.
    The Committee will stand adjourned.
    [Whereupon, at 11:48 a.m., the Committee was adjourned.]
  

                                  
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