[Senate Hearing 109-627]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-627
 
HEARING ON PROPOSED FISCAL YEAR 2007 BUDGET FOR DEPARTMENT OF VETERANS 
                            AFFAIRS PROGRAMS

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 16, 2006

                               __________

       Printed for the use of the Committee on Veterans' Affairs


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                     COMMITTEE ON VETERANS' AFFAIRS

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


                            C O N T E N T S

                              ----------                              

                           February 16, 2006
                                SENATORS

                                                                   Page
Craig, Hon. Larry, Chairman, U.S. Senator from Idaho.............     1
Akaka, Hon. Daniel K., Ranking Member, U.S. Senator from Hawaii..     3
Murray, Hon. Patty, U.S. Senator from Washington.................     4
Jeffords, Hon. James M., U.S. Senator from Vermont...............     5
Obama, Hon. Barack, U.S. Senator from Illinois...................     6
Graham, Hon. Lindsey O., U.S. Senator from South Carolina........     8
Thune, John, U.S. Senator from South Dakota......................    68

                               WITNESSES

Nicholson, Hon. R. James, Secretary, Department of Veterans 
  Affairs; accompanied by Jonathan B. Perlin, Under Secretary for 
  Health; Daniel L. Cooper, Under Secretary for Benefits; William 
  F. Tuerk, Under Scretary for Memorial Affairs; Jack Thompson, 
  Deputy General Counsel; and Robert J. Henke, Assistant 
  Secretary for Management.......................................     9
    Prepared statement...........................................    13
    Response to written questions submitted by:
        Hon. Larry E. Craig......................................    21
        Hon. Arlen Specter.......................................    44
        Hon. John Ensign.........................................    48
        Hon. John R. Thune.......................................    48
        Hon. Daniel K. Akaka.....................................    49
        Hon. John D. Rockefeller IV..............................    52
        Hon. James M. Jeffords...................................    54
        Hon. Barack Obama........................................    56
        Hon. Ken Salazar.........................................    57
Robertson, Steve, Director, National Legislative Commission, The 
  American Legion................................................    71
    Prepared statement...........................................    73
    Response to written questions submitted by:
        Hon. Larry E. Craig......................................    82
        Hon. Daniel K. Akaka.....................................    83
Kinderman, Quentin, Deputy Director, National Legislative 
  Service, Veterans of Foreign Wars..............................    86
    Prepared statement...........................................    87
Lawrence, Brian, Assistant National Legislative Director, 
  Disabled American Veterans.....................................    90
    Prepared statement...........................................    91
Blake, Carl, Senior Associate Legislative Director, Paralyzed 
  Veterans of America............................................    94
    Prepared statement...........................................    95
Greineder, David G., Deputy National Legislative Director, AMVETS    97
    Prepared statement...........................................    98

                                APPENDIX

Rockefeller, Hon. John D. IV, U.S. Senator from West Virginia, 
  prepared statement.............................................   107
Salazar, Hon. Ken, U.S. Senator from Colorado, prepared statement   107
Response to written questions submitted by Hon. Larry E. Craig to 
  the Independent Budget (AMVETS, Paralyzed Veterans of America, 
  Disabled American Veterans and Veterans of Foreign Wars of the 
  United States).................................................   108
Response to written questions submitted by Hon. Daniel K. Akaka 
  to the Independent Budget (AMVETS, Paralyzed Veterans of 
  America, Disabled American Veterans and Veterans of Foreign 
  Wars of the United States).....................................   110


HEARING ON PROPOSED FISCAL YEAR 2007 BUDGET FOR DEPARTMENT OF VETERANS 
                            AFFAIRS PROGRAMS

                              ----------                              


                      THURSDAY, FEBRUARY 16, 2006

                               U.S. Senate,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:50 a.m., in 
room SR-418, Russell Senate Office Building, Hon. Larry E. 
Craig, Chairman of the Committee, presiding.
    Present: Senators Craig, Graham, Thune, Akaka, Jeffords, 
Murray, and Obama.

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

    Chairman Craig. Good morning, everyone. Today we will 
examine the President's Fiscal Year 2007 budget request for the 
Department of Veterans Affairs. It is by any objective standard 
an extraordinary budget proposal: An 11.3 percent increase in 
VA medical care, a 10.9 percent increase in total mandatory 
appropriations, and a 10.3 percent increase in total VA 
appropriations.
    When I first learned of the President's request, I was on 
the one hand pleased that President Bush again made care for 
veterans a top priority, and on the other hand, I was sobered. 
I was convinced that the President's request would unite 
Republicans and Democrats and, if not all, most veterans 
advocates. Surely a budget plan proposing an 11.3 percent 
increase in medical care during a time of war, high deficits, 
and restrained discretionary spending in nearly every account 
unrelated to national security was one we would all support.
    In the weeks since the budget numbers were released, I have 
listened, I have read various comments which instead suggest 
that the President's request ignores the reality of the full 
cost of war, that it breaks faith with veterans who have 
returned from the battlefield and, most remarkably, that this 
budget is somehow a cut in the care of our veterans. Boy, was I 
wrong.
    Ladies and gentlemen, it is time to suspend the rhetoric 
and it is a reality check time for all of us. First, let me 
quickly respond to the criticism that this budget breaks faith 
with veterans during a time of war and from our present 
conflict. Every man, woman, and child in America would agree 
with VA's mission statement that those who have borne the 
battle, particularly those who have returned from the battle 
with physical and psychological wounds, should be the first in 
line for the highest quality of care available. VA's budget 
tells us that just over 2 percent of its medical care patients 
are veterans from Operation Iraqi Freedom or Enduring Freedom. 
It is hard to imagine that within a $35 billion medical care 
budget, VA does not have funds to care for returning combat-
wounded veterans, yet it is what some have insinuated.
    If there is a problem here with caring for returning combat 
veterans, those problems have more to do with a system of 
priorities than it is in sustaining our capabilities. There is 
no lack of resource. Ten years ago, a Republican Congress and a 
Democratic President united with veterans organizations to 
modernize the delivery of health care for veterans so that 
limited dollars could be put to their most effective use. A 
values-based priority system was established, and the Secretary 
of Veterans Affairs was given discretion to suspend or limit 
enrollment to ensure that care to higher priority veterans 
would not deteriorate. The authority of the Secretary to limit 
enrollment was the safety valve that was put in place to ensure 
a balance between the resources Congress provided and the 
demand for care placed on the VA's medical system.
    Let me fast forward to 2006. That is approximately 10 
years. VA health care funding has nearly doubled in the 
intervening years. According to the President's request, 
double-digit growth in funding for 2007 is needed even though 
VA expects it will treat approximately the same number of 
patients it did a year earlier. The safety valve of limiting 
enrollment was used once and once only, in 2003. Since that 
time, we in Congress have shown an unwillingness to allow it to 
be used again, necessitating the annual double-digit increases 
that we see here today.
    Now I come to the reality check that all of us, I would 
hope, could come to grips with. On its present path, the VA 
budget will double every 6 years or nearly every 6 years. What 
will occur in the near future, be it under the current 
discretionary funding process or under a mandatory funding 
formula, is that VA spending will collide with spending demands 
from all other areas of Government. Just as future liabilities 
for service Social Security, Medicare and Medicaid if left 
unchanged will crowd out our limited resources, so too will VA 
spending, and so I ask all of my colleagues and the veterans 
organizations what do we do in the face of this challenge.
    The President has again proposed a way for us to begin the 
conversation about re-prioritizing veterans spending by asking 
veterans with no service-related disabilities to pay a little 
more for their own care. To be exact, he is asking them to pay 
an enrollment fee that equates to $21 a month and a copay of 
$15 a month for a 30-day supply of medicine. I sat down just 
this week with the Secretary of Health and Human Services. It 
is believed that by the end of the month, they will announce 
that the new prescription drug program currently being 
implemented will cost its recipients $27 a month.
    So, I must tell you, I find these proposals imminently 
reasonable. If the President's proposals are not accepted, then 
we are forced to discuss options if we assume that we will 
sustain the level of funding proposed by this President. Either 
way, we cannot pretend the taxpayers' funding of programs that 
support our Nation's veterans exist in a vacuum. It simply does 
not. VA's budget represents the mathematical reality that 
Congress will be forced to address. If we duck it in 2007, we 
will simply have it in our face in 2008.
    I look forward to a serious discussion about these and 
other important issues with my colleagues, the Secretary, and 
the veterans organizations that so our ably represent our 
Nation's veterans. I hope my candor represents what I believe 
is a current lay of the land, and as I see it, we simply have 
to get down to the business of understanding where we are and 
not expecting that this Congress or the American taxpayers can 
sustain the level of funding that is represented in the chart 
behind me without some change in how we operate.
    I will also strive during the course of this very serious 
discussion to continue to operate this Committee and its 
proceedings in a bipartisan way, but we cannot nor should we 
tolerate rhetoric that is simply that doesn't address the 
reality of the day or the simple fact that this is the single 
largest increase in veterans' budget that this Committee has 
ever seen. I recognize and honor this President for doing so, 
and the Secretary, but even as they do it, I am one that has to 
stand forward and say this is a reality check that will be very 
difficult to sustain in the future.
    Now, before I introduce our panels, our Ranking Member has 
just arrived. So, Danny, we will let you get settled in.

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

    Senator Akaka. Thank you very much, Mr. Chairman. It is no 
secret that we work very well together and in a bipartisan 
manner and we look forward to continuing that. I want to thank 
the Chairman for all of his work and the work of his staff and 
mine.
    I want to welcome our Secretary Nicholson and his staff, 
and dedicated public servants from VA.
    It requires our work to add funding to ensure that VA has 
the financial tools to make it work. I want to work with you, 
Mr. Chairman, to see whether we can do this in a bipartisan 
manner. I know that each and every one of us wants to avoid the 
financial shortfall of last year. I am tremendously relieved to 
know that VA has made its numbers much more transparent to us. 
We know this was not always the case. It should have been 
obvious that a shortfall was imminent.
    The number of veterans seeking health care kept climbing 
last year, and finally in the summer we heard an admission that 
the shortfall required immediate and drastic help from 
Congress. We need to be listening to the people in the field 
when they are telling us that they are being forced to take 
drastic measures to make ends meet. Rather than providing 
sufficient funding, this budget calls upon veterans to shoulder 
the costs. We are presented with recycled proposals to double 
the drug copayment and to charge a yearly enrollment fee for 
veterans who simply want to use VA care.
    Let me set the record straight about the types of veterans 
who would be shouldering these costs. These veterans are not 
affluent as they have been described. They are veterans living 
in States like Hawaii where the cost of living is one of 
America's highest. We are talking about veterans making as 
little as $27,000 a year. The President's solution to making 
room for returning servicemembers is to literally force other 
veterans out of the system. Indeed, we hear much about core 
veterans. I wonder what the health care system would be like if 
it were only opened to highly service-connected veterans. 
Access must be available to all veterans who choose to come for 
care, and in return, they can expect that VA will bill their 
insurance companies and charge modest copayments.
    We hear stories about mandatory overtime and personnel 
shortages and contracted care because VA cannot meet the 
demand. We must ensure that in the years to come, VA has the 
resources to maintain the high customer service rating that it 
has today. It is also shortsighted to cut research. Many 
physicians choose to work at VA despite the modest pay because 
of the opportunity to do research. This account is something we 
should be adding to and not cutting. VA does solid research 
which benefits both veterans and non-veterans alike.
    With regard to the VBA budget, I am concerned whether or 
not this budget provides an adequate level of staffing for 
compensation claims. Whatever the reason for the increase in 
compensation claims, VA must be prepared. Whether it is the 
successful benefit delivery discharge program, legislation on 
expanded outreach, court decisions, or reopened claims, VA must 
be ready to adjudicate its claims in a timely and accurate 
manner. Looking down the road, VA must be ready for an 
increased number of appeals from this increased workload.
    I will continue to monitor VA's workload and rating output 
because our veterans deserve nothing less than their claims 
rated accurately and in a reasonable amount of time.
    Again, I want to dearly welcome our Secretary Nicholson and 
your staff and welcome all of you here today.
    Thank you, Mr. Chairman.
    Chairman Craig. Senator Akaka, thank you very much for your 
opening statement, and let me reciprocate by saying over the 
past year, we have worked very well together as we have worked 
our way through these difficult choices and decisions. I look 
forward to that opportunity again.
    Now let me turn to Senator Patty Murray.
    Patty.

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

    Senator Murray. Thank you very much, Mr. Chairman, and 
thank you, Mr. Secretary and all your staff, for being here 
today and for the excellent job you do.
    Mr. Chairman, I listened carefully to your opening 
statement, and I must say that when the President's budget came 
forward on VA, you did hear a round of applause. I think many 
of us felt strongly that we appreciated the VA and the 
President recognizing the troubles and difficulties we went 
through last year and stepping up to come up with a much better 
number. You didn't hear a standing ovation because many of us 
were very concerned that although it was one step forward, it 
was two steps back, and I think for many of us, limiting the 
access to the VA through the increased fees and copayments is 
really a step backwards, that we should not balance the budget 
on the backs of those who have served us.
    As Senator Akaka very rightly put forward, who these people 
are and what their incomes are and how they are working was not 
part of what they signed up for when they went to a recruiting 
station. There wasn't an asterisk by the health care, and we 
have to take that into consideration, not only for our veterans 
today, but for those who are following us. So that was sort of 
the step backward.
    And the second step backward is a deep concern that 
although the numbers are increased, we need to see the reality 
of the challenges that the VA is facing today. Overall, health 
care in this country is at double-digit inflation. That impacts 
the VA as well. We have a higher number of OIF and OEF soldiers 
who are returning who are accessing care not just for a month 
or two, but probably for a lifetime with serious injuries, 
18,000 soldiers at this point who will have lifetime care.
    We are seeing the Medicare prescription drug plan that is 
moving forward in this country where people are calling 
Medicare and are being told if you are a VA, don't do Medicare 
Part D, go to the VA, and I believe that that will increase the 
number of veterans who will be accessing it. We are seeing a 
higher number of Vietnam veterans now begin to go into the VA 
health care system that we have to recognize and acknowledge 
and see the reality of the numbers; and frankly, because in the 
country today, we do have a health care crisis, more and more 
employers are not providing health care. Those people who work 
for them who are veterans may for the first time in their life 
say, my only access to health care is now through the VA, and 
we are seeing an increased number there.
    So the real numbers that are affecting the VA have to be 
taken into account. Yes, it is a better number than we had last 
year, but we want to see what the reality is. We want to see a 
VA budget based on the real needs, based on the very, very 
critical factors that are facing the VA today, and I for one am 
going to continue to advocate to make sure that every person 
who serves us in the Nation today, overseas at war or here at 
home, gets what they were promised, and I will continue to push 
and not give a standing ovation until we get to that.
    Chairman Craig. Senator, thank you very much. I doubted 
very much that you would step back from your advocacy role that 
you do very well for our veterans. Thank you.
    Now let me turn to Senator Jim Jeffords.
    Jim.

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

    Senator Jeffords. Thank you, Mr. Chairman, for holding this 
hearing today. I would also like to thank the Secretary for 
joining us to discuss the President's budget request for fiscal 
year 2007.
    I am pleased that the President has requested a 12 percent 
increase in the Veterans Affairs budget for the coming year. 
The request for a $1.5 billion increase in the medical services 
budget over this fiscal year is a welcoming improvement over 
past years, one that our veterans well deserve; however, I am 
concerned that this budget uses unduly optimistic assumptions 
about the numbers of servicemembers who will seek care in the 
VA following deployment to Iraq or Afghanistan. We know that 
these wars will continue to generate more combat veterans, many 
of whom will need special services from the VA for many years 
to come.
    This comes as the cost of health care continues to spiral. 
I question whether this budget is sufficient in dollars and 
personnel to prepare the VA for addressing the increased 
demands on its services. I am also concerned that projected 
collections for the coming year are overly optimistic and 
unlikely to generate the expected revenue.
    Your budget predicts a 37 percent increase in collections 
above last year's level, but, frankly, this is not seen to be 
likely. Most facilities have made great efforts over the last 
few years to collect third-party reimbursements. So I am 
skeptical that they will be able to increase their collections 
by $700 million.
    Congress last year rejected proposals to increase 
prescription drug copays or impose a $250 enrollment fee on 
middle income veterans. I doubt Congress' reaction will be 
different this year. I also believe this budget does not 
adequately fund vet centers, especially those in rural areas 
where reservists have been activated in large numbers. These 
are often areas where no military installation is available to 
support servicemembers or their families. These vet centers 
provide a service that is not found elsewhere and is critical 
to our servicemembers who are returning to from war.
    Finally, I remain concerned that the Administration's 
policy of not allowing enrollment of new Priority 8 veterans. 
In the face of growing crisis in health care options for middle 
income veterans, I believe that VA's mission should be 
expanding to include more veterans instead of limiting its 
services. At a time when we have asked more and more Americans 
to serve their country, we must make sure that the VA is 
capable of providing them with the health care and other 
services they deserve.
    I am looking forward to hearing your testimony, Mr. 
Secretary, and to our discussion thereafter.
    Thank you, Mr. Chairman.
    Chairman Craig. Jim, thank you very much.
    Senator Obama, welcome to the Committee.

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

    Senator Obama. Thank you so much, Mr. Chairman.
    Thank you, Mr. Secretary, and to all of you who are 
appearing here today. Some of what I had intended to say in my 
opening remarks have already been stated. So I will try to keep 
this brief.
    It has been about a year ago since we sat here and heard 
you, Secretary, say that a .04 percent increase in veterans 
health spending was going to be enough despite the fact that we 
had large numbers of veterans coming back from Iraq and 
Afghanistan, and as you will recall, just a few months later, 
we sat here and heard you admit that you needed $1 billion more 
in emergency funding to make it through the end of the year. So 
I am sure that neither you, nor we, want to relive that 
experience.
    At first glance, at least, the President's 2007 budget 
looks like it avoids a significant fiasco, but I have to be 
honest about the budget. I don't think we should fool ourselves 
or our vets into thinking that the increase that is represented 
in this budget is as large as the White House would like us to 
think it is, and we shouldn't fool ourselves into thinking that 
this budget represents a significant departure from this 
Administration's tendency to play with the numbers when it 
comes to the VA budget.
    There continue to be some accounting gimmicks in this 
budget that we talked about last year that needed to be fixed. 
It is not clear to me that they are fixed. Some of them have 
been mentioned. You know, Congress has rejected 3 years in a 
row the proposal for a new enrollment fee and the proposal to 
double prescription drug copayments for Priority 7 and 8 
veterans. So 3 years in a row, we have said no. I can't imagine 
that we are going to say yes this year. That is $800 million in 
revenue that is accounted for in this budget that I just don't 
see coming.
    The VA had made management efficiency claims which make up 
over $1 billion in this year's budget, but the GAO, at least, 
says haven't been and can't be proven. So one of the concerns, 
and I am sure you will hopefully have a chance to respond 
directly to this is, if those savings prove illusory, what 
happens and how are you planning that possibility?
    Just a couple other points I would make: With respect to 
banning new Priority 8 enrollments, through this ban, the VA 
has denied health care to about 260,000 vets who assumed upon 
enlistment that a working class salary of $25,000 wouldn't 
prevent them from receiving the health care they were promised. 
In Illinois, you have got 8,944 veterans who were denied health 
care through the ban just last year. I am deeply concerned 
about that.
    Last year, I raised an issue with respect to funding for VA 
nursing home care. It appears, once again, that the President's 
budget cuts funding to VA nursing homes and flat-line spending 
for the construction of new ones. In Illinois, we have got 
391,000 sixty-five and older, but only 4 State nursing homes 
that together have just barely above a thousand beds, and we 
have got a waiting list that tops 920.
    Finally, I want to take this opportunity just to revisit an 
issue that became a top priority for me, the issue of 
disability payments. As you know, we had some problems last 
year in Illinois with respect to disability payments. I have to 
say, Mr. Secretary, you and Admiral Cooper and others took the 
time to come to Illinois, have been working on it. I appreciate 
that work, but I am concerned that if we continue to have low 
estimates of the growing demand on the system and insufficient 
staffing at the VA, we could see some of the same problems not 
just in Illinois, but across the country. So that is why this 
budget is so important, and I hope you can clarify some of the 
questions that have been raised.
    Thank you, Mr. Chairman.
    Chairman Craig. Senator, thank you very much.
    We have been joined by Senator Lindsey Graham.
    Senator, do you have any opening comments?

 STATEMENT OF HON. LINDSEY O. GRAHAM, U.S. SENATOR FROM SOUTH 
                            CAROLINA

    Senator Graham. Very briefly, Mr. Chairman.
    This is an important time for this Committee to be in 
existence. I think it is in good hands with you and the Ranking 
Member, and to our veteran community out there, the Nation owes 
you a lot, but I would argue that your need to serve the Nation 
never stops. So we are going to make some hard decisions.
    I hope to be a recipient of some VA health care one day if 
I can ever get my retirement in the bank. I am 3 years away, 
but when that day comes, I would appreciate anything my 
Government could do for me, but I expect to do more for myself. 
If I ever get my retirement--I will probably have a pretty good 
retirement here from the Senate. I hope I can stay around long 
to enough to do that--I may have some health care of my own, 
and anything I get from the VA, I don't mind paying a little 
bit more for.
    We have got to make some hard decisions. Who should be 
eligible and how much should they pay is a decision that can't 
be ignored anymore, because there is only so much money coming 
from the taxpayer. We are having very large increases in the VA 
budget, but we are having large increases in Medicare and 
Social Security, and 20 years from now, the money we are 
spending today to run the Government will be spent on three 
programs: Social Security, Medicare and Medicaid.
    The VA part of the budget is hugely important in two ways, 
Mr. Chairman. It is a commitment to the people who have allowed 
us to be free, but it has to be an honest commitment to the 
next generation so they can afford to maintain a level of 
productivity to make freedom meaningful, and that is the 
dilemma this Committee faces. That is the dilemma the United 
States faces.
    Mr. Secretary, I think you are a good man. You are the 
right guy at the right time, and I will join with you and the 
Chairman and any other Member of this Committee to ask for some 
sacrifice, continued sacrifice, from those who can afford it in 
the veterans community, understanding our priority is to take 
care of those who can afford it the least first.
    Chairman Craig. Senator, thank you very much.
    Our first panel this morning is the Department of Veterans 
Affairs. Secretary Jim Nicholson, welcome to the Committee.
    The Secretary is accompanied by Jonathan Perlin, Under 
Secretary for Health; Daniel Cooper, Under Secretary for 
Benefits; William--Bill Tuerk, Under Secretary for Memorial 
Affairs; Jack Thompson, Deputy General Counsel; and Robert 
Henke, Assistant Secretary for Management.
    At the outset in welcoming you, Mr. Secretary, because of 
last year's budget, and it was referenced here several times, 
we want to thank you for starting what we insisted and you 
agreed to would be a quarterly analysis of where we are 
financially as we see these numbers move and as we see the 
demographics shift and change. And last Wednesday, I believe it 
was, we had that first analysis from you and your immediate 
staff here with you, and we thank you very much for that. We 
look forward to those.
    I have expressed my concern about these budgets and my 
support for this level of spending, but at the same time, I 
think all of us recognize the importance to monitor this now 
more closely than we ever have before, not just for the dollars 
and cents of it, but as Senator Murray and others have said, 
for the service you offer to our veterans.
    Thank you much. Please proceed.

STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY, DEPARTMENT OF 
  VETERANS AFFAIRS; ACCOMPANIED BY JONATHAN B. PERLIN, UNDER 
  SECRETARY FOR HEALTH; DANIEL L. COOPER, UNDER SECRETARY FOR 
   BENEFITS; WILLIAM F. TUERK, UNDER SECRETARY FOR MEMORIAL 
 AFFAIRS; JACK THOMPSON, DEPUTY GENERAL COUNSEL; AND ROBERT J. 
           HENKE, ASSISTANT SECRETARY FOR MANAGEMENT

    Secretary Nicholson. Thank you, Mr. Chairman, Members of 
the Committee. I do have a written statement that I would ask 
to be entered into the record.
    Chairman Craig. Without objection, all statements and all 
accompanying information you provide will be made a part of our 
record.
    Thank you.
    Secretary Nicholson. Thank you, Mr. Chairman, for 
introducing the members of my team I have with me here at the 
table. We have many others in the room. We are blessed at the 
VA with an extraordinary group of dedicated competent 
professional people.
    I am pleased to announce this morning a landmark Department 
of Veterans Affairs budget proposal of $80.6 billion for fiscal 
year 2007. This is truly historic in its scope of services to 
veterans.
    Behind the budget figures, Mr. Chairman, is a great story, 
one of America's truly good news stories. So before we get down 
to the numbers, I would like to brag a bit on my Department's 
people and their successes. In fact, back home where I come 
from, there is a saying that it ain't bragging if it is true.
    One of those truths, Mr. Chairman, is that our VA 
employees, all 225,000 of them, come to the aid of their 
communities and their fellow citizens, veterans and non-
veterans alike in times of disasters and other national 
emergencies. To make my point, I need only to mention the 
heroic efforts of VA employees during Hurricane Katrina and 
Hurricane Rita. Not only did our staffs evacuate several 
hundred patients out of our hospitals in the Gulf area to other 
hospitals, and not only did they do it quickly and efficiently, 
they did it at great personal risk and great personal sacrifice 
and loss.
    It is also a fact that the VA knows how to protect our 
veterans' vital health information against these kinds of 
catastrophic events that swept us in the Gulf Coast. Here, of 
course, I am talking about our electronic health care records. 
No matter where our New Orleans veterans were eventually 
relocated, their complete health records were available for 
uninterrupted care and treatment.
    I would like, if I could, Mr. Chairman, to also read an 
extract of a letter that was recently published by one of the 
VSOs. It was a letter a father had written to them about his 
veteran son who came through Reagan Airport here, and 
unfortunately while transitioning through the airport, his 
luggage was stolen. He was a diabetic, a young diabetic 
veteran. He didn't know what to do. He called his father, and 
his father thought and said call the VA hospital there in 
Washington. He did that, and he gave them his name, of course, 
and his last four digits of his social security number and his 
date of birth, and they dialed him up on their computers there. 
He was from South Carolina, I think. By the time he got in a 
cab and got out to that hospital, they had his total record 
portrayed and his unique insulin regime prepared for him and 
then gave him the other supplies that he needed to proceed on 
his trip.
    That illustrates, I think, the extraordinary paradigm in 
medical care the VA has achieved, and it is an example of what 
it means as it did to the hundreds and hundreds of other 
patients that we relocated during our emergency work in the 
Gulf.
    I would like to add, also, in recognition of our 
accomplishments during that megastorm that I was recently 
privileged to present Senate Resolution 263 to Gulf Region VA 
employees and volunteers who went there. That was a 
Congressional commendation for their extraordinary efforts as a 
first responder to a disaster of unprecedented proportions, and 
I would like to thank all of you in the Senate for that 
resolution that recognized our care-giving heroes.
    Mr. Chairman, following a decade-long health care 
transformation, this Department stands as a recognized leader 
of America's health care industry and we have the credentials 
to prove that. The Journal of American Medical Association has 
applauded VA's dedication to patient safety. The Washington 
Monthly magazine featured VA in an article entitled The Best 
Care Anywhere. U.S. News and World Report described the entire 
VA as the home of, ``top-notch health care'' in its annual best 
hospitals issue. A RAND report ranked VA performance on 294 
measures of quality as significantly higher than any other 
health care system in America. Even the New York Times just 
last month in an article by Paul Krugman, no less, called the 
VA the model for our Nation.
    While these enthusiastic stories about the VA from outside 
are certainly always welcome, the most meaningful measure of 
our success comes from the millions of men and women that we 
serve, that we care for, our prized patients, our veterans. 
They are our biggest supporters. Our veterans rank our care a 
full 10 percentage points above their counterpart patients in 
private hospitals. Yes, for the sixth consecutive year, the 
American Customer Satisfaction Index reports that veterans are 
more satisfied with their health care than any other patients 
in America.
    This, I think, speaks volumes about the competency and the 
compassion of the caregivers in our system. For us, the support 
of our veterans, the people who know us the best, is the 
highest level of praise that we can receive. That is what gives 
us our bragging rights. Because our first rate, high-quality 
health care, because of that, our veterans are coming to us in 
ever greater numbers. Fully 7.6 million are currently enrolled 
for our care. This year, we expect to see well over 5 million 
of them.
    Mr. Chairman, President Bush in his 2007 budget proposal 
for the Department of Veterans Affairs is fulfilling his 
promise to our veterans with a strong budget that respects 
their service to our country and takes a significant step 
toward redeeming America's debt to our veterans, a debt that 
President Washington said after the end of the Revolutionary 
War, that we owe to these men. The President's total request is 
for $80.6 billion, which is an increase of 12.2 percent over 
last year's record amount. It is $8.8 billion above the fiscal 
year 2006 level. This budget contains the largest dollar 
increase in discretionary funding for VA ever requested by a 
President.
    The resources requested for VA in the 2007 budget will 
strengthen even further our position as the Nation's leader in 
delivering accessible high-quality health care that already 
sets the national benchmark for excellence. In addition, this 
budget will allow the Department to maintain its focus on 
benefits, on timely and accurate claims processing. The 
President's 2007 budget will also enable us to expand veterans' 
access to National and State Veterans Cemeteries.
    As an integral component of our fiscal year 2007 goals, we 
will continue to work closely with the Department of Defense to 
fulfill our priority that servicemembers' transition from 
active duty military status to civilian life, veteran life at 
that point, is as smooth and is as seamless as possible.
    Mr. Chairman, our written statement presents a detailed 
description of the President's proposal for fiscal year 2007, 
but I would like to take a few moments to highlight several of 
the key components of this historic budget. During 2007, we 
expect to treat 5.3 million patients, including more than 
109,000 combat veterans who will have served in Operation 
Enduring Freedom and/or Iraqi Freedom. The 3.8 million veteran 
patients in priorities one through six will comprise 72 percent 
of our total patient population in 2007. This will be an 
increase of 2.1 percent in the number of patients in this core 
group and will represent the fourth consecutive year during 
which those veterans who count on us the most will increase as 
a percent of all veterans that we treat.
    The President's 2007 budget request reflects the largest 
dollar increase for VA medical care ever requested by a 
President and includes our funding request for the three 
medical care appropriations, $27.5 billion for medical 
services, including $2.8 billion in collections, $3.2 billion 
for medical administration, and $3.6 billion for medical 
facilities. The total proposed budgetary resources of 34.3 
billion for the medical care program represents an increase of 
11.3 percent or 3.5 billion over the level for fiscal year 
2006, and it is a 69.1 percent increase in the funding over 
that available to this Department at the beginning of the Bush 
Administration.
    The VA is also focused on delivering timely, accurate, and 
consistent benefits to the veterans and, of course, to their 
families. The volume of claims receipts has grown substantially 
during the last few years and is now the highest that it has 
been in the last 15 years as we received over 788,000 claims in 
2005. This trend is expected to continue. We are projecting the 
receipt of over 910,000 compensation and pension claims in 2006 
and more than 828,000 claims in 2007.
    One of the key drivers of new claims activity is the 
increase in the size of the active duty military force now 
including the reservists and National Guard members who have 
been called to active duty to support Operation Enduring 
Freedom and Operation Iraqi Freedom. This has led to a sizable 
growth in the number of new claims, and we expect that this 
pattern of growth will continue.
    The natural outcome of this increasing claims workload is 
growth in our mandatory spending accounts which are growing 
even faster than our discretionary accounts. We estimate that 
mandatory spending will increase by 14.5 percent to over $42 
billion from an estimated fiscal year 2006 level of $36.7 
billion. This growth is largely in the compensation and pension 
accounts and reflects the combined impact of adding new 
veterans and beneficiaries to the rolls, the aging of our 
claimant veteran population, increasing levels of disability 
ratings for veterans already on the rolls, and annual cost of 
living adjustments for veterans and beneficiaries.
    In addition, we expect to continue to receive a growing 
number of complex disability claims resulting from post-
traumatic stress disorder, environmental and infectious risks, 
traumatic and brain injuries, complex combat-related injuries, 
and complications resulting from diabetes, the latter of which 
is approaching epidemic proportions in our veteran population. 
Each claim now takes more time and more resources to 
adjudicate. We will address our ever-growing workload 
challenges by improving our training and productivity, by 
moving work among regional offices to maximize our resources 
and performance, by simplifying and clarifying benefit 
regulations, and by improving the consistency and quality of 
claims processing all across our regional office benefits 
system.
    Mr. Chairman, our veterans are leaving this life at an 
ever-increasing pace. Every day now, 1,800 men and women who 
dedicated their lives to the continuation of our democracy are 
being laid to rest in fields of honor. Of the 16 million World 
War II veterans who have proudly served us, fewer than 3.5 
million now remain. By this time next year, that number is 
projected to be less than 3 million. Korean War veterans are 
now all in their seventies or eighties. Vietnam veterans, most 
of us at least, are resisting the notion that we are next, but, 
of course, we are.
    It has been said that a nation is known by the way it 
honors its dead. I believe that and I firmly believe that 
America's greatness is reflected in the final tributes and 
perpetual care with which we respect the service of departed 
veterans. Buglers play taps now for more than 107,000 veterans 
in our national cemeteries each year. In 2007, that will 
increase by 5.4 percent and will be 15.1 percent more than the 
number that we interred just in 2005.
    The President's 2007 budget request for the VA includes 
$160.7 million in operations and maintenance funding for the 
National Cemetery Administration. This represents an increase 
of $11.1 million or 7.4 percent over the amount for last year. 
We will expand access to our burial program by increasing the 
percent of veterans served by our burial option in the National 
or State Veterans Cemeteries within 75 miles of their residence 
to 83.8 percent in fiscal year 2007, which is a 6.7 percent 
increase over 2005. Our plan for the biggest expansion of the 
national cemeteries since the Civil War is on track.
    Mr. Chairman, I started out my testimony by saying that 
this budget is historic, that this is a landmark proposal of 
funding unmatched by any previous VA budget ever. I also said 
that VA's 225,000 employees are doing a terrific job in taking 
care of our veterans. This level of competent and compassionate 
care was earned by the men and the women through their blood, 
sweat, and tears, serving our country honorably and 
courageously.
    Veterans don't seek the spotlight of approval, Mr. 
Chairman. So as Secretary of Veterans Affairs, and it is my 
privilege to lead our national applause in grateful thanks for 
every gift our veterans have given us. This proposed budget for 
the VA is, in my opinion, President Bush's appreciation for 
these heroes.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Secretary Nicholson follows:]

Prepared Statement of Hon. R. James Nicholson, Secretary, Department of 
                            Veterans Affairs

    Mr. Chairman and Members of the Committee, good morning. I am 
pleased to be here today to present the President's 2007 budget 
proposal for the Department of Veterans Affairs (VA). The request 
totals $80.6 billion--$42.1 billion for entitlement programs and $38.5 
billion for discretionary programs. The total request is $8.8 billion, 
or 12.2 percent, above the level for 2006. This budget contains the 
largest increase in discretionary funding for VA ever requested by a 
President.
    With the resources requested for VA in the 2007 budget, we will be 
able to strengthen even further our position as the Nation's leader in 
delivering accessible, high-quality health care that sets the national 
benchmark for excellence. Whether compared to other Federal health 
programs or private health plans, the quality of VA health care is 
unsurpassed. In addition, this budget will allow the Department to 
maintain its focus on the timeliness and accuracy of claims processing, 
and to expand access to national and state veterans' cemeteries.
    As an integral component of our 2007 goals, we will continue to 
work closely with the Department of Defense (DOD) to fulfill our 
priority that servicemembers' transition from active duty to civilian 
life is as seamless as possible.

ENSURING A SEAMLESS TRANSITION FROM ACTIVE MILITARY SERVICE TO CIVILIAN 
                                  LIFE

    The President's 2007 budget request provides the resources 
necessary to help ensure that servicemembers' transition from active 
duty military status to civilian life is as smooth and seamless as 
possible. Last year through our aggressive outreach programs, VA 
conducted nearly 8,200 briefings attended by over 326,000 separating 
servicemembers and returning Reserve and National Guard members. We 
will continue to stress the importance of an informed and hassle-free 
transition for all of our forces coming off of active duty, and their 
families, and especially for those who have been injured.
    If active duty servicemembers, Reservists, and members of the 
National Guard served in a theater of combat operations, they are 
eligible for cost-free VA health care and nursing home care for a 
period of 2 years after their release from active military service 
provided that the care is for an illness potentially related to their 
combat service. VA has already facilitated transfers from military 
medical facilities to VA medical centers several thousand injured 
servicemembers returning from Operation Enduring Freedom and Operation 
Iraqi Freedom.
    There are many other initiatives underway that are aimed at easing 
servicemembers' transition from active duty military status to civilian 
life. Within the last year, VA hired an additional 50 veterans of 
Operation Enduring Freedom and Operation Iraqi Freedom to enhance 
outreach services to veterans returning from Afghanistan and Iraq 
through our Vet Centers. They joined our corps of Vet Center outreach 
counselors hired earlier by the Department to brief servicemen and 
women about VA benefits and services available to them and their family 
members. They also encourage new veterans to use their local Vet Center 
as a point of entry to VA and its services. Our outreach counselors 
visit military installations, coordinate with military family 
assistance centers, and conduct one-on-one interviews with returning 
veterans and their families.
    Last year VA signed a memorandum of agreement with Walter Reed Army 
Medical Center to give severely injured servicemembers practical help 
in finding civilian jobs. Under this agreement, VA offers vocational 
training and temporary jobs at our headquarters in Washington, DC to 
servicemembers recovering at the Army facility from traumatic injuries.
    VA and DOD are working together to establish a cooperative 
separation exam process so that separating servicemembers only need to 
have one medical exam that meets both military service separation 
requirements and VA's disability compensation requirements.
    Separating military personnel receive enhanced services through the 
Benefits Delivery at Discharge (BDD) program. This program enables 
separating servicemembers to file disability compensation claims with 
VA staff at military bases, complete physical exams, and have their 
claims evaluated before, or closely following, their military 
separation. With the assistance of VA staff stationed at 140 military 
installations around the Nation as well as in Korea and Germany, 
servicemembers can begin the VA disability compensation application 
process 180 days prior to separation. These applications are now 
processed at two locations to improve efficiency and the consistency of 
our claims decisions. In addition, our employees conduct transition 
assistance briefings in Germany, Italy, Korea, England, Japan, and 
Spain.

                              MEDICAL CARE

    The President's 2007 request includes total budgetary resources of 
$34.3 billion for the medical care program, an increase of 11.3 percent 
(or $3.5 billion) over the level for 2006 and 69.1 percent higher than 
the funding available at the beginning of the Bush Administration. The 
2007 budget reflects the largest dollar increase for VA medical care 
ever requested by a President and includes our funding request for the 
three medical care appropriations--medical services ($27.5 billion, 
including $2.8 billion in collections); medical administration ($3.2 
billion); and medical facilities ($3.6 billion).
    The cornerstone of our medical care budget is providing care for 
veterans who need us the most--veterans with service-connected 
disabilities; those with lower incomes; and veterans with special 
health care needs. A key element of this effort is to make sure every 
seriously injured or ill serviceman or woman returning from combat in 
Operation Enduring Freedom and Operation Iraqi Freedom receives 
priority consideration and treatment.

                              INITIATIVES

    The 2007 budget includes two provisions that, if enacted, will be 
instrumental in helping VA meet our primary goal of providing health 
care to those who need our medical services the most. The first 
provision is to implement an annual enrollment fee of $250 and the 
second is to increase the pharmacy copayment from $8 to $15 for a 30-
day supply of drugs. Both of these provisions apply only to Priority 7 
and 8 veterans who have no compensable service-connected disabilities 
and do have the financial means to contribute modestly to the cost of 
their care. Priority 7 and 8 veterans typically have other alternatives 
for addressing their medical care costs, including third-party health 
insurance coverage and Medicare, and were not eligible to receive VA 
medical care at all or only on a case-by-case space available basis 
until 1999 when new authority allowed VA to enroll them in any year 
that resource levels permitted.
    As you know, these two initiatives are not new, and I recognize 
that Congress has not enacted them in the past. However, we are 
reintroducing them because I believe they are justifiable, fair, and 
reasonable policies. They are entirely consistent with the priority 
health care structure enacted by Congress several years ago, and would 
more closely align VA's fees and copayments with other public and 
private health care plans. The President's budget includes similar, 
small incremental fee increases for DOD retirees under age 65 in the 
TRICARE system. The VA fees would allow us to focus our resources on 
patients who typically do not have other health care options. 
Furthermore, these two provisions reduce our need for appropriated 
funds by $765 million as a result of the additional collections they 
would generate, and a modest reduction in demand.
    The 2007 budget also includes a provision to eliminate the practice 
of offsetting or reducing VA first-party copayment debts with 
collection recoveries from third-party health plans. Veterans receiving 
medical care services for treatment of nonservice-connected 
disabilities would receive a bill for their entire copayment. If 
enacted, this provision would yield about $30 million in additional 
collections that could be used to provide further resources for the 
Department's health care system.
    The combined effect of all three provisions reduces our need for 
appropriated funds by $795 million in 2007. I want to work with your 
Committee and the rest of Congress to gain your support for these 
proposals.

                                WORKLOAD

    During 2007, we expect to treat nearly 5.3 million patients, of 
which 4.8 million are veterans, including over 100,000 combat veterans 
who served in Operation Enduring Freedom and Operation Iraqi Freedom. 
Among the remaining patients we will treat are qualified dependents and 
survivors eligible for care through the Civilian Health and Medical 
Program of the Department of Veterans Affairs (CHAM PVA), VA employees 
receiving preventive occupational immunizations, and patients receiving 
humanitarian care.
    The 3.8 million veteran patients in Priorities 1-6 will comprise 79 
percent of our total veteran patient population and 72 percent of our 
overall total patient population in 2007. This will be an increase of 
2.1 percent in the number of patients in Priorities 1-6 and will 
represent the fourth consecutive year during which those veterans who 
count on us the most will increase as a percentage of all patients 
treated.
    We have made significant improvements to the actuarial model that 
was used to support our 2007 budget request, including development of 
an enhanced methodology for determining enrollee morbidity and a more 
detailed analysis of enrollee reliance on VA health care compared to 
other medical service providers. Also, we have added new data sources, 
including the Social Security Death Index, which resulted in a more 
accurate count of enrolled veterans. Finally, we have more accurately 
assigned veterans into the income-based enrollment priority groups by 
using data from the 2000 decennial census.
    VA continues to take steps to ensure the actuarial model accurately 
projects the needs of veterans from Operation Enduring Freedom and 
Operation Iraqi Freedom. However, many unknowns can impact the number 
and type of services the Department will need to provide these 
veterans, including the duration of the military action, when these 
veterans are demobilized, and the impact of our enhanced outreach 
efforts. Therefore, we have made additional investments in key 
services, such as mental health, prosthetics, and dental care to ensure 
we will be able to continue to meet the health care needs of these 
returning veterans and veterans from other eras seeking more of these 
same services.

                            FUNDING DRIVERS

    There are three key drivers of the additional funding required to 
meet the demand for VA health care services in 2007:
     inflation;
     expanded utilization of services; and
     greater intensity of services provided.
    The impact of the composite rate of inflation within the actuarial 
model increased our resource requirements for medical care by $1.2 
billion, or 3.9 percent. This includes the effect of additional funds 
needed to meet higher payroll costs as well as the influence of growing 
costs for supplies, as measured in part by the medical Consumer Price 
Index.
    VA will experience a significant increase in the utilization of 
health care services in 2007 as a result of four factors. First, 
overall utilization trends in the U.S. health care industry continue to 
increase. Veterans who previously came to VA for a single medical 
appointment now more typically require multiple appointments in many 
different specialty clinics. And, they return more often for follow-up 
appointments in any given year. To illustrate, in 2005 we treated about 
5.3 million individual patients but had a total of over 58 million 
outpatient visits. These trends expand VA's per-patient cost of doing 
business. Second, we expect to see changes in the demographic 
characteristics of our patient population. Our patients as a group will 
continue to age, will have lower incomes, and will seek care for more 
complex medical conditions. These projected changes in the case mix of 
our patient population will result in greater resource needs. Third, 
veterans are displaying an increasing level of reliance on VA health 
care as opposed to using other medical care options they may have 
available. This increasing reliance on VA medical care is due at least 
in part to the positive experiences veterans have had with the 
Department's health care system and is a reflection of our status as 
the Nation's leader in delivering high-quality care. And fourth, 
veterans are submitting compensation claims with more, as well as more 
complex, disabilities claimed. Our Veterans Health Administration does 
the majority of disability examinations required in order to evaluate 
these claims. This results in the need for a disability compensation 
medical examination that is more complex, costly, and time consuming.
    General medical practice patterns throughout the Nation have 
resulted in an increase in the intensity of health care services 
provided per patient, due to the growing use of diagnostic tests, 
pharmaceuticals, and other medical services. This rising intensity of 
care is evidenced in VA's health care system as well. This has 
contributed to higher quality of care and improved patient outcomes, 
but it requires additional resources to provide this greater intensity 
of services.
    The combined impact of expanded utilization and greater intensity 
of services increased our resource requirements for medical care by 
nearly $1.2 billion.

                            QUALITY OF CARE

    VA's standing as the Nation's leader in providing safe, high-
quality health care is evident and has been well documented. For 
example:
     in December 2004 RAND investigators found that VA 
outperforms all other sectors of American health care across a spectrum 
of 294 measures of quality in disease prevention and treatment;
     the Department's health care system was featured in the 
January/ February 2005 edition of Washington Monthly in an article 
titled ``The Best Care Anywhere'';
     the May 18, 2005, edition of the prestigious Journal of 
the American Medical Association noted that VA's health care system has 
``. . . quickly emerged as a bright star in the constellation of safety 
practice, with system-wide implementation of safe practices, training 
programs and the establishment of four patient-safety research 
centers'';
     the July 18, 2005, edition of the U.S. News and World 
Report included a special report on the best hospitals in the country 
titled ``Military Might-- Today's VA Hospitals Are Models of Top-Notch 
Care;'' and
     on August 22, 2005, The Washington Post ran a front-page 
article titled ``Revamped Veterans' Health Care Now a Model.''
    It should be noted that for the sixth consecutive year, VA set the 
public and private sector benchmark for health care satisfaction based 
on the American Customer Satisfaction Index survey conducted by the 
National Quality Research Center at the University of Michigan. VA's 
inpatient index was 83 compared to 73 for the private sector, and our 
outpatient index was 80 compared to 75 for the private sector.
    These external acknowledgments of the superior quality of VA health 
care when compared to other public and private health plans reinforce 
the Department's own findings. We use two primary measures of health 
care quality--Clinical Practice Guidelines Index and Prevention Index. 
These measures focus on the degree to which VA follows nationally 
recognized guidelines and standards of care that medical literature has 
proven to be directly linked to improved health outcomes for patients. 
Our performance on the Clinical Practice Guidelines Index, an internal 
accountability measure focusing on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to reach 78 percent in 2007, or a 1 percentage 
point rise over the 2006 estimate. Similarly, VA's Prevention Index, a 
set of measures aimed at preventive health care, including 
immunization, health risk assessments, and cancer screenings, is 
projected to remain at the estimated 2006 high rate of performance of 
88 percent.

                             ACCESS TO CARE

    With the resources requested for medical care in 2007, the 
Department will be able to both maintain its current high performance 
dealing with access to medical care as well as seek ways to continually 
reduce waiting times for non-urgent care. In 2007 we expect that 93.7 
percent of appointments will be scheduled within 30 days of the 
patient's desired date. For primary care appointments, 96 percent will 
be scheduled within 30 days of the patient's desired date and for 
specialty care, 93 percent of all appointments will be scheduled within 
30 days of the patient's desired date. No veteran will have to wait for 
emergency care.
    VA is also committed to ensuring that no veteran returning from 
service in Operation Enduring Freedom and Operation Iraqi Freedom has 
to wait more than 30 days for a primary care or specialty care 
appointment.
    We have achieved these waiting times efficiencies by developing a 
number of strategies to reduce waiting times for appointments in 
primary care and specialty clinics nationwide, to include implementing 
state-of-the-art appointment scheduling systems, standardizing business 
processes associated with scheduling practices, and ensuring that 
clinicians focus on those tasks that only they can perform to optimize 
the time available for treating patients. To further improve access and 
timeliness of service, VA will fully implement Advanced Clinic Access 
nationally, an initiative that promotes the efficient flow of patients. 
This program optimizes clinical scheduling so that each appointment or 
inpatient service is most productive. In turn, this reduces unnecessary 
appointments, allowing for relatively greater workload and increased 
patient-directed scheduling.

                        MAJOR CHANGES IN FUNDING

    VA's 2007 request includes over $4.3 billion for long-term care 
($229 million more than the 2006 level). I can assure you that the 
patient and cost projections associated with long-term care have been 
checked to ensure that they represent our real need in this area. While 
we aim to expand all types of extended care services, we plan to 
increase the rate of growth of non-institutional care funding about 
twice as much as that for institutional care. With an emphasis on 
community-based and in-home care, the Department can provide extended 
care services to veterans in a more clinically appropriate setting, 
closer to where they live, and in the comfort and familiar settings of 
their homes surrounded by their families. During 2007 we will increase 
the number of patients receiving non-institutional long-term care, as 
measured by the average daily census, to about 36,700. This represents 
a 14.4 percent increase above the level we expect to reach in 2006 and 
a 33.7 percent rise over 2005.
    The Department's 2007 request includes nearly $3.2 billion ($339 
million over the 2006 level) to provide comprehensive mental health 
services to veterans,
    including our effort to improve timely access to these services 
across the country. These additional funds will help ensure that VA 
continues to realize the aspirations of the President's New Freedom 
Commission Report as embodied in VA's Mental Health Strategic Plan and 
to deliver exceptional, accessible mental health care.
    The Department will continue to place particular emphasis on 
providing care to those suffering as a result of their service in 
Operation Enduring Freedom and Operation Iraqi Freedom from a spectrum 
of combat stress reactions, ranging from readjustment issues to Post-
Traumatic Stress Disorder (PTSD). An example of our firm commitment to 
provide the best treatment available to help veterans recover from 
these mental health conditions is our increased outreach to veterans of 
the Global War on Terror, as well as increased readjustment and PTSD 
services. This includes the December 2005 designation of three new 
centers of excellence in Waco (Texas), San Diego (California), and 
Canandaigua (New York) devoted to advancing the understanding and care 
of mental health illness.
    VA's medical care request includes $1.4 billion ($160 million over 
the 2006 level) to support the increasing workload associated with the 
purchase and repair of prosthetics and sensory aids to improve 
veterans' quality of life. VA has already provided prosthetics and 
sensory aids to military personnel who served in Operation Enduring 
Freedom and Operation Iraqi Freedom and the Department will continue to 
provide them as needed.

                          MEDICAL COLLECTIONS

    As a result of improvements in our medical collections processes 
and the initiatives presented in this budget request, we expect to 
collect over $2.8 billion in 2007 that will substantially supplement 
the resources available from appropriated sources. In 2005, we 
collected just under $1.9 billion. The collections estimate for 2007 is 
$779 million, or 37.9 percent, above the 2006 estimate. About 70 
percent of the projected increase in collections is due to the 
provisions calling for implementation of a $250 annual enrollment fee, 
an increase to $15 in the pharmacy copayment, and elimination of the 
practice of offsetting VA first-party copayment debts with collection 
recoveries from third-party health plans. The remaining 30 percent of 
the growth in collections will result from continuing improvements in 
billing and collections.
    We have several initiatives underway to strengthen our collections 
processes. These include:
     the Department is implementing a private-sector-based 
business model pilot, tailored to our revenue operations, to increase 
third-party insurance revenue and improve VA's business practices. The 
pilot Consolidated Patient Account Center will address all operational 
areas contributing to the establishment and management of patient 
accounts and related billing and collections processes;
     we are working with Centers for Medicare/Medicaid Services 
contractors to obtain a Medicare-equivalent remittance advice for 
veterans who are covered by Medicare and are using VA health care 
services. This project will result in more accurate payments and better 
accounting for receivables through use of more reliable data for claims 
adjudication;
     our Insurance Identification and Verification project is 
providing VA medical centers with an automated mechanism to obtain 
veterans' insurance information from health plans that participate in 
the electronic data exchange;
     we are testing the e-Pharmacy Claims software that 
provides real-time claims adjudication for outpatient pharmacy claims; 
and
     VA is implementing the Patient Financial Services System 
pilot that will increase the accuracy of bills and documentation, 
reduce operating costs, generate additional revenue, reduce outstanding 
receivables, and decrease billing times.

                            MEDICAL RESEARCH

    The President's 2007 budget includes $399 million to support VA's 
medical and prosthetic research program. This amount will fund more 
than 2,000 high-priority research projects to expand knowledge in areas 
critical to veterans' health care needs, most notably research in the 
areas of mental illness ($51 million), aging ($40 million), health 
services delivery improvement ($36 million), heart disease ($30 
million), central nervous system injuries and associated disorders ($29 
million), and cancer ($28 million).
    The requested funding for the medical and prosthetic research 
program will position the Department to buildupon its long track record 
of success in conducting research projects that lead to clinically 
useful interventions that improve veterans' health and quality of life. 
Examples of some of the recent contributions made by VA research to the 
advancement of medicine are:
     use of the antidepressant paroxetine decreases symptoms 
related to Post Traumatic Stress Disorder and improves memory;
     physical activity and body-weight reduction can 
significantly cut the risk of developing type II diabetes;
     new links have been discovered between diabetes and 
Alzheimer's disease; and
     vaccination against varicella-zoster (the same virus that 
causes chickenpox) decreases the incidence and/or severity of shingles.
    In addition to VA appropriations, the Department's researchers 
compete and receive funds from other Federal and non-Federal sources. 
Funding from external sources is expected to continue to increase in 
2007. Through a combination of VA resources and funds from outside 
sources, the total research budget in 2007 will be almost $1.65 
billion, or about $17 million more than the 2006 estimate.

                       GENERAL OPERATING EXPENSES

    The Department 2007 resource request for General Operating Expenses 
(GOE) is nearly $1.5 billion. It is $131 million, or 9.7 percent, above 
the 2006 current estimate. Within the 2007 total funding request, 
$1.168 billion is for the management of the following non-medical 
benefits administered by the Veterans Benefits Administration (VBA)--
disability compensation; pensions; education; housing; vocational 
rehabilitation and employment; and insurance. This is an increase of 
$114 million (or 10.8 percent) over the 2006 level. Our request for GOE 
funding also includes $313 million to support General Administration 
activities, an increase of $17 million, or 5.7 percent, from the 
current 2006 estimate.
     compensation and pensions workload, performance, and staffing
    VA is focused on delivering timely and accurate benefits to 
veterans and their families. Improving the delivery of compensation and 
pension benefits has become increasingly challenging during the last 
few years due to a steady and sizable increase in workload. This 
growing workload is the result of several factors--more claims are 
being filed; we are experiencing more direct contact with veterans and 
servicemembers, particularly those who served in Operation Enduring 
Freedom and Operation Iraqi Freedom; the complexity of claims is 
increasing; and more appeals are being filed.
    The volume of claims receipts has grown substantially during the 
last few years and is now the highest it has been in the last 15 years 
as we received over 788,000 claims in 2005. This trend is expected to 
continue. We are projecting the receipt of over 910,000 compensation 
and pension claims in 2006 (which includes over 98,000 claims resulting 
from the special outreach requirements of recently enacted legislation) 
and more than 828,000 claims in 2007.
    One of the key drivers of new claims activity is the size of the 
active duty military force. The number of active duty servicemembers as 
well as Reservists and National Guard members who have been called to 
active duty to support Operation Enduring Freedom and Operation Iraqi 
Freedom have increased. This has led to a sizable growth in the number 
of new claims, and we expect this pattern to persist. An additional 
reason that the number of compensation and pension claims is climbing 
is the Department's commitment to increase outreach efforts. Our 
outreach efforts are critical to the men and women who are entitled to 
VA benefits and services. We have an obligation to extend our reach as 
far as possible and to spread the word to veterans about what VA stands 
ready to provide.
    Disability compensation claims from veterans who have previously 
filed a claim comprise almost 60 percent of the disability claims 
receipts each year, and the number of such claims is climbing at a rate 
of two to 3 percent annually. Many veterans now receiving compensation 
suffer from chronic and progressive conditions, such as diabetes, 
mental illness, and cardiovascular disease. As these veterans age and 
their conditions worsen, we experience additional claims for increased 
benefits.
    The growing complexity of the claims being filed also contributes 
to our workload challenges. Since the beginning of 2000, the number of 
veterans receiving compensation has increased 14 percent, from slightly 
over 2.3 million to more than 2.6 million. However, the total number of 
disabilities for which veterans are being compensated has increased 37 
percent during this time, from nearly 6 million disabilities to 8.2 
million disabilities. In addition, we expect to continue to receive a 
growing number of complex disability claims resulting from Post-
Traumatic Stress Disorder, environmental and infectious risks, 
traumatic brain injuries, complex combat-related injuries, and 
complications resulting from diabetes. Each claim now takes more time 
and more resources to adjudicate. Additionally, as the Department 
receives and adjudicates more claims, this results in a larger number 
of appeals from veterans and survivors.
    In addition to the growing complexity of compensation and pension 
claims, there are special outreach requirements that will have a 
significant impact on our workload and program performance. These 
outreach requirements will result in nearly 100,000 additional claims. 
As a result of the increasing volume and complexity of claims, the 
average number of days to complete compensation and pension claims is 
now projected to rise from 167 days in 2005 to 185 days in 2006, and to 
fall slightly to 182 days in 2007. In addition, we anticipate that our 
pending inventory of disability claims will climb throughout 2006 as we 
receive new claims, reaching nearly 418,000 by the end of this year. 
The inventory will fall by 5 percent during 2007 to around 397,000. 
Despite these significant workload challenges, we remain committed to 
reaching our strategic goal of processing compensation and pension 
claims in an average of 125 days.
    We will address our ever-growing workload challenges in several 
ways. First, we will continue to improve our productivity as measured 
by the number of claims processed per staff member. Second, we will 
continue to move work among regional offices in order to maximize our 
resources and enhance our performance. Third, we will simplify and 
clarify benefit regulations and ensure our claims processing staff has 
easy access to the manuals and other reference material they need to 
process claims as efficiently and effectively as possible. And fourth, 
we will further advance our efforts to improve the consistency and 
quality of claims processing across regional offices.
    Even though we will implement several management improvement 
practices, we will need additional staffing in order to address our 
workload challenges in claims processing. Our 2007 budget includes 
resources to support over 13,100 staff members (including nearly 7,900 
staff in direct support of the compensation and pensions programs), or 
about 170 above the staffing supported by our 2006 budget.
   education and vocational rehabilitation and employment performance
    Key program performance will improve in both the education and 
vocational rehabilitation and employment programs. The timeliness of 
processing original education claims will improve by 8 days during the 
next 2 years, falling from 33 days in 2005 to 25 days in 2007. In 
addition, the rehabilitation rate for the vocational rehabilitation and 
employment program will climb to 69 percent in 2007, a gain of 6 
percentage points over the 2005 performance level.

                        FUNDING FOR INITIATIVES

    The 2007 request for VBA includes $3.4 million to continue 
development of comprehensive training and electronic performance 
support systems. This ongoing initiative provides technical training to 
compensation and pension staff through a multimedia, multi-method 
training approach that has a direct impact on the accuracy and 
consistency of our claims processing.
    The 2007 resource request for VBA includes $2 million to continue 
the development of a skills certification instrument for assessing the 
knowledge base of current and new veterans' service representatives and 
will also result in a skills certification module for a variety of 
program staff. This initiative will help identify those employees who 
need additional training in order to better perform their duties and 
will allow us to improve our screening process involving applicants for 
higher-level positions.

                    NATIONAL CEMETERY ADMINISTRATION

    The President's 2007 budget request for VA includes $160.7 million 
in operations and maintenance funding for the National Cemetery 
Administration (NCA). This represents an increase of $11.1 million (or 
7.4 percent) over the 2006 current estimate. The additional funding 
will be used to meet the growing workload at existing cemeteries by 
increasing staffing and augmenting funds for contract maintenance, 
supplies, and equipment. We expect to perform over 107,000 interments 
in 2007, or 5.4 percent more than the 2006 estimate and 15.1 percent 
more than the number of interments in 2005.
    Our resource request also has $9.1 million to address gravesite 
renovations as well as headstone and marker realignment, an increase of 
$3.6 million from our funding for 2006. These improvements in the 
appearance of our national cemeteries will help us maintain the 
cemeteries as shrines dedicated to preserving our Nation's history and 
honoring veterans' service and sacrifice.
    We will expand access to our burial program by increasing the 
percent of veterans served by a burial option in a national or state 
veterans cemetery within 75 miles of their residence to 83.8 percent in 
2007, which is 6.7 percentage points above the 2005 level. In addition, 
we will continue to increase the percent of respondents who rate the 
quality of service provided by national cemeteries as excellent to 97 
percent in 2007, or 3 percentage points higher than the 2005 
performance level.

              CAPITAL (CONSTRUCTION AND GRANTS TO STATES)

    The President's 2007 budget request includes $714 million in 
capital funding for VA. Our request includes $399 million for major 
construction projects, $198 million for minor construction, $85 million 
in grants for the construction of state extended care facilities, and 
$32 million in grants for the construction of state veterans 
cemeteries.
    The 2007 request for construction funding for our medical care 
program is $457 million--$307 million for major construction and $150 
million for minor construction. All of these resources will be devoted 
to continuation of the Capital Asset Realignment for Enhanced Services 
(CARES) program to renovate and modernize VA's health care 
infrastructure and to provide greater access to high-quality care for 
more veterans. When combined with the $293 million that was enacted in 
the Hurricane Katrina emergency funding package in late December 2005 
to fund a CARES project for a new hospital in Biloxi, Mississippi, the 
total CARES funding since the 2006 budget totals $750 million and since 
the 2004 CARES report amounts to nearly $3 billion.
    Our major construction request for medical care will fund the 
continued development of two medical facility projects--$97.5 million 
to address seismic corrections in Long Beach; and $52 million for a new 
medical facility in Denver. In addition, our request for major 
construction funding includes $38.2 million to construct a new nursing 
home care unit and new dietetics space, as well as to improve patient 
and staff safety by correcting seismic, fire, and life safety 
deficiencies at American Lake (Washington); $32.5 million for a new 
spinal cord injury center at Milwaukee; $25.8 million to replace the 
operating room suite at Columbia (Missouri); and $7 million to renovate 
underutilized vacant space located at the Jefferson Barracks Division 
campus at St. Louis as well as provide land for expansion at the 
Jefferson Barracks National Cemetery.
    We are also requesting $53.4 million in major construction funding 
and $25 million in minor construction resources to support our burial 
program. Our request for major construction includes funds for cemetery 
expansion and improvement at Great Lakes, Michigan ($16.9 million), 
Dallas/Ft. Worth, Texas ($13 million), and Gerald B. H. Solomon, 
Saratoga, New York ($7.6 million). Our request will also provide $2.3 
million in design funds to develop construction documents for gravesite 
expansion projects at Abraham Lincoln National Cemetery (Illinois) and 
at Quantico National Cemetery (Virginia). In addition, the major 
construction request includes $12 million for the development of master 
plans for six new national cemeteries in areas directed by the National 
Cemetery Expansion Act of 2003--Bakersfield, California; Birmingham, 
Alabama; Columbia-Greenville, South Carolina; Jacksonville, Florida; 
Sarasota County, Florida; and southeastern Pennsylvania.

                    INFORMATION TECHNOLOGY SERVICES

    The President's 2007 budget for VA provides $1.257 billion for the 
non-payroll costs associated with information technology (IT) projects 
across the Department. This is $43.2 million, or 3.6 percent, above our 
2006 budget.
    The 2007 request for IT services includes $832 million for our 
medical care program, $55 million for our benefits programs, $4 million 
for our burial program, and $366 million for projects managed by our 
staff offices, most notably non-payroll costs in our Office of 
Information and Technology and Office of Management to support 
department-wide initiatives and operations.
    The most critical IT project for our medical care program is the 
continued operation and improvement of the Department's electronic 
health record system, a Presidential priority which has been recognized 
nationally for increasing productivity, quality, and patient safety. 
Within this overall initiative, we are requesting $51 million for 
ongoing development and implementation of HealtheVet-VistA (Veterans 
Health Information Systems and Technology Architecture) which will 
incorporate new technology, new or reengineered applications, and data 
standardization to continue improving veterans' health care. This 
system will make use of standards that will enhance the sharing of data 
within VA as well as with other Federal agencies and public and private 
sector organizations. Health data will be stored in a veteran-centric 
format replacing the current facility-centric system. The standardized 
health information can be easily shared between facilities, making 
patients' electronic health records available to all those providing 
health care to veterans.
    Until HealtheVet-VistA is operational, we need to maintain the 
VistA legacy system. This system will remain operational as new 
applications are developed and implemented. This approach will mitigate 
transition and migration risks associated with the move to the new 
architecture. Our budget provides $188 million in 2007 for the VistA 
legacy system.
    In support of the Department's education program, our 2007 request 
includes $3 million in non-payroll costs to continue the development of 
The Education Expert System. This will replace the existing benefit 
payment system with one that will allow the Department to automatically 
process education claims received electronically.
    VA's 2007 request provides $57.4 million for cyber security. This 
ongoing initiative involves the development, deployment, and 
maintenance of a set of enterprise-wide security controls to better 
secure our IT architecture in support of all of the Department's 
program operations.

                                SUMMARY

    In summary, Mr. Chairman, the $80.6 billion the President is 
requesting for VA in 2007 will provide the resources necessary for the 
Department to:
     provide timely, high-quality health care to nearly 5.3 
million patients, including 4.8 million veteran patients of which 79 
percent are among those who need us the most--those with service-
connected disabilities, lower incomes, or special health care needs;
     address the large growth in the number of claims for 
compensation and pension benefits; and
     increase access to our burial program by ensuring that 
nearly 84 percent of veterans will be served by a burial option in a 
national or state veterans cemetery within 75 miles of their residence.
    I look forward to working with the Members of this Committee to 
continue the Department's tradition of providing timely, high-quality 
benefits and services to those who have helped defend and preserve 
freedom around the world.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Larry E. Craig to Hon. 
                           R. James Nicholson

                         MEDICAL CARE PROGRAMS

    Question 1. VA has been able to offer veterans a wide-range of 
pharmaceutical medications over the years without breaking the bank 
because of its ability to manage a formulary and hold down drug cost 
increases. This year, however, VA shows a need for a 10 percent 
increase in the pharmacy budget, with little to no growth in the 
patient population.
    A. Is VA starting to lose the ability to keep pharmacy inflation 
down in the 3 to 7 percent range?
    B. Or is there another explanation for this fairly large growth?
    Answer A and B. No, we are not losing our ability to keep pharmacy 
inflation under control. There are explanations for the 10 percent 
increase in the fiscal year 2007 pharmacy budget: the increasing number 
of veterans using our pharmacy services and the increases in costs per 
user of our pharmacy service. This increase in cost is both due to 
inflation and the increased availability and complexity of modern drug 
treatments.
    Question 2. As you know, in addition to this Committee, I also sit 
on the Appropriations Subcommittee with jurisdiction over your 
Department. I have noticed that VA's health care funds are provided 
through numerous accounts--Medical Services, Medical Administration, 
Medical Facilities, and Information Technology.
    A. Does this structure help VA to more accurately account for its 
expenditure in any or all of the areas?
    B. Or does it cost a significant amount of money to account for 
different expenditures because VA needs to properly reflect the correct 
account?
    Answer A and B. No, this structure does not increase the accuracy 
of accounting for expenditures because all the expenditures are 
recorded in VA's Financial Management System (FMS), by appropriation, 
budget object code, cost center, and year of fund availability. The 
accuracy of the recording is identical whether all expenditures are in 
a single appropriation (medical care) as it was prior to fiscal year 
2004 or in three appropriations (medical services, medical 
administration, and medical facilities) that were created in fiscal 
year 2004 and now in fiscal year 2006 in four appropriations (medical 
services, medical administration, medical facilities, and information 
technology).
    The change to three appropriations in fiscal year 2004 actually 
made local medical facility operations significantly more complex. 
Prior to fiscal year 2004, the medical facility director was allocated 
a single budget that could be used to address local operational 
priorities as they occurred. For example, funds could be used to 
address critical vacancies in nurse staffing, or security guard 
staffing, or food service staffing as the need arose in the support of 
the total patient care mission. Now each of those functions is 
supported by a totally separate appropriation (the nurse is in medical 
services, the security guard in medical administration, and the food 
service worker in medical facilities). Although all three individuals 
are critical to the successful care and treatment of the patient, the 
three appropriation structure has the unintended consequence of 
suggesting that some how the medical services appropriation is more 
important to the care of the patient than the other two. This is one of 
the most serious drawbacks of the multi-appropriation structure--it 
gives the false impression that the medical services appropriation is 
the only one of the appropriations that is related to direct patient 
care. All three (now four) appropriations are directly related to 
patient care.
    The multiple appropriation structure requires a significant 
increase in the volume of funding transactions. For example, each 
appropriation is allocated to approximately 150 separate facilities or 
program offices. Also, the volume and complexity of the financial 
workload have increased significantly. For example, in fiscal year 
2003, there were approximately 30,000 funding transactions to support 
the single appropriation structure. In fiscal year 2005, there were 
over 55,000 funding transactions required to support the three 
appropriation structure. In fiscal year 2006, based on our current 
experience, we anticipate approximate 70,000 funding transactions to 
support the four appropriation structure.
    In summary, the multi-appropriation structure does not improve the 
accuracy of accounting for expenditures, it generates a significant 
increase in workload, and it reinforces a false perception that the 
medical services appropriation is more important than the other 
appropriations in the delivery of high quality healthcare services to 
veterans.
    Question 3. VA's fiscal year 2007 budget proposes a number of new 
major construction projects. VA has already begun several major 
projects whose completion costs are not reflected in the budget 
request. However, the Committee will need to authorize all CARES 
related construction that occurs after September 30, 2006.
    A. Please provide the Committee with a complete list of all of VA's 
major construction projects that would require authorization to either 
begin construction or to complete construction already underway. This 
list should include a breakdown of money already obligated under the 
existing authorization as well as the cost of completing such projects.
    Answer. See listing below of major construction projects requiring 
authorization, total estimated cost and obligations to date of project 
funds.

------------------------------------------------------------------------
                                                               Obliga-
                                    Project      Total Est.     tions
           Location               description       cost       (Project
                                                   ($000)    funds only)
------------------------------------------------------------------------
                Immediate need for FY 2006 Authorization
------------------------------------------------------------------------
1. Biloxi, MS................  Restoration of      $310,000           $0
                                Hospital/
                                Consolidation
                                of Gulfport.
2. Denver, CO................  Replacement          621,000            0
                                medical center
                                facility.
3. New Orleans, LA...........  Restoration/         675,000            0
                                Replacement of
                                Medical Center
                                Facility.
------------------------------------------------------------------------
   Extension of Authorization of Major Construction Project Authorized
                           Under P.L. 108-170
------------------------------------------------------------------------
1. Anchorage, AK.............  Outpt. Clinic/        75,270            0
                                Regional Office.
2. Cleveland, OH.............  Cleveland-           102,300            0
                                Brecksville
                                Consolidation.
3. Des Moines, IA............  Extended Care         25,000            0
                                Building.
4. Durham, NC................  Renovate Patient       9,100          354
                                Wards.
5. Gainesville, FL...........  Correct Pt.           85,200            0
                                Privacy
                                Deficiency.
6. Indianapolis, IN..........  7th & 8th Fl.         27,400       27,400
                                Wards
                                Modernization
                                Addition.
7. Las Vegas, NV.............  New Federal          406,000            0
                                Medical
                                Facility.
8. Lee County, FL............  Outpatient            65,100            0
                                Clinic.
9. Long Beach, CA............  Seismic              107,845            0
                                Corrections-
                                Bldgs 7 &126.
10. Los Angeles, CA..........  Seismic               79,900            0
                                Corrections-
                                Bldgs. 500 &
                                501.
11. Orlando, FL..............  New Medical          347,700            0
                                Center Facility.
12. Pittsburgh, PA...........  Consolidation of     189,205       39,000
                                Campuses.
13. San Antonio, TX..........  Ward Upgrades         19,100          702
                                and Expansion.
14. San Juan, PR.............  Seismic               15,000            0
                                Corrections-
                                Bldg. 1.
15. Syracuse, NY.............  Spinal Cord           53,900            0
                                Injury Center.
16. Tampa, FL................  Spinal Cord            7,100            0
                                Injury Center
                                Expansion.
17. Tampa, FL................  Upgrade               49,000            0
                                Essential
                                Electrical
                                Distribution
                                Systems.
18. Temple, TX...............  Blind Rehab and       56,000            0
                                Psychiatric
                                Beds.
------------------------------------------------------------------------
                 FY 2007 New Major Construction Projects
------------------------------------------------------------------------
1. American Lake, WA.........  Seismic               38,220            0
                                Corrections-
                                NHCU &
                                Dietetics.
2. Columbia, MO..............  Operating Room        25,830            0
                                Suite
                                Replacement.
3. Fayetteville, AR..........  Clinical              56,163            0
                                Addition.
4. Milwaukee, WI.............  Spinal Cord           32,500            0
                                Injury Center.
5. St. Louis (JB), MO........  Medical Facility      69,053            0
                                Improvements
                                and Cemetery
                                Expansion.
6. San Juan, PR..............  Seismic              130,200            0
                                Corrections-
                                Bldg. 1.
------------------------------------------------------------------------

    Question 4. The decrease in direct appropriations for Medical and 
Prosthetic Research stands out against the backdrop of budget increases 
for medical services, medical administration, and medical facilities. 
Knowing that today's research will guide clinical treatment and service 
delivery in the years ahead, I am interested in your comments on the 
projected research budget.
    A. Specifically, as an increasing number of younger combat injured 
veterans with traumatic brain injuries, amputations, spinal cord 
injuries, and sensory problems are seeking VA care, should we be 
greatly expanding our research efforts in these areas?
    B. Does this budget provide enough latitude to do so, given that 
significant resources are already directed toward research on Geriatric 
Care, Alzheimer's, Parkinson's, and other disorders associate with VA's 
older population?
    Answer A and B. VA research is increasing its focus on newly 
emerging needs of veterans, especially those returning from Operation 
Iraqi Freedom and Enduring Freedom (OIF/OEF). VA recently issued a 
Request for Applications (RFA) to stimulate more research in combat 
casualty neurotrauma, including traumatic brain injury and spinal cord 
injury. VA also issued an RFA to establish a Quality Enhancement 
Research Initiative (QUERI) Coordinating Center for implementation of 
best practices in polytrauma and blast-related injuries (i.e., complex, 
multiple injuries in unpredictable patterns, including amputations, 
brain injuries, eye injuries, musculoskeletal injuries and emotional 
adjustment problems). The Center will be expected to create and 
coordinate an implementation network that includes researchers, 
clinicians, managers and leaders with VA and the Department of Defense 
(DOD).
    In addition, VA continues to expand its support of 
multidisciplinary research and examination of enabling technologies to 
ease the physical and psychological impacts of limb loss, including 
pain. While traditional amputation research has focused on mechanical 
limb prostheses, VA is expanding its focus to include novel approaches, 
such as tissue engineering and surgical treatment for residual limb 
lengthening, joint replacement and attachment of prostheses, as well as 
incorporating advanced materials, microelectro-mechanics and 
nanotechnologies into current prosthetic designs. One particularly 
innovative approach involves investigating the control of prostheses 
through direct brain activity. A primary goal of these activities is to 
generate rigorous data that can drive policy and shape clinical care 
guidelines.
    VA also continues to support a broad mental health research 
portfolio. VA has recently issued a joint RFA with DOD and the National 
Institutes of Health (NIH) to enhance and accelerate research on the 
identification, prevention and treatment of combat related post-
traumatic psychopathology and similar adjustment problems. Studies 
target active-duty or recently separated National Guard and Reserve 
troops involved in current and recent military operations.
    In many cases, the specific needs of returning OIF/OEF veterans 
mirror those of veterans who served in previous conflicts. For example, 
a significant percentage of these returning veterans exhibit symptoms 
of post-traumatic stress disorder and depression that resemble those 
following previous deployments. Similarly, research designed to improve 
traumatic amputation and subsequent prosthetics care is nonetheless 
relevant to veterans other than those who served in OIF/OEF, including 
elderly patients with diabetes and vascular disease who account for the 
majority of the prosthetic fittings performed in VA annually. 
Accordingly, VA is funding OIF/OEF related research as it continues 
aging research. VA's research focuses on both newly emerging needs of 
OIF/OEF veterans as well as for VA's older population.
    Question 5. VA's budget request $85 million for the State Nursing 
Home Grant program.
    A. Please provide me with a breakdown of how this money would be 
allocated between new construction proposals and repairs to existing 
homes.
    Answer. VA is assessing the fiscal year 2007 budget proposal of $85 
million to determine the amount of funding that will be used for a 
grant to support the construction of a new 400-bed nursing home in West 
Los Angeles and the amount of funding that will be required for state 
home life safety projects. VA anticipates providing $68 million to the 
West Los Angeles construction project in fiscal year 2006 and providing 
the remaining funding to complete the project over the next few years.
    Question 6. Mr. Secretary, VA is transitioning to a ``federated 
model'' of IT program management. VA's budget request reflects this 
transition. The total IT request represents an increase of over 3 
percent. But, within that overall increase, the Office of Management 
will see nearly a 16 percent increase, almost doubling its IT funding 
within the last 2 years.
    A. Why was the Office of Management singled out for such a large 
increase, whereas other offices--such as the Office of Information 
Technology--were not?
    Answer. The IT increases requested by the Office of Management (OM) 
between fiscal years 2005 and 2007 is primarily the result of 
additional funding required for VA's Financial & Logistics Integrated 
Technology Enterprise (FLITE) project. The 2007 funding level is $20.4 
million over the 2005 level. FLITE is an essential effort to move VA 
away from a financial system developed in the 1980's to a modem 
environment that will effectively integrate and standardize financial 
and logistical data department-wide. In addition, other 2007 OM IT 
increases over 2005 include funding to operate the H.R. and Payroll 
system ($1.7 million); E-travel ($2.0) and E- Payroll ($6.4 million).
    Question 7. VA has once again proposed that VA increase 
prescription drug copayments to $15 for each 30-day supply of 
medication. Of course, Congress has previously declined to approve 
these fee proposals.
    A. Are you wed to this specific increase on medication copayments?
    Answer. We believe this increase for prescription copayments from 
$8 to $15 is a fair and reasonable policy. It is consistent with the 
priority health care structure enacted by Congress several years ago, 
and would more closely align VA's copayments with other public and 
private health care plans. The President's budget includes similar, 
small incremental copayment increases for DOD retirees under age 65 in 
the TRICARE system. The VA increase in copayment fees would allow us to 
focus our resources on patients who typically do not have other health 
care options.
    B. Or, have you explored other cost-sharing options?.
    Answer. Yes, VA has evaluated other alternatives, but we believe 
this proposal is fair and will generate sufficient revenue to allow us 
to focus our resources on patients who typically do not have other 
health care options.

                   COMPENSATION AND PENSION PROGRAMS

    Question 1. The Administration's FY07 budget proposal estimates an 
output of 108 completed rating-related disability claims per direct 
FTE. The Independent Budget, on the other hand, recommends that 
staffing levels be based on 100 ratings for each direct FTE.
    A. What factors were considered by VA in setting the productivity 
goal of 108?
    Answer. VBA considered the increased experience level of employees 
hired over the past several years. VBA expects that the employees hired 
in fiscal year 2005 and those we are currently hiring and training will 
be able to assist in improving timeliness and delivery of benefits to 
veterans in fiscal year 2007. VBA believes the increase to 108 claims 
per FTE is realistic and consistent with our goal of producing timely 
and accurate claims decisions.
    B. Is there any reason to expect less productivity in FY07 than was 
accomplished in FY05 (101 ratings per direct FTE) and is expected in 
FY06 (106 ratings per direct FTE)?
    Answer. We do not have reason to expect a lower level of 
productivity. VBA's projected output of 108 claims per FTE for fiscal 
year 2007 represents a 6.9 percent increase in productivity over our 
actual output of 101 claims per FTE in fiscal year 2005. It represents 
an increase in productivity of 1.9 percent over our projected fiscal 
year 2006 output of 106 claims per FTE.
    Question 2. The Secretary has authority to furnish office space in 
VA facilities to representatives who assist veterans in pursuing their 
claims before VA.
    A. Does VA track the cost of providing representatives with office 
space in VA facilities?
    Answer A. VA provides space to authorized Veterans Service 
Organizations free of charge. We do not track the cost.
    B. If so, how much will VA expend on that in FY07? Answer B. That 
information is not available.
    C. What measures, if any, does VA take to ensure that those 
representatives are competent to assist veterans in pursuing claims for 
VA benefits?
    Answer C. As provided in 38 CFR Sec. 14.628(d)(1)(v), VA requires 
that all VSOs have a plan for training qualified claims representatives 
and take affirmative action in the area of training as a condition for 
recognition. VA relies, in large part, on the training programs of the 
VSOs to ensure that individuals employed by those organizations are 
adequately trained and supervised. We have found this process to be a 
suitable and efficient means for ensuring that VSO representatives are 
adequately trained. In order to emphasize the importance of maintaining 
such training programs, VA's Office of General Counsel has previously 
sent inquiries to several of the larger VSOs to verify the sufficiency 
of their programs. The information received from VSOs in response to 
these inquiries did not reveal any significant deficiencies.
    VBA does offer training for accredited veterans service officers 
involved in the claims development process under the TRIP (Training, 
Responsibility, Involvement, and Preparation of Claims) Program. 
Participating VSOs are provided with training aimed at improving the 
quality of claims submissions. Those accredited VSOs who successfully 
complete TRIP training are also given restricted access to some VA 
computer applications that are used in the claims development process. 
The TRIP Program is designed to ensure that VSOs understand the claims 
development process. VSOs who successfully complete the training then 
can help expedite the claims they submit by working with veterans to 
obtain the evidence needed from non-Federal sources.
    D. Is a minimum level of training or experience required?
    Answer. See response to 2.C above.
    Question 3. In testimony submitted to this Committee last year, VA 
indicated that it would ``consider ways to prevent the protracted 
piece-meal submission of evidence and the delays it causes, while 
protecting due process rights of claimants.''
    A. What is the status of that effort?
    B. Would legislative action be needed to accomplish that objective?
    Answer A and B. Following a May 26, 2005, Senate Committee on 
Veterans' Affairs hearing, VBA was asked to comment on recommendations 
made by former U.S. Court of Appeals for Veterans Claims (Veterans 
Court) Chief Judge Kenneth Kramer for improving the VA claims 
adjudication and appeal system, including his recommendation to close 
the record at an earlier stage in the appeal process. We responded that 
``[w]e recognize . . . that an open record contributes to protracted 
appeal processing and therefore to delay in deciding appeals. We will 
consider ways to prevent the protracted piece-meal submission of 
evidence and the delays it causes, while protecting due process rights 
of claimants.''
    The laws currently governing VA's administrative appeal process 
contemplate that VA (1) will continue to develop the record after a 
claimant has filed a notice of disagreement (NOD), which commences the 
appeals process, in order to resolve the disagreement either by 
granting the benefit or through withdrawal of the NOD; (2) afford the 
appellant an opportunity for a hearing; and (3) obtain an advisory 
medical opinion when warranted by the medical complexity of the case.
    VA must implement the development contemplated by these laws in 
accordance with procedures required by governing statutes and fair 
process concerns recognized by the Veterans Court. The courts have held 
that procedural fairness in an administrative proceeding generally 
requires an adequate opportunity to know the evidence to be relied upon 
and to rebut it. See Wirtz v. Baldor Elec. Co., 337 F.2d 518, 528 (D.C. 
Cir. 1963) (citing cases). The Veterans Court has held that, before the 
Board of Veterans' Appeals (Board) relies, in rendering a decision, on 
any evidence (in that case a medical treatise) obtained after the 
issuance of the most recent statement of the case or supplemental 
statement of the case with respect to the claim at issue, the Board is 
required to provide the appellant with reasonable notice of the 
evidence and of the reliance proposed to be placed on it, as well as 
reasonable opportunity to respond. Thurber v. Brown, 5 Vet. App. 119, 
126 (1993). In another case, the Veterans Court held that a claimant is 
entitled to submit evidence as well as present argument or comment in 
response to additional evidence, in that case a medical-adviser 
opinion, obtained by the Board. Austin v. Brown, 6 Vet. App. 547, 551 
(1994). More recently, the U.S. Court of Appeals for the Federal 
Circuit held that the Board may not consider additional evidence 
without either remanding the case to the agency of original 
jurisdiction (AOJ) for initial consideration or obtaining the 
appellant's waiver permitting the Board to consider the evidence in the 
first instance. Disabled Am. Veterans v. Secretary of Veterans Affairs, 
327 F.3d 1339, 1353 (Fed. Cir. 2003). VA has promulgated and amended 
its regulations in accordance with these court decisions.
    VA has most recently focused its efforts to limit piecemeal 
submission of evidence on litigation designed to prevent judicial 
interpretations of the Veterans Claims Assistance Act of 2000 (VCAA) 
that would delay appellate decisionmaking through protracted evidence 
development. For example, in two cases recently decided by the Veterans 
Court, Dingess v. Nicholson and Hartman v. Nicholson, VA argued that 
the VCAA does not require VA to provide notice of the information and 
evidence necessary to substantiate a claim each time the Department 
renders a decision on a claim and the claimant files a NOD with that 
decision. The same issue is raised in several Veterans Court decisions 
that VA has appealed to the Federal Circuit. The Veterans Court held in 
Dinqess and Hartman that, assuming VA has provided proper notice, VCAA 
notice is no longer required once a decision awarding service 
connection, a disability rating, and an effective date has been made by 
VA. In addition, in Mayfield v. Nicholson, which was recently decided 
by the Federal Circuit, the claimant contended that VA was required to 
provide VCAA notice after the Board remanded the case to the AOJ for 
compliance with the VCAA and obtained a medical opinion that proved to 
be adverse to the claim. The Federal Circuit held that VA must provide 
VCAA notice before VA decides the claim and in a form that enables the 
claimant to understand the process, the information that is needed, and 
who will be responsible for obtaining the information. The VCAA 
provides a claimant with 1 year after VA sends VCAA notice to provide 
VA with the information and evidence necessary to substantiate the 
claim, although VA could issue a decision before the end of the 1-year 
period.
    Question 4. In testimony presented to this Committee last year, it 
was posited that attorneys representing claimants before VA would have 
an ethical obligation to screen claims for merit and to counsel their 
clients against filing frivolous claims.
    A. Would an initial screening process that discourages the filing 
of non-meritorious claims have a beneficial effect on VA's claims 
processing system?
    Answer. Following his testimony at the May 26, 2005, Senate 
Committee on Veterans' Affairs hearing, Mr. Robert V. Chisholm was 
asked to respond to a post-hearing question concerning the obligation 
of attorney representatives to counsel their clients against filing 
claims for veterans benefits that may not be meritorious. Mr. Chisholm 
responded that the American Bar Association's Model Rules of 
Professional Conduct and parallel State rules ``impose an ethical 
obligation upon an attorney to examine a claim for its merit and to 
counsel the client against filing a claim if it is frivolous and 
without merit.''
    VBA's current procedures include an initial screening process to 
immediately review all incoming applications for veterans benefits to 
determine whether a claim requires: (1) expedited action because of the 
nature of the claim or the facts; (2) immediate referral to the rating 
activity because all evidence was submitted with the claim; (3) further 
development because it is incomplete; or (4) immediate denial because 
the claim cannot be substantiated. VBA performs a routine check of all 
original claims for disability compensation to check for: (1) the 
proper signature for the claim; (2) the benefit sought and type of 
claim; (3) character of discharge; (4) service verification; (5) basic 
eligibility for the benefit sought; (6) completeness of application; 
and (7) acceptable dependency information. If there is a legal bar to 
entitlement, such as lack of qualifying service or character of 
discharge, VBA denies the claim without referring it to the rating 
activity. However, in the absence of a statutory bar to entitlement, 
VBA does not deny any claim until it has complied with VA's statutory 
duty to assist in obtaining evidence necessary to substantiate the 
claim. VA must provide assistance unless there is no reasonable 
possibility that assistance would aid in substantiating the claim. 
Prior screening of claims by claimants' representatives would save VA 
the burden of evaluating, and in some cases developing, claims that 
will ultimately prove incapable of substantiation.
    Question 5. In the Administration budget proposal, it is noted that 
the Veterans Claims Assistance Act of 2000 ``significantly increased 
both the length and complexity of claims development'' and ``add led] 
more steps to claims process.''
    A. Have those additional steps led to improved outcomes for 
veterans or improved satisfaction with the process?
    Answer. Following the Court of Appeals for Veterans Claims decision 
in Morton v. West, VA was required to deny claims without rendering 
assistance to a veteran when the claim was determined to be ``not well 
grounded.'' The Veterans Claims Assistance Act (VCAA) eliminated the 
``well grounded'' requirement. Consequently, when VA now receives a 
substantially complete application for benefits, the claimant is 
provided with a VCAA notice, which details what further information or 
evidence is needed to substantiate the claim. The notice identifies the 
information or evidence that VA will try to obtain and the information 
or evidence the veteran must submit. VA then provides assistance in 
obtaining the evidence in all disability claims except in very limited 
circumstances described by statute. VA provides the veteran with a 
decision and an explanation of the reasons for the decision. We believe 
the provision requiring assistance in virtually all claims is a 
significant improvement for claimants.
    We have no data to suggest that, for those veterans who submit 
claims that would have met the previous ``well grounded'' test, 
providing the VCAA notice has affected the eventual outcome of the 
claim. We believe it has, however, lengthened the time to get to that 
decision and lengthened the appeals process as well, with numerous 
opportunities for remands based solely on issues of technical 
compliance with VCCA notice provisions.
    The most recent customer satisfaction data we have indicates that 
in 2004 overall customer satisfaction with the compensation and pension 
claims process was 60.9 percent, a slight improvement over 2003 when it 
was 59.4 percent.
    Question 6. Your testimony points to increased utilization of VA 
medical services as one of the key cost drivers of the system. One 
primary example of increased utilization you cite is the number of 
disability examinations performed at VA medical facilities.
    A. How are requests for disability examinations managed by facility 
directors given that demand for medical care services is high?
    Answer. No Response.
    B. Would utilizing contract disability examiners free up direct 
labor hours so that clinicians could focus on medixcal care?
    Answer. No Response.
    C. How much does it cost to perform a thorough and accurate 
disability examination?
    Answer. No Response.
    D. How much does it cost a contract examiner?
    Answer. No Response.
    Question 7. Over the past 5 years VA has seen a two-fold increase 
in the number of claims filed with 8 or more claimed service-connected 
conditions.
    A. Are there particular cohorts of veterans responsible for filing 
claims with 8 or more issues, e.g., OIE/OEF, military retirees, etc.?
    Answer. VBA does not currently collect this type of data. However, 
claims filed under the Benefits Delivery at Discharge (BDD) program 
typically contain a larger number of issues.
    B. How many disabilities on a claim with 8 or more issues does VA, 
on average, end up establishing service-connection?
    Answer. VBA does not currently have a mechanism to collect this 
information. However, we are working to develop a means to associate 
the disabilities claimed with the service-connected disabilities 
granted through extraction of data from the Modern Award Processing-
Development (MAP-D) and Rating Board Automation 2000 (RBA2000) systems.
    C. What is the highest number of issues ever claimed by a veteran 
on one claim? What is the highest number ever granted by VA?
    Answer. VBA does not currently collect this information. However, a 
claim decided in August 2005 initially included approximately 400 
conditions. During the claims development process, this number was 
narrowed to 281 issues, by consolidating similar or repeated entries. 
The final Rating Decision further consolidated this to 84 ``rated'' 
disabilities. Of those, serviceconnection was granted for 39 
disabilities. The combined evaluation was 100 percent.
    D. In the interest of fairness to other claimants and efficient 
processing of legitimate, claimed disabilities with scarce resources, 
would it make sense for Congress to consider a cap on the number of 
issues that could be claimed by any one veteran?
    Answer. Since the circumstances of each veteran claiming disability 
compensation are unique, it is fair to consider each claim on its own 
merits, regardless of the number or types of issues claimed. The number 
of issues is not the only cause of longer processing times. The 
increasing complexity of the legal requirements surrounding the claims 
process has also extended the time veterans must wait for decisions on 
their claims.
    Question 8. While VA expects well over 800,000 disability claims in 
FY07, the number of claimed service-connected disabilities on each 
individual claim will be far greater.
    A. What is the total number of disability decisions VA expects to 
make within the 849,000 claims it will receive?
    Answer. VA cannot capture this data precisely. However, information 
currently available to us indicates that a veteran requests 
compensation for three conditions on average in his or her disability 
claim. Therefore, we estimate decisions on 2,457,000 claimed conditions 
in fiscal year 2007.
    Question 9. The budget estimates that disability claims workload 
will increase in FY07, but that direct FTE to handle that workload will 
decrease.
    A. Why does VA propose a significant increase in Management 
Direction and Support FTE for Compensation and Pension in FY07?
    Answer. The 2007 budget does not actually propose a significant 
increase in management support; rather it correctly identifies indirect 
FTE required to support direct VBA FTE for all business lines. The 2006 
President's Budget erroneously understated total management support 
FTE, resulting in a misallocation of management support FTE to the 
Compensation and Pension business line. The 2007 budget submission 
correctly identifies the total number of management support FTE based 
upon our most recent execution records and equitably allocates these 
FTE across all business lines.
    B. Isn't the need for FTE most acute in the field, where the claims 
will be received, and not in Management Direction and Support?
    Answer. Yes. VBA is committed to ensuring that our field offices 
have sufficient FTE to directly meet our veterans' needs. Historically, 
VBA has increased FTE in functions that directly support veterans, 
while decreasing indirect support functions. For example, since 2002, 
VBA has increased direct FTE by nearly 100 while management support has 
decreased by over 180.
    Question 10. Section 1103 of title 38, United States Code, bars the 
payment of disability compensation to veterans on account of diseases 
or injuries attributable to the use of tobacco products while in serve. 
However, this bar does not apply to diseases or injuries that manifest 
while in service, even if attributed to the use of tobacco products.
    A. For prospective claims only, what would be the cost savings 
associated with barring all service-connected compensation for diseases 
or disabilities attributed to the use of tobacco products, irrespective 
of whether such disease manifested before or after military service?
    Answer. VA is working on that estimate and will provide it as soon 
as it is completed.
    Question 11. VA expects a 10 percent increase in the number of 
veterans on the disability compensation roles over just a 2-year 
period. In my first decade in the senate (from 1991 to 2001), there was 
only a 5 percent increase in the disability roles.
    A. Is this acceleration a trend VA expects will continue?
    Answer. The number of original compensation claims received by VA 
has increased from 111,672 in fiscal year 2000 to 210,504 in fiscal 
year 2005. The number of veterans receiving compensation has increased 
by 261,595 during the same period. We expect the number of veterans 
receiving compensation to continue to grow in the foreseeable future. 
Among the reasons for the growth are the current conflicts in Iraq, 
Afghanistan, and the Global War on Terrorism; the increased size of the 
active force as a result of the mobilization of large numbers of Guard 
and reserve military personnel; and the impact of Combat Related 
Special Compensation (CRSC) and Concurrent Retirement and Disability 
Pay (CRDP).
    This projected growth takes into account the offsetting increased 
death rate among older veteran populations. The number of World War II 
veterans on the rolls is rapidly declining due to age and the Korean 
War population on the rolls, the next oldest veteran group, is 
comparatively small. In the near term, the impact of deaths in these 
two veteran populations receiving compensation will slow but not 
reverse the growth trend in the number of veterans receiving 
compensation. The rapidly growing Guff War Era veteran population is 
now the third largest population of veterans on the rolls. We believe 
that original claim rates will return to more traditional levels only 
when the full impacts of the conflict, CRDP, and CRSC have been 
experienced.
    Question 12. VA projects double-digit mandatory spending growth.
    A. In addition to the growth of the number of veterans on the 
compensation roles, what accounts for the large increase in mandatory 
spending?
    Answer. Factors that influence average payments are the annual cost 
of living adjustments (COLAs), an increase in the average degree of 
disability per veteran, an increase in the number of individual 
unemployability (IU) cases, and an increase in the number of special 
monthly compensation (SMC) cases. Enacted legislation that provides new 
or expanded benefits also contributes to the rise in mandatory 
spending.
     The 4.1 percent COLA in 2006 and 10 months of the 
anticipated 2.6 percent COLA for 2007 are expected to add $784 million 
to Compensation and Pension Program mandatory spending in 2007.
     The average degree of disability per veteran increased 
from 33.2 percent in 2000 to 38.3 percent in 2005 and is expected to 
continue increasing in 2007 and beyond.
     Veterans who are rated 60 percent and above are eligible 
for IU. Those who qualify because they are unable to maintain 
employment due to a service-connected disability are compensated at the 
100 percent benefit rate. The number of veterans receiving IU benefits 
increased by 20,774 in 2005.
     Special monthly compensation is a monetary benefit paid in 
addition to or in place of the zero to 100 percent combined degree of 
disability for special circumstances, such as loss of use of one hand. 
In 2004, there were 207,637 veterans receiving SMC in 2005 the number 
rose to 230,713.
    B. Is this trend expected to continue?
    Answer. The C&P forecasting model is based on historical data and 
trends. While our projections take many factors into account, like 
those cited above, there are other variables that cannot be 
anticipated. These include court decisions, enacted legislation, and 
the number of troops deployed. Based on all available information, we 
expect continued growth in mandatory spending.
    Question 13. The Independent Budget suggests that experienced, 
well-trained personnel are essential to improve timeliness and accuracy 
of claims adjudication.
    A. What is the average number of years of experience, i.e., years 
as a VA employee, for VA's VSRs and RVSRs?
    Answer. The average VSR has just over 4 years of Federal service, 
while the average RVSR has approximately 15 years.
    B. Is the trend toward a more experienced workforce or less 
experienced one?
    Answer. The average years of VA experience for RVSRs is projected 
to decline in the near term, as many of our current RVSRs are at or 
near retirement age. Most of the RVSR vacancies resulting from 
retirements will be filled from the ranks of our VSRs, who generally 
have much less VA experience. Since most of our VSR hires will continue 
to be new to the Federal workforce, we do not project the average VA 
experience level of our VSRs to increase significantly in the near 
term.
    C. Is there a correlation between the average years of experience 
of the workforce and positive or negative performance?
    Answer. Performance is affected by many factors including the 
complexity of claims, claims volume, policy and regulatory changes, 
years of experience, and others. We have not conducted any analyses to 
determine what, if any, correlation exists between the average years of 
experience of RVSRs or VSRs and performance.
    Question 14. You anticipate an extra 98,000 disability claims to be 
filed in FY06 as a result of specialized outreach in six states 
directed by the recently enacted Appropriations bill (Publics Law 109-
114).
    A. What effect will the influx of these claims have on disability 
claims processing performance nationwide?
    Answer. VBA estimates that the number of days required to complete 
a claim will rise in the near term from 167 days in fiscal year 2005 to 
185 days in fiscal year 2006. We project that timeliness will again 
begin to improve in the latter part of fiscal year 2007 as we are able 
to complete the processing of some of this additional workload and the 
inventory again begins to decline.
    B. What performance impact will there be on the Regional Offices in 
the six states in question?
    Answer. The regional offices in the six states most directly 
affected by this special outreach effort do not have the resources to 
handle the large workload increases that are anticipated. Therefore, 
regional offices and resource centers across the Nation will be called 
upon to assist these six offices through workload brokering 
arrangements. While the greatest impact will still likely be on the 
performance in the six regional offices, our brokering strategy will 
help to minimize the impact on the veteran populations in these states.
    C. As veterans respond to this outreach by filing claims, how many 
do you anticipate being successful?
    Answer. We cannot predict how many veterans will receive increased 
evaluations. Available data indicates that the ten most prevalent 
service-connected conditions are in the areas of the musculoskeletal 
system, the skin, hearing, neurological conditions, mental disorders, 
the cardiovascular system, the respiratory system, the endocrine system 
(mostly type II diabetes), the genitourinary system, and vision. Many 
of the conditions related to these ten areas are chronic and 
progressive. It is therefore reasonable to assume that, in cases 
involving these conditions where the veteran has not filed a claim for 
increase in many years, a significant number of claims could result in 
increased benefits.
    Question 15. I was particularly struck by one aspect of VA's 2004 
pension program evaluation report which suggested that 5 percent of 
pension participants who are veterans, and 13 percent of participants 
who are spouses, have no health care coverage.
    A. How is it possible that recipients of VA cash benefits are 
unaware of their eligibility for VA health care?
    Answer. With each compensation, pension, and dependency indemnity 
compensation award notification letter, we include information about 
health care benefits. For example, VA Form 21-8769, Disability Pension 
Award Attachment, states: ``Veterans who are entitled to pension and/or 
special monthly pension (aid and attendance or housebound benefits) as 
determined by the Veterans Benefits Administration are eligible for 
medical care through the VA health care system. If you are interested 
in obtaining VA medical care, you may contact your nearest VA health 
care facility or the VA Health Benefits Center at 1-877-222-8387.''
    B. What is VA doing to let these beneficiaries know that VA will 
provide them with coverage?
    Answer. See response to 15A.

                           EDUCATION PROGRAM

    Question 1. From FY01 to FY03, the timeliness of decisions on 
original education claims improved remarkably. During FY04 and FY05, 
however, there was a deterioration of that improvement.
    A. Will the additional 34 direct FTE requested for the Education 
Service for FY07 allow VA to regain that lost ground?
    Answer. We believe the additional 34 FTE requested for 2007, 
together with the additional FTE allotted for 2006, will enable us to 
achieve the 2007 target of 25 days, on average, to process original 
claims.
    Question 2. In 2004, Congress created a new education program 
(Chapter 1607) for Guard and Reserve personnel activated after 
September 11, 2001. According to the Administration's FY07 budget 
proposal, no Chapter 1607 benefits were paid during FY05.
    A. How many Chapter 1607 claims are now pending?
    Answer. As of Monday, March 27, 2006, 8,833 claims were pending.
    B. Will those pending claims be decided this fiscal year?
    Answer. Yes.
    C. Does the budget proposal devote sufficient resources to handling 
the Chapter 1607 workload during fiscal year 2007?
    Answer. The majority of the Chapter 1607 claims in 2006 and 2007 
will come from Guard and Reserve personnel who are converting to 
Chapter 1607 from the less generous Chapter 1606 program. The 
additional resources required for this conversion are minimal. 
Resources in the fiscal year 2007 budget are sufficient to handle the 
anticipated workload from those with eligibility for Chapter 1607 only, 
as well as those who are converting from Chapter 1606.
    Question 3. Last year, the Veterans Advisory Committee on Education 
recommended that three education programs (Chapter 30, Chapter 1606, 
and Chapter 1607) be replaced with a single program applicable to all 
members of the Armed Forces. VA personnel and personnel from the 
Department of Defense subsequently formed a working group to assess the 
merits of that recommendation.
    A. What the status of the working group's efforts?
    Answer. Acknowledging that the three programs differ by design, the 
group members first reviewed the specific purposes of each program to 
identify the unique and essential elements of each. The group must 
agree next on those features from each program that would need to be 
incorporated into a new program. Also, the group must discuss the 
issues to be considered in bringing hundreds of thousands of 
beneficiaries receiving benefits under three separate programs into a 
single program.
    B. When will that group finish its assessment of the proposed 
changes?
    Answer. While no deadline was established for the group to complete 
its work, an assessment of the merits of the recommendation is likely 
within the next 90 days.
    Question 4. Currently, veterans cannot electronically access 
important information regarding their VA education benefits and may 
have to endure delays in receiving this information telephonically.
    A. Would allowing students to access information electronically 
increase the efficiency and convenience of the VA education benefits 
system?
    Answer. Yes, if students had access to additional account 
information it would benefit both the student and VA. Many of our calls 
are claim specific, so allowing students access to additional on-line 
information would reduce the number of calls and allow VA employees 
more time to process the students' claims.
    B. What steps have been taken or will be taken to provide veterans 
with electronic access to all relevant information regarding their 
education benefits?
    Answer. Students are currently able to obtain some monthly payment 
information from our automated phone system. They are able to verify 
their enrollment information via the telephone and our Web Automated 
Verification of Enrollment (WAVE) system. Our WAVE system also allows 
them to view a portion of their VA record, change their mailing 
address, and establish or change a direct deposit.
    We are currently looking at the feasibility of providing the 
student with information on our web site. The information would consist 
of a listing of information (forms) VA received on their claims and an 
estimated timeframe when their claims will be processed.

            VOCATIONAL REHABILITATION AND EMPLOYMENT PROGRAM

    Question 1. The Vocational Rehabilitation and Employment (VR&E) 
program would receive a significant increase in FTE under the 
Administration's budget proposal.
    A. How many of those additional FTE will be Employment 
Coordinators?
    B. In total, how many Employment Coordinator does VR&E plan to 
utilize in FY07 and what functions will they perform?
    C. Do those functions overlap with functions performed by Disabled 
Veterans' Outreach Program (DVOP) specialists?
    D. To what extent--if any--will VR&E rely on DVOP specialists to 
provide employment services to VR&E participants?
    Answer. A and B. The fiscal year 2007 budget allocates 107 
additional FTE to VR&E. The first priority in filling the positions 
will be the new Employment Coordinator (EC) position, second will be 
Rehabilitation Counselors, and third, Contract Specialists. Exact 
numbers will be determined based on hiring in the interim.
    In keeping with the VR&E Task Force recommendations and to ensure 
that service-connected disabled veterans who are participating in a 
vocational rehabilitation program are provided with comprehensive 
employment services, VR&E plans to have at least one employment 
coordinator at every regional office. All existing Employment 
Specialists have been permanently re-assigned to Employment Coordinator 
positions and the Employment Specialist position has been abolished.
    The duties/functions of the Employment Coordinator include:
     Providing comprehensive vocational assessment, case 
management, marketing, and placement services;
     Serving as an integral resource in support of the delivery 
of employment exploration and readiness services;
     Assisting vocational rehabilitation counselors to 
accurately assess a veteran's current feasibility for achievement of a 
vocational goal;
     Recommending an appropriate vocational rehabilitation plan 
through one of five possible service delivery options (tracks) with the 
goal of suitable employment or independent living; and
     Assisting veterans to access VetSuccess.gov, VR&E's newly 
developed ``online'' employment resource that provides orientation to 
VR&E programs, expert vocational advice, rich labor market resources, 
and career development tools.
    Answer C. Employment Coordinators do not provide services that are 
duplicative of those tasks performed by the Department of Labor's 
Disabled Veterans' Outreach Program (DVOP) specialists. VR&E Employment 
Coordinators serve as ``triage'' team members to help disabled veterans 
make informed choices regarding selection of an employment goal and 
services needed to reach those goals. ECs provide oversight, 
consultation, and coordination of services for ``job-ready'' veterans 
which requires close coordination with DVOPs.
    Answer D. VR&E's Employment Coordinators work in partnership with 
DVOPs and Local Veterans Employment Representatives (LVERs) to ensure 
that veterans with service-connected disabilities have access to 
suitable employment opportunities. DVOPs/LVERs staff are included in 
the roll-out activities associated with the national deployment of the 
new 5-Track Employment model. The Five Track Employment model provides 
employment services to veterans with the most serious service-connected 
disabilities. It assists these veterans with work accommodations, 
resume/interviewing skills, training in small business operations, 
apprenticeships, independent living skills training, and other 
services. VR&E's 5-Track Employment Model training sessions currently 
underway at the National Veterans' Training Institute (NVTI) include 
local DVOPs. Also, DVOPs co-located within VR&E will now have access to 
the technology to provide comprehensive employment services through 
VR&E's job labs and VetSuccess.gov.
    Question 2. According to the Administration's budget proposal, VR&E 
personnel have been conducting outreach to employers to help create 
employment opportunities for veterans. These activities appear to 
mirror functions performed by an employment program administered by the 
Department of Labor (DOL)--the Local Veterans' Employment 
Representative program.
    A. To what extend do VA and DOL coordinate to ensure that redundant 
functions are not being performed?
    Answer. VA, through the VR&E Program, and DOL work in partnership 
to conduct outreach and identify employment opportunities. VR&E focuses 
outreach activities specifically on identifying opportunities for 
disabled veterans and works with potential employers to educate and 
train them in the challenges that disabilities present both to the 
veteran and the employer.
    Question 3. In February 2005, the VA Inspector General found that 
VA was ``at risk of paying excessive prices'' on 241 contracts for 
assessments, rehabilitation, training, and employment services for 
veteran participants.
    A. What amount does VR&E plan to expend on contract services in 
FY07?
    Answer. VR&E anticipates spending approximately $28 million in 
total contract funds in fiscal year 2007, distributed as follows:
     $9 million General operating expenses (GOE)
     $13 million General readjustment benefits
     $6 million Educationallvocational counseling (Chapter 36)
    B. What steps have been taken to ensure that VA does not pay an 
excessive price for those contracts services?
    Answer. VR&E uses several methods to ensure that we do not pay 
excessively for services. Market analyses, cost comparisons, and 
competitive bidding processes are employed before contracting with 
service providers. At the regional office level, each VR&E division has 
a warranted contracting officer who is authorized to establish the 
spending limit under each contract. Individual case managers who have 
completed training as contracting officer technical representatives are 
authorized to expend funds within those limits. All vouchers are 
individually approved by someone other than the authorizing official 
before payment is issued. In general, the three parts of the process--
obligating funds, authorizing funds, and making payments--are performed 
by different employees to ensure propriety of payment. At the national 
level, the VR&E Service Quality Assurance Program incorporates review 
of contracting activities in both the individual case reviews and 
regional office site visits.
    C. Will VR&E have adequate resources to provide all necessary 
services and assistance to those veterans?
    Answer. VR&E Service anticipates that the requested level of 
resources will be adequate to provide the necessary training, 
rehabilitative, and employment services and assistance to all veterans 
requiring VR&E benefits.
    Question 4. In FY07, VR&E expects an increase in workload in part 
due to seriously injured veterans retiring from Operation Iraqi Freedom 
(OIF) and Operation Enduring Freedom (OEF).
    A. How many OIF/OEF veterans do VR&E expect to participate in VR&E 
programs during FY07?
    Answer. VR&E anticipates a small increase in workload in fiscal 
year 2007 due specifically to OIF/OEF participants. However, the number 
of new applications for VR&E benefits has not increased significantly 
since the onset of OIF/OEF. The typical VR&E claimant does not apply 
for benefits until approximately 6 years after separation from military 
duty. We do expect an increase in applications from seriously disabled 
veterans due to OIF/OEF. That increase alone, however, does not 
represent a large increase in overall activity.
    B. Will those veterans be given priority of service?
    Answer. Persons with serious disabilities are given a high priority 
in processing. We make every effort to ensure that initial contact is 
made while the veteran is still in a military treatment facility, and 
we follow-up after the person is discharged to his or her place of 
residence.
    C. Will VR&E have adequate resources to provide all necessary 
services and assistance to those veterans?
    Answer. The resources requested for the VR&E program will be 
adequate to serve the OIF/OEF applicants.

                            HOUSING PROGRAM

    Question 1. The budget request assumes the continued loss of FTE 
for VA's housing program. Yet the budget also assumes increased default 
and foreclosure rates in 2006 and 2007.
    A. How does VA expect to keep its Foreclosure Avoidance Through 
Servicing (FATS) ratio at a high level if the staff available to 
perform that servicing is diminished?
    Answer. The Loan Guaranty Service continues to improve efficiency 
through the consolidation, delegation, and automation of many 
functions. This flexible approach to resource utilization has allowed 
the entire program to maintain high performance metrics with fewer 
personnel. The Loan Administration function benefits from this 
delegation and automation, and we do not foresee that the FATS ratio 
will decline.
    Question 2. The budget notes that there were 8,963 
``reinstatements'' with VA's direct assistance in 2005.
    A. Is a ``reinstatement'' synonymous with a ``foreclosure 
avoided''?
    Answer. Yes. Reinstatement means that the loan was returned to a 
current status and a foreclosure avoided. The 8,963 reinstatements 
noted in the budget refer specifically to ``successful interventions'' 
where VA intervened with the loan holder on behalf of the veteran to 
arrange a repayment plan, forbearance agreement, delay in foreclosure, 
or similar agreement, and the veteran was able to reinstate the loan 
based on that agreement.
    B. VA lists four methods it uses to assist veterans in avoiding a 
foreclosure (successful intervention, refunding, voluntary conveyance, 
and compromise claim). Please detail for me the breakdown of how many 
of each method was used in 2005, and the cost savings associated with 
each of those methods.
    Answer. For fiscal year 2005, VA completed the following 
alternatives to foreclosure:

------------------------------------------------------------------------
                                              Number         Estimated
       Alternative to foreclosure          completed FY     Savings FY
                                               2005            2005
------------------------------------------------------------------------
Successful intervention.................           8,963           $180M
Voluntary conveyances & compromise                 1,650             $3M
 claims.................................
Refunded loans..........................             855             N/A
                                         -------------------------------
    Total...............................          11,468           $183M
------------------------------------------------------------------------

    Question 3. On September 30, 2008, the authorization for VA to 
guaranty adjustable rate mortgage (ARM) and hybrid ARM loans will 
expire. The Committee will need information about veterans and lenders' 
interest in these loans before it extends that authorization.
    A. How many ARM and hybrid ARM loans has VA guaranteed thus far?
    Answer. Through February 2006, a total of 219,935 ARM loans have 
been guaranteed. Of these, 144,428 were traditional, 1-year ARMs and 
75,507 were hybrid ARMs. In the following table, ARM loans are divided 
into the two periods under which VA was authorized to offer ARMs (2004-
present, and 1993-1996). Note also that hybrid ARMs were not available 
until 2004.

------------------------------------------------------------------------
                                                  Regular
   Second authorization period     Hybrid ARMs      ARMs        Total
------------------------------------------------------------------------
FYTD 2006........................        2,090           98        2,188
    2005.........................       18,480          269       18,749
    2004.........................       54,937        4,790       59,727
                                  --------------------------------------
    Total '04-'06................       75,507        5,157       80,664
                                  ======================================
    Cumulative total.............       75,507      144,428      219,935
------------------------------------------------------------------------

    B. Are there data available on foreclosure rated associated with 
these loans?
    Response. Data is available only on the traditional, 1-year ARM 
loans guaranteed during the years 1993-1996, for which the foreclosure 
rate is 9.9 percent.
    VA's authority to offer traditional, 1-year ARMs was discontinued 
after this initial pilot program and not reauthorized until fiscal year 
2004. A full and accurate representation of the foreclosure rate for a 
loan cohort cannot be provided until 5-7 years after a loan is 
guaranteed. Consequently, traditional 1-year ARM loans guaranteed in 
fiscal year 2004 and fiscal year 2005 have not matured enough to offer 
an accurate picture.
    The hybrid ARM program was not authorized until 2004, so loans made 
under this program are also not mature enough to offer a true sense of 
their rate of foreclosure. However, we can say with certainty that 
hybrid ARMs foreclose at a lower rate than traditional, 1-year ARM 
loans.

                           INSURANCE PROGRAMS

    Question 1. The budget notes that ``[d] isbursements, which are 
loans, cash surrenders and death claim awards, are considered the most 
important service provided by the Insurance Program to veterans and 
beneficiaries.''
    A. What is the total number of such disbursements the Insurance 
Program Expects to make in 2007?
    Answer. 180,825.
    B. What is the 5-year trend on the annual number of disbursements?
    Answer:

----------------------------------------------------------------------------------------------------------------
                       Fiscal year                            2007       2008       2009       2010       2011
----------------------------------------------------------------------------------------------------------------
Projected disbursements..................................   180,825    177,102    172,279    165,271    158,480
----------------------------------------------------------------------------------------------------------------

    C. As the number of disbursements decline in the coming years, and 
the number of veterans insured under the five closed insurance programs 
VA administers also declines, can we expect to see a declining FTE 
request for VA's Insurance Program?
    Answer. Yes. The Insurance Service projects a gradual decline of 
approximately 3 percent in FTE per year as the projected Insurance 
workload also declines.
    D. When is that decline expected, and how does VBA plan to use 
available space at the Philadelphia Regional Office and Insurance 
Center once the FTE drawdown begins?
    Answer. Insurance's FTE request for 2007 is 422 FTE. Although we 
have not officially formulated our FTE budget request for 2008 and 
beyond, we expect our FTE to decline by about 3 percent a year based on 
our decline in disbursements and other workload. This would equate to a 
decline of approximately 12 FTE per year.
    However, these losses might be offset by increases in other areas 
of insurance, such as increases in Service-Disabled Veterans Insurance 
applications, which have increased over the past several years. 
Insurance always strives to provide benefits and services at the lowest 
achievable administrative cost and will continue to look for ways to 
consolidate office space. Although our projected annual loss of 12 FTE 
will be spread throughout Insurance and will not represent large areas 
of contiguous space, we will make every effort to consolidate our 
personnel and activities. Space that is freed up in this way can be 
made available to VBA, VA, or GSA. For example, in 1999 Insurance 
completed a project to convert key insurance documents to images. 
Completing this project allowed us to retire over 2.5 million insurance 
folders and make available 30,000 square feet of space. That space 
ultimately became the Pension Maintenance Center, currently 
accommodating 156 FTE.
    Question 2. I noted that the 2005 Program Assessment Rating Tool 
(PART) score of the VA Insurance Program was only 74 percent, or 
``Moderately Effective.''
    A. How does this PART score square with the American Customer 
Satisfaction Index (ACSI) assessment of the VA Insurance Program, which 
scored the Insurance Program significantly higher than its private 
sector competitors?
    Answer. First, it should be noted that ``moderately effective'' is 
the second highest rating that can be achieved. The American Customer 
Satisfaction Index (ACSI) measures the satisfaction of our customers 
with the service we provide. The PART process, as indicated in the 
chart below, covers several additional areas. Therefore, the ACSI and 
other benchmarks are considered only within the Program Results and 
Accountability area. Furthermore, factors other than ACSI and similar 
benchmark results are encompassed within that area.

------------------------------------------------------------------------
                                                   Score
           PART Section             PART Score   Weighting     Weighted
                                       (%)          (%)       PART Score
------------------------------------------------------------------------
Program Purpose and Design.......          100           20           20
Strategic Planning...............           88           10            9
Program Management...............           86           20           17
Program Results and                         53           50           27
 Accountability..................
                                  --------------------------------------
    Final PART Score.............  ...........  ...........           74
------------------------------------------------------------------------

    B. Was there a particular aspect of the Insurance Program that the 
PART identified as ineffective that was not covered in the ACSI score?
    Answer. The only area where the Insurance Program did not score 
well was in the area of Program Results and Accountability. The other 
three sections yielded scores at or near the maximum. One of the 
reasons given by OMB for the low score in the results and 
accountability section was the lack of historical performance measures 
to determine whether the level of insurance coverage is sufficient to 
meet each individual's life insurance needs. Although we had been 
collecting and utilizing performance data for many years, it had not 
been included and tracked in previous budget submissions. We have now 
begun to do so. Certain targets and goals will be revised as 
appropriate and used in future submissions.

                            BURIAL PROGRAMS

    Question 1. A 2001 report identified $280 million worth of needed 
repairs at VA National Cemeteries. Is my understanding that $160 
million of repairs remain?
    A. How much is in this budget to meet those repair needs?
    Answer. The fiscal year 2007 budget request includes $108 million 
for national cemetery maintenance. This funding will support mowing and 
trimming, routine maintenance as well as repair projects to correct 
deficiencies that impact cemetery appearance. Of this amount, $28 
million is for gravesite renovation and cemetery infrastructure repair 
projects. This reflects an increase of $8 million over the fiscal year 
2006 level of $20 million.
    B. What is the target date for all $280 million worth of repairs to 
be funded and completed?
    Answer. The Veterans Millennium Health Care and Benefits Act Report 
to Congress identified the need for 928 repair projects at an estimated 
cost of $280 million. Through fiscal year 2005, NCA has completed an 
estimated $88 million of the repairs identified in the report, 
including work on 208 projects. Work on additional repair projects is 
currently in process.
    With the resources included in this budget, approximately $144 
million of the $280 million identified in the Millennium report will 
remain outstanding. In some cases, the recommended repairs involve 
materials and processes that, while achieving the same results, are 
different from NCA's established methods. NCA will use the most cost-
effective method in accomplishing these repairs. In addition, cemetery 
staff will be used, and have been used, to complete some repairs during 
routine maintenance.
    A multi-year effort will be required, and VA is committed to 
ensuring that a dignified and respectful setting appropriate for each 
national cemetery is achieved. In planning to complete the large number 
of repair projects identified in the report, repair projects are 
evaluated and prioritized on an annual basis to take into account the 
current condition of cemetery assets. This assessment is conducted 
within the Department's budget and planning processes. The funding 
request in the 2007 budget will allow VA to continue to make steady 
progress in improving the appearance of its national cemeteries and 
complete all currently identified cemetery repair projects within 5 
years.
    Question 2. Recent news accounts suggest potential delays in 
purchasing land for the establishment of a Southeastern Pennsylvania 
national cemetery.
    A. Is this true? Is so, when must the purchase of available land 
occur in order to keep VA on pace to meet its goal to have this 
cemetery operational by 2009?
    Answer. The VA needs to complete the land acquisition process and 
have title to the property in order to begin cemetery design when 
fiscal year 2007 funding becomes available. There is sufficient time to 
resolve all local land use issues concerning the preferred site, 
Dolington, near Washington Crossing in southern Bucks County. The site 
will be acquired using funds appropriated in fiscal year 2006 for that 
purpose. Funds to begin design are included in the President's fiscal 
year 2007 budget request. The architectural and engineering design team 
has been selected, and will begin the design process when funds are 
appropriated in fiscal year 2007. This timeline will allow VA to meet 
its goal to open this new cemetery in the fall of 2008.
    B. Are there any land acquisition problems in the five other areas 
where VA seeks to establish cemeteries in accordance with Public Law 
108-109?
    Answer. VA has not experienced any problems in the site selection 
and land acquisition process for the other five areas where new 
national cemeteries will be established: Bakersfield, California; 
Birmingham, Alabama; Columbia-Greenville, South Carolina; Jacksonville, 
Florida; and Sarasota County, Florida. Potential sites in each of these 
five areas have been identified, and environmental assessments are 
currently being conducted in order to assess the suitability of these 
sites for cemetery development. Funds appropriated in 2006 will be used 
to acquire land in each area. The 2007 President's budget includes 
funding to begin the design development process.

                         GENERAL ADMINISTRATION

    Question 1. VA has met all of the statutory minimum goals with 
respect to the percentage of total VA procurement dollars going to 
certain small business concerns, with one exception: the 3 percent goal 
for service-disabled veteran-owned small businesses.
    A. What is VA doing to meet the 3 percent goal which, many would 
say, is the most important of its small business goals given its 
overall agency mission?
    Answer. VA continues to make progress in implementing a very 
ambitious and proactive implementation plan for Executive Order (E.O.) 
13360, The Service Disabled Veteran Executive Order. The plan appears 
to be taking root, as accomplishments in the SDVOSB category increased 
to 2.09 percent in fiscal year 2005, up from 1.25 percent in fiscal 
year 2004. In addition, there has been increased use of the set-aside 
and sole source award authorities provided under P.L. 108-183, the 
Veterans Benefits Act of 2003. VA is not considering a different or 
alternative strategy at this time. The visibility of veteran 
entrepreneurial programs and the commitment of VA's senior leadership 
to these programs continues to increase as E.O. 13360 is more fully 
implemented.
    Data from the Federal Procurement Data System--Next Generation 
(FPDS-NG) shows VA acquisition professionals continue to increase use 
of the authorities under P.L. 108-183:

------------------------------------------------------------------------
                                             Number of
                   FY                      transactions   Dollar  amount
------------------------------------------------------------------------
2004 Set-Asides.........................              32      $4,357,094
2004 Sole Source........................              14       2,740,769
2005 Set-Asides.........................             266      76,295,124
2005 Sole Source........................              56      13,593,062
------------------------------------------------------------------------

    In fiscal year 2006, through January 31, 2006, a total of 73 
acquisitions has been set-aside for competition among SDVOSBs using 
this authority. The value of the resulting contracts total $9,805,460. 
During this same period, a total of 13 acquisitions were awarded to 
SDVOSBs using the sole source authority of the Act. The value of the 
resulting contracts total $1,058,276.
    The VA has directed that existing individual performance plans be 
modified to incorporate the SDVOSB and Veteran-Owned Small Business 
(VOSB) socioeconomic procurement preference program goals as 
significant elements in the performance plans of all VA employees 
involved in the acquisition process, and that this change be included 
in new and ensuing performance plans. This includes the performance 
plans of VA senior executives such as network directors and facility 
directors, as well as acquisition professionals, program managers and 
other officials responsible for overseeing acquisition operations or 
developing work statements or specifications, or who otherwise define 
VA acquisition requirements, and includes purchase card holders.
    VA's Office of Acquisition and Materiel Management has issued a 
number of Information Letters (IL), that are directive in nature, 
setting forth specific requirements to be followed by VA's acquisition 
and logistics community in contracting with SDVOSBs and VOSBs in order 
to enhance acquisition opportunities for these firms. One such 
requirement establishes that contracting officers shall not add items 
to their respective prime vendor contracts, contracts usually held by 
large businesses, nor shall they order standardized items from prime 
vendor contracts when the items are available from SDVOSBs through the 
Federal Supply Schedule (FSS) Program. In those instances, VA 
contracting officers may order directly from the SDVOSB.
    VA has proposed significant changes to the VA Acquisition 
Regulations (VAAR) that will soon be published for public comment. One 
important change proposed would be to allow set-aside provisions under 
the Veterans Benefits Act of 2003 to be applied to FSS acquisitions. 
Another proposed change would allow VA acquisition professionals to 
deviate from using FSS or national contracts as a priority source when 
VA can purchase identical items from SDVOSBs under comparable contract 
terms at the same or lower price than the FSS or national contract 
price.
    Heads of VA contracting activities are required to consider the 
SDVOSB goal when formulating advanced procurement plans and their 
Forecast of Contracting Opportunities (FCO). These plans shall be 
updated at least quarterly and reviewed against SDVOSB sources 
identified in VA's Vendor Information Pages (VIP) Data-base accessible 
through the VetBiz.gov web portal. When contracting officers identify 
VOSBs and SDVOSBs not contained in the VIP Data base, they are to 
initiate a provisional entry in the data base for that firm.
    The VA directed that VA's FCO shall ensure all opportunities are 
forecasted and that forecasted opportunities identify SDVOSB set-asides 
sufficient for the respective contracting activity to achieve the 3 
percent statutory goal.
    VA has instituted a ``Rule of Two,'' whereby contracting officers 
are required to solicit at least one SDVOSB and one VOSB whenever the 
acquisition cannot be totally set-aside for SDVOSBs or awarded pursuant 
to the sole source authority of P.L. 108-183.
    VA contracting officers are strongly encouraged to consider the 
socioeconomic status, especially those identified as a SDVOSB/VOSB, 
when selecting FSS contractors for competition, consistent with FAR 
Subpart 8.4.
    In fiscal year 2005, the Center for Veterans Enterprise (CVE) and 
Office of Small and Disadvantaged Business Utilization (OSDBU) attended 
200 conferences and meetings as speakers, exhibitors, panelists, 
matchmakers and facilitators, with over 28,000 participants attending 
these events. As part of VA's small business outreach efforts, OSDBU 
provides and distributes information on the Veterans Benefits Act of 
2003, E.O. 13360, and VA's approved implementation strategy for the 
E.O. at each event attended. Events include small business conferences, 
trade and industry shows, Procurement Technical Assistance Center 
(PTAC) conferences and training sessions, and large business/prime 
contractor-sponsored events.
    CVE provides advice and assistance to SDVOSBs in the Federal 
marketplace: U.S. Small Business Administration (SBA), the Association 
of Small Business Development Centers, and the Association of 
Procurement Technical Assistance Centers. Core services provided by CVE 
include: Business Coaching, Web Portal, VetBiz Vendor Information Pages 
(VIP) Data base and Community Events.
    Question 2. How does VA's Office of Small and Disadvantage Business 
Utilization (OSDBU) interact with the Small Business Administration's 
Office of Veterans Business Development?
    Answer. On a quarterly basis, the Associate Administrator of the 
Office of Veterans Business Development (OVBD) and VA's OSDBU Director 
meet with the Board of Directors of the National Veterans Business 
Development Corporation, doing business as The Veterans Corporation 
(NC). These are three of the organizations identified under Public Law 
106-50, the Veterans Entrepreneurship and Small Business Development 
Act of 1999, to assist veterans in establishing and expanding 
businesses. During these 2-day meetings, joint plans are established 
for specific projects and outreach support.
    In addition, the Administrator of SBA has appointed an Advisory 
Committee on Veterans Affairs which also meets quarterly. The Chairman 
of the Committee and the Associate Administrator of OVBD regularly 
exchange information with VA's OSDBU Director. Further, VA's OSDBU 
Director has formally briefed the Board at several of their meetings. 
VA and SBA staff often appear together at small business conferences to 
answer veterans' questions. SBA's Advisory Committee on Veterans 
Business Affairs is planning to conduct approximately 10 town hall 
meetings this year and has extended an invitation to VA to join those 
programs.
    SBA and VA personnel mutually support the informal Veterans 
Business Interagency Council which consists of volunteers with 
responsibilities under E.O. 13360, for Improving Procurement 
Opportunities for Service-Disabled Veterans. This group meets monthly 
and is currently involved in planning the Second Annual Veterans 
Business Conference to be held in June 2006.
    Question 3. What are the statutory responsibilities of VA's OSDBU 
with respect to administration of Small Business Act requirements?
    Answer. The SDVOSB Set-Aside program was enacted by Public Law 108-
183 (December 16, 2003) and promulgated in Federal Acquisition 
Regulation (FAR) Subpart Part 19.14 and in the 13 CFR 125.
    Predecessor legislation established a network of government 
agencies and organizations who work cooperatively to ensure that 
veterans are supported in the formation and expansion of businesses. 
Two of these fundamental statutes are: Public Law 106-50 and Public Law 
105-135 which required the first formal partnership between 
organizations and which further established the Veterans Business 
Outreach Program.
    As a result, VA personnel spent $207,320,465, or 2.09 percent of 
our prime contract dollars with SDVOSBs in fiscal year 2005. This 
figure represents awards from all available programs, including 266 
competitive SDVOSB set-aside actions and another 56 actions under the 
SDVOSB direct sourcing authority.
    A detailed listing of Public Law 106-50 responsibilities involving 
VA follows:
     Support the Veterans Corporation (Sec 33)
     Support SBA's Veterans Advisory Board (Sec 203)
     VA, SBA and the Association of Small Business Development 
Centers shall (Sec 302):

          1. Conduct studies
          2. Provide training & counseling to veterans
          3. Provide technical assistance re: international trade & 
        technology transfer markets
          4. Provide assistance & information regarding procurement 
        opportunities with Federal, State & local government agencies
          5. Establish an information clearinghouse to collect and 
        distribute information, including by electronic means, on 
        assistance programs of Federal, State & Local Governments, and 
        of the private sector, including information on office 
        locations, key personnel, telephone numbers, mail and 
        electronic addresses, and contracting and subcontracting 
        opportunities.
          6. Accomplish Subcontracting Goals with Veterans and Service-
        Disabled Veterans (Sec 501 & Public Law 106-554 Sec 808)
          7. Accomplish Prime Contracting Goals with SDVOSBs (Sec 501)
          8. Secretary of Veterans Affairs shall (Sec 604):
                  i. Coordinate with SBA and the U.S. Department of 
                Labor (DOL) an annual notice to business owners 
                informing them of available assistance
                  ii. Coordinate Vocational Rehabilitation Services 
                with the DOL's Veterans Employment and Training Service 
                to enhance Self-Employment Opportunities.

    Question 4. VA's OSDBU is listed in the budget under the Office of 
the Secretary, yet a summary of employment and obligations for OSDBU Is 
not available (as they are for other Office of the Secretary 
functions).
    Please provide the Committee with that information for OSDBU.
    Answer. Under Public Law 95-507, VA's OSDBU Director must report to 
the Secretary or Deputy Secretary of Veterans Affairs. OSDBU obtains 
its budget resources through the Supply Fund Appropriation, a revolving 
account. That summary information is located in Volume 2 on pages 9-8 
to 9-11. Details of OSDBU's fiscal year 2005 obligations, the fiscal 
year 2006 budget allotment and the fiscal year 2007 estimate are found 
in Attachment 2.
    Question 5. I note a precipitous decline in the percent of cases 
before the Board of Contract Appeals that are resolved using 
Alternative Dispute Resolution (ADR) techniques.
    Can you explain this decline in the use of ADR?
    Answer. The Department is uncertain of the causes of the low 
percentage of cases that are reported using ADR. The Department offers 
ADR as the preferred option for dispute resolution, to all parties 
before BCA. Parties have not complained to the Board or raised any 
intrinsic causes that would account for a decreased ADR use in BCA 
cases. ADR is, of course, voluntary for the parties. The parties must 
request it, the Board cannot compel it.
    We note that, when data as to low usage was collected, the BCA's 
case docketing system, which tracks all CDA docketed appeals, did not 
capture ADR data on CDA docketed appeals in which ADR was used but did 
not result in complete resolution of the appeal.
    The Department has advocated early use of ADR in the pre-appeal 
state of disputes for several years. Effective use of ADR in the pre-
appeal stage may result in fewer docketed contract appeals because the 
parties have used ADR successfully in the pre-appeal stage to resolve 
their dispute. As noted above, BCA's case tracking system has not 
previously consistently captured data on pre-appeal ADR use to resolve 
a dispute. BCA is improving its tracking system to consistently capture 
such data and to capture data concerning CDA cases where ADR techniques 
are used but do not result in a settlement.
    VA is also developing new strategies to promote increased use of 
ADR in resolving cases. For example, two strategies being developed are 
(1) increasing education and training of Department Contracting 
Officers and Contracting Officer Technical Representatives in the 
awareness and use ADR and (2) updating Department policy and guidance 
on ADR use and practice.
    We note that, under Public Law 109-163, the National Defense 
Authorization Act of fiscal year 2006, effective January 1, 2006, the 
civilian agency BCAs will be consolidated into a newly formed Civilian 
Board of Contract Appeals (CBCA) located in the General Services 
Administration. VA will still provide a pre-CDA ADR option. However, 
ADR provided after a filed and docketed appeal will be provided by the 
newly formed CBCA. The details of the consolidation have not been 
resolved.
    Question 6. Does the Board of Veterans Appeals (BVA) give expedited 
consideration to cases on appeal from veterans from Operation Iraqi 
Freedom or Operation Enduring Freedom? Under what circumstances does 
BVA advance a case on the docket for special consideration?
    Answer. BVA does not give expedited consideration to appeals based 
on the particular circumstances of a veteran's service, including 
participation in Operation Iraqi Freedom (OIF) or Operation Enduring 
Freedom (OEF).
    By statute, an appeal must be considered by BVA in regular order 
according to its place on our docket, 38 U.S.C. subscript 7107(a)(1); 
38 CFR subscript 20,900(b). A docket number is assigned to an appeal 
when the VA Form 9 or ``substantive appeal'' is received from the 
appellant and entered into our case tracking system by the agency of 
original jurisdiction (AOJ), usually a VA regional office or medical 
center. After the AOJ certifies the appeal and transfers the appeal 
records to BVA, the case is distributed to a Veterans Law Judge for 
consideration in the order in which the appeal was entered onto the BVA 
docket.
    A case may be advanced on the docket on motion for earlier 
consideration and determination. 38 U.S.C. subscript 7107(a)(2); 38 CFR 
subscript 20,900(c). A motion for advancement on the docket may be 
granted if the case involves an interpretation of law of general 
application affecting other claimants, if the appellant is seriously 
ill or is under severe financial hardship, or if other sufficent cause 
is shown. Examples of other sufficient cause include, but are not 
limited to, administrative error resulting in significant delay in 
docketing the case, or the advanced age of the appellant. Advanced age 
is defined by the regulation as 75 or more years of age.
    In addition to cases that are advanced on the docket, the law 
requires that BVA take action to provide for the expeditious treatment 
of any claim that is remanded to VA by the U.S. Court of Appeals for 
Veterans Claims (Court). 38 U.S.C. subscript 7112. To implement this 
requirement, BVA regulations provide their expeditious treatment will 
be accorded to cases remanded by the Court ``without regard to [their] 
place on the Board's docket.'' 38 CFR subscript 20,900(d).
    Question 7. VA's budget asks that the Office of General Counsel 
receive an increase of $4.166 million in budget authority to fund the 
fiscal year 2007 2.2 percent pay raise as well as $600 thousand to hire 
6 additional attorneys and paralegals to help with an increased 
caseload.
    A. Please provide the Committee with data on the caseloads of those 
staff who work in the areas of personnel law, medical malpractice 
defense, benefits law, land property and acquisition law related to the 
VA's CARES initiative.
    B. What are the 5-year trend data on these caseloads?
    Answer A and B. The Office of General Counsel does not maintain 
per-staff caseload data on the categories of cases identified in the 
question, and does not segregate data on CARES-related work within its 
property-and acquisition law case information. However, we report below 
our caseload trends for personnel law, medical malpractice, benefits 
law and business law (business law includes property and acquisitions 
law).
    The statistical data follows.

    [GRAPHIC] [TIFF OMITTED] T7355.001
    
    [GRAPHIC] [TIFF OMITTED] T7355.002
    
    C. Is there a per-FTE caseload threshold that, if breached, would 
have a detrimental impact on OGC's performance?
    Answer. Over the past 5 years, we have carefully monitored the case 
loads of our attorneys to ensure the quality and timeliness of their 
work did not suffer as the result of a net decline in staffing. During 
this period, there have been times when the per capita case loads in 
certain of our Regional Counsel Offices and in the Professional Staff 
Group that supports litigation before the Court of Veterans Claims have 
risen dramatically. In some cases, increased per capita case loads have 
risen to over 70 cases, and in those situations we have noticed a 
decline in the depth of research, the quality of written products and 
the level of personal involvement with our clients in the field. We 
reduced those case loads as soon as the budget allowed us to do so, and 
through that process determined that the optimum case load per attorney 
is 50 cases. This work load ensures that our attorneys are challenged, 
yet allows them to provide the quality and timeliness of work that our 
clients require and that our veterans deserve.
    Question 8. What problem has VA encountered in its joint VA/DOD 
data sharing efforts? What information exchange problems have been 
encountered once a veteran has been transferred from DOD to VA and what 
is being done to correct these problems from an IT standpoint?
    Answer. To provide a seamless transition as servicemembers move 
from DOD to VA, VA needs information on the servicemembers who will be 
transitioning to VA for care and benefits, particularly those who are 
severely injured in Operation Iraqi Freedom (OIF) and Operation 
Enduring Freedom (OEF). On June 29, 2005, DOD and VA signed a 
Memorandum of Understanding (MOU) for the purpose of sharing data 
between DOD and VA. The Departments have made significant progress in 
sharing pertinent health information as servicemembers and veterans are 
transferred from Military Treatment Facilities to VA medical centers. 
VA's Polytrauma Rehabilitation Centers have read only access to 
electronic medical information at Walter Reed and Bethesda. VA staff 
has and continues to train clinicians to access and utilize this 
information. While this is a major accomplishment, some limitations 
still remain. DOD's medical record is not fully electronic; 
consequently, not all medical information can be shared electronically. 
VA's Polytrauma Rehabilitation Centers have initiated monthly video-
teleconferences with the treatment teams at Walter Reed Army Medical 
Center and Bethesda National Naval Medical Center. This has proven to 
be an effective means of communicating information that is not 
typically documented in the medical record.
    From an IT standpoint, VA and DOD have made significant progress 
toward achieving interoperability of available electronic medical 
information. In 2002, VA and DOD implemented the Federal Health 
Information Exchange (FHIE). FHIE supports the one-way transfer of all 
clinically pertinent electronic data from the DOD Composite Health Care 
System (CHCS) to clinicians from the Veterans Health Administration 
(VHA) and to benefits workers from the Veterans Benefits Administration 
(VBA). Upon a servicemember's separation or retirement from DOD, DOD 
sends that servicemember's data to a shared secure FHIE repository 
where the data are available for viewing by VA personnel using the VA 
Computerized Patient Record System (CPRS). FHIE is operational at all 
VA medical centers and facilities.
    To date, DOD has transferred records on approximately 3.3 million 
unique servicemembers to the shared FHIE repository. Of this 3.3 
million, over 2 million have registered to receive medical treatment or 
benefits from VA. FHIE data available for viewing by VA include 
outpatient pharmacy, laboratory, radiology reports, consults, 
admission, disposition and transfer data, and diagnostic coding data 
from the standard ambulatory data record.
    Using FHIE, VA also has access to military pre- and post-deployment 
health assessment data from DOD Forms 2795 and 2796. DOD has 
transmitted more than 515,000 pre- and post-deployment health 
assessments on over 266,000 separated servicemembers. DOD continues to 
send monthly transmissions of these data to VA as more members separate 
or retire. These assessment data provide useful information to VA 
clinicians including information about exposures and other stressors 
related to deployments. In March 2006, DOD completed an initial load of 
over 700,000 pre- and post-deployment health assessments for 
demobilized National Guard and Reservists. VA and DOD are now working 
together to ensure that National Guard and Reserve data also are 
collected and included in the monthly transmissions.
    In addition to the one-way transfer of electronic medical data 
through FHIE, VA and DOD have developed the capability to share 
electronic medical records bidirectionally to use in the care of shared 
patients. The VA/DOD Bidirectional Health Information Exchange (BHIE) 
automatically match patient identities for active DOD military 
servicemembers and their dependents with their electronic health 
records at VA facilities. It also supports the real-time bidirectional 
exchange of outpatient pharmacy data, allergy information, lab results, 
and radiology reports. BHIE data is available at eight DOD host sites. 
These DOD sites include locations that receive large numbers of 
Operation Enduring Freedom and Operation Iraqi Freedom combat veterans, 
such as the Walter Reed Army Medical Center, the Bethesda National 
Naval Medical Center, and the Landstuhl Army Medical Center. DOD data 
from these host sites are available at every VA site of care, and staff 
at those DOD facilities has full access to this information from every 
VA facility.
    Both FHIE and BHIE provide interoperability of data through 
existing health information systems for VA and DOD. VA and DOD are now 
migrating these technologies to next-generation health information 
systems and implementing a plan to share data between those systems. 
The first release of this interface, known as ``CHDR,'' will support 
interoperability between the DOD Clinical Data Repository (CDR) and the 
VA Health Data Repository (HDR) and will allow VA and DOD to conduct 
drug-drug and drug-allergy interaction checking between VA and DOD 
pharmacy systems. In January 2006, the Departments completed formalized 
interagency testing and conducted a successful demonstration using the 
production version of CHDR for VA and Military Health System IT 
leadership. The Departments are now working closely with an interagency 
staff in El Paso, Texas, to complete CHDR production testing in a 
patient care environment between the William Beaumont Army Medical 
Center and the VA El Paso Healthcare System no later than July 2006.
    VA is working closely with DOD to expand the scope of clinical 
information that is shared. Recently, the Departments initiated a pilot 
to explore the feasibility of sharing scanned paper records to provide 
VA electronic access to clinical data that was not previously available 
in electronic format. VA and DOD also are closely collaborating on the 
development of next generation imaging technology that will facilitate 
the sharing of radiological images between DOD and VA.
    Question 9A. What is the status of the Security Program 
administered by the CIO through the Office of Cyber and Information 
Security (OCIS)?
    Answer. VA significantly improved its security posture by 
completing certification and accreditation activities for one hundred 
percent of the Department's operational information technology systems. 
This major accomplishment provides VA senior management officials with 
the information necessary to authorize processing for those systems 
based on an acceptable level of risk, and the planned remediation of 
known system vulnerabilities during fiscal year 2006. Also VA enhanced 
its ability to effectively implement the Department-wide Information 
Security Program through an over 70 percent increase in the number of 
individuals who have completed the role-based training requirements of 
the Department's Cyber Security Professionalization (CSP) program, to 
773 participants. Moreover, VA has made great strides in the 
implementation of the Department-wide Security Operations Center (SOC) 
that provides the integration and continuous operation of information 
technology security program elements, such as vulnerability scanning, 
intrusion detection, and incident response, into a Critical 
Infrastructure Protection Program to ensure adequate protection of 
mission-essential assets and provide VA management an ``at a glance'' 
view of VA's security posture and potential vulnerabilities. Finally, 
VA has laid the groundwork for the implementation of the Security 
Configuration Management Program, which will establish an enterprise-
wide configuration management, to include upgrading and removing those 
information technology assets currently using operating systems that do 
not have adequate security features, and providing real-time security 
patch updates to system software. This program is essential to 
eliminate vulnerabilities that expose VA systems to inappropriate 
access and manipulation. All these major programs buildupon and enhance 
the Department's centralized information security program administered 
by the CIO through the Office of Cyber & information Security.
    Question 9B. What is the cost estimate for any required remedial 
action?
    Answer. While VA's certification and accreditation effort was a 
resounding success, it did reveal that the Department has a number of 
deficiencies on its more than 450 major applications and general 
support systems that must be addressed through some type of remedial 
action. The Office of Cyber & Information Security collected estimates 
from VA system owners on the cost of these remedial actions. The costs 
as outlined below are included in fiscal year 2006 appropriation and 
fiscal year 2007 President's Budget:

------------------------------------------------------------------------
     Administration or Staff Office           FY 2006         FY 2007
------------------------------------------------------------------------
VHA.....................................     $33,632,373     $19,785,204
VBA.....................................       2,543,050       2,243,435
Office of Management....................         700,000         200,000
Office of Information & Technology             1,795,200         501,304
 Austin Automation Center...............
Other Staff Office Systems & NCA........         750,000         500,000
                                         -------------------------------
    Total VA............................      39,420,623      23,229,943
------------------------------------------------------------------------

                               __________
   Response to Written Questions Submitted by Hon. Arlen Specter to 
                        Hon. R. James Nicholson

    Mr. Secretary, I understand that the VA Pittsburgh major 
construction project is currently moving on schedule and within budget. 
However, exclusion of scheduled funding in the FY07 budget is building 
in a delay for this critical project.
    Question 1. What is the rationale for excluding construction 
funding from the FY07 budget?
    Answer. In developing the Department's fiscal year 2007 major 
construction budget within the resources available, a number of factors 
were considered including the extent of any delay that might be 
incurred to projects should funding not be included in the budget. 
Pittsburgh is a multi-phased project with funding currently available 
for six of the eight phases. The delay in funding will cause one phase, 
the Ambulatory Care facility at the Heinz Division, to incur a few 
months delay. The Behavioral Health phase will not be delayed. During 
fiscal years 2006 and 2007, significant construction will be ongoing at 
the Pittsburgh facilities. In allocating funding in the fiscal year 
2007 budget, the Department endeavored to move as many projects forward 
as possible within the resources available.
    Question 2. At the University Drive campus, I understand that the 
parking garage is under construction and is slated for completion 
during FY07 clearing the way for construction to begin on the 
Behavioral Health building. When does VA expect the garage to be 
complete? When does VA plan to begin construction if the Behavioral 
Health building? How much of a delay will be caused at University Drive 
by exclusion of funding in FY07?
    Answer. The schedule is to complete the parking garage in late FY07 
and to immediately begin activation and use. The Behavioral Health 
building is scheduled to start very soon thereafter in the first 
quarter of FY08 without delay.
    Question 3. At the Heinz campus, I understand that the new 
Domiciliary and Administrative buildings are set to begin in FY06. It 
is also my understanding that construction of the Ambulatory Care 
building is not contingent upon completion of these other projects. 
Why, then, has funding been delayed for this project? When does VA plan 
to begin construction of the Ambulatory Care building? How much of a 
delay will be caused at the Heinz campus by exclusion of funding in 
FY07?
    Answer. Please refer to the answer to question 1. It is expected 
that construction will begin as soon as funds are available in fiscal 
year 2008.
    Question 4. Given that VA Pittsburgh is described as a ``model for 
all VA'' in the Capital Advisory Board report that you received in 
November of 2005, would you agree that VA would want to proceed with 
this project and not intentionally delay its scheduled completion?
    Answer. Pittsburgh is a high priority project for the VA and we 
would not want to jeopardize its completion by unnecessary delays.
    Question 5. Mr. Secretary, I understand that the VA Pittsburgh 
project is one of only three projects that will actually lead to a 
closing of a current VA medical center (the Highland Drive campus). The 
closing of this older site will lead to enhancements to VA care and 
reduce expenses associated with maintaining excess and obsolete space. 
However, VA has already made a commitment that the Highland Campus can 
not be closed until the entire Pittsburgh project is completed. As 
such, Mr. Secretary, is VA creating inefficiencies by delaying 
completion of this project?
    Answer. VA anticipates minimal delay in the completion of the 
multi-phased project at Pittsburgh.
    Question 6. Mr. Secretary, it is important to keep all approved VA 
construction on schedule and on budget. Can you achieve that if the 
budget calls for delaying the VA Pittsburgh project that is currently 
ahead of schedule and on budget?
    Answer. We strive to keep projects on schedule. In this instance, 
we anticipate only a minimal delay.

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[GRAPHIC] [TIFF OMITTED] T7355.004

[GRAPHIC] [TIFF OMITTED] T7355.005

    Response to Written Questions Submitted by Hon. John Ensign to 
                        Hon. R. James Nicholson

    Question 1. Should a veteran have to meet a higher standard of 
blindness than a social security beneficiary in order to receive 
disability for blindness? Do they currently?
    Answer. Veterans generally do not have to meet a higher standard of 
blindness than a social security applicant in order to receive VA 
disability compensation for blindness. Under the VA rating schedule 
veterans receive compensation for visual impairment at lower levels of 
impairment than those that would qualify an applicant for social 
security disability. Compensation can be paid for both visual acuity 
impairment and field of vision impairment at levels that do not qualify 
as legal blindness.
    Since VA only compensates for disabilities that were incurred 
during or aggravated by military service, we do not consider the 
disabling effect of visual impairment in an eye that is not service 
connected. However, if the criteria for blindness under VA regulations 
in one eye are met as a result of service-connected disability and the 
criteria for blindness under VA regulations in the other eye are met as 
a result of nonservice-connected disability, VA will pay compensation 
as though the impairments in both eyes were service-connected, provided 
the nonserviceconnected disability is not the result of the veteran's 
own willful misconduct.
    Question 2. What is the current number of veterans who are only 
service connected for blindness in one eye that have anatomical loss of 
one eye, blindness in one eye with light perception only, or blindness 
rated at 5/200 visual acuity?
    Answer. As of December 31, 2005, the most current data available, 
there are a total of 16,186 veterans who are service connected for 
blindness in one eye, that have anatomical loss of one eye, blindness 
in one eye with light perception only, or blindness rated at 5/200 
visual acuity.
    Question 3. How many OIF/OEF veterans have been service connected 
for blindness in one eye, and for blindness in both eyes?
    Answer. VA identifies veterans by the wartime period in which they 
served, or by peacetime. The conflicts in Afghanistan and Iraq fall 
within the Gulf War Era, which began in 1990. As of December 31, 2005, 
the most current data available, there are 1,405 veterans of the Gulf 
War Era who are service-connected for blindness in one or both eyes.
                               __________

   Response to Written Questions Submitted by Hon. John R. Thune to 
                        Hon. R. James Nicholson

    Question 1. I believe the VA and the IHS have a Memorandum of 
Understanding to encourage cooperation and resource sharing between the 
two agencies. I'm wondering if you could update me broadly on the 
collaboration efforts between the VA and the Indian Health Service, and 
whether there's a likelihood that the existing IHS Service Unit in 
Wagner, SD could somehow be integrated with the proposed CBOC to be 
built In Wagner. This integration could be mutually beneficial to the 
IHS and the VA, particularly in light of the large number of Native 
American veterans we have in that area.
    Answer. VHA and the Indian Health Service have made great progress 
in collaborations on twenty three different project initiatives. VHA 
and IHS routinely meet on a monthly basis to review the progress on 
each of the initiatives and to identify new opportunities for 
collaboration.
    The Sioux Falls VA Medical Center, the parent facility to the 
Wagner CBOC, has an active and mutually beneficial working relationship 
with the Indian Health Service in South Dakota. Their most recent 
sharing agreement was established in March 2006.
    At this time, the Wagner CBOC remains in the VISN 23 plan. Before 
the CBOC can be established, it must receive formal VA and 
Congressional review and approval. Because IHS has recently discussed 
changes in their presence at Wagner, VA feels it would be premature to 
discuss specific potential sharing arrangements. However, the overall 
sharing possibilities are a cause for excitement in both agencies. At 
the time VHA submits a formal plan for a CBOC, we will explore 
collaboration possibilities with the IHS Regional Director, and will 
include such proposals in our plan.
    Question 2. While I support standardization when it comes to IT 
issues within the VA because it would be an important management 
efficiency, I am opposed to the standardization of diabetes monitoring 
supplies and monitoring equipment because I think there will be 
expensive health implications over the long term if we do so. With 
regard to diabetes standardization, the 2006 VA Appropriations Act 
specifically prohibits the VA from replacing the current system by 
which VISN businesses select and contract for blood glucose testing 
supplies and monitoring equipment. However, I'm told that some VISN 
directors are not conforming, and are preparing for a national 
standardization of diabetes monitoring supplies and equipment in spite 
of the prohibition in the law. Could you tell me what the present 
status is, and what directives you've given to the VISN directors on 
this issue? Are you doing what is required by the 2006 VA 
Appropriations Act with regard to this issue?
    Answer. VA is not pursuing a proposal to standardize self-
monitoring blood glucose equipment through a single national contract.

                               __________

  Response to Written Questions Submitted by Hon. Daniel K. Akaka to 
                        Hon. R. James Nicholson

    Question 1. The increase in the prescription drug copayment and the 
annual enrollment fee are measures that will deter Priority 7 and 8 
veterans from coming to VA for care. Part of the rationale for this 
move is that many of these veterans have other forms of insurance. Why 
would VA seek to discourage these veterans from coming if their care is 
predominantly financed through a small copayment and VA billing their 
insurance company?
    Answer A large majority of Priority 7 and 8 enrollees (68 percent 
of Priority 7 and 59 percent of Priority 8) are covered under Medicare, 
which does not reimburse VA for the care provided. Under current cost-
sharing policies, the average Priority 7 and 8 patient is projected to 
use approximately $3,692 in health care services in fiscal year 2007. 
VA is expected to collect an average of $358 in first-party copayments 
and an average $338 in third-party collections from those patients.
    Question 2. As you are aware, GAO recently reported that the 
management efficiencies built into the past few years' budget requests 
are essentially unfounded. This year, it is my understanding that the 
efficiencies contained in the budget proposal are in the ``clinical'' 
arena, rather than in ``management.'' Based on VA information, is it my 
understanding that much of these savings are to come from the pharmacy 
benefits program, mostly by negotiating even deeper discounts on 
drugs--yet, this was also a major facet of the ``management'' savings. 
Please explain what will happen if these savings also fail to 
materialize.
    Answer. To clarify, the GAO did not find that VA has not attained 
the budgeted efficiencies, but rather that there were not consistent 
processes across the organization for calculating them. The fiscal year 
2007 budget request reflects cumulative efficiencies attained in fiscal 
year 2005 and fiscal year 2006 expected to continue in fiscal year 
2007.
    VA is estimating additional efficiencies of $197 million in the 
2007 budget request, of which $107 million is in clinical efficiencies 
and $90 million is in pharmaceutical cost efficiencies. VA expects that 
these savings will materialize because the estimates are consistent 
with historical VA management and cost trends. VA also has a 
methodology for measuring and reporting the accomplishment of the 
clinical and pharmaceutical cost efficiencies estimates.
    Question 3. I'm very concerned that VA does not have enough doctors 
and nurses to care for our veterans. For example, in the budget 
proposal before us today, a 14 percent increase is projected for 
Inpatient, Home and Community-Based Care beds, as well as an 8 percent 
increase in the number of patients treated. Yet, despite these 
increased demands, VA is projecting less than 1 percent increase for 
physicians-- nd a flat-line increase for nurses. How will VA be able to 
maintain the current level of high-quality care for our veterans if 
staffing levels are not keeping pace with demand?
    Answer. VA's professional staff continually strives for increasing 
efficiencies while improving the quality of care of our veterans. For 
example, Advanced Clinic Access programs and reduction of missed 
appoints improve system efficiency. In addition, advances in technology 
will continue to allow us to provide more home and community- based 
services to an increasing number of veterans without a commensurate 
increase in staff. Veterans receive care based on their assessed needs. 
Although physicians and nurses provide direct medical care and 
interventions, other disciplines are often involved in the delivery of 
patient care, especially in home and community-based care. Other health 
care professionals augment the services provided by nurses and doctors.
    Question 4. Public Law 108-445 was designed to reduce VA's 
dependency on contract physicians, as it completely restructured VA's 
physician and dentist pay scales. Yet, I note a significant increase in 
the FY07 budget request for specialty physician contracts. Please 
explain how the Physician Pay bill has impacted how VA budgets for 
contract physicians. Shouldn't we be seeing a corresponding decrease in 
the amount of money requested to contract specialty services?
    Answer. The legislation for the new pay system for physicians and 
dentists was effective January 8, 2006. As of this date, we are 
assessing the financial impact of the conversion process for physicians 
and dentists who were employed as of January 8, 2006. Recruitment 
efforts to reduce contract costs by employing staff at rates that are 
commensurate with local labor market trends are underway. Most clinical 
turnover and contract changes for affiliated medical centers occur in 
conjunction with the academic year, which begins July 1. VHA expects to 
offset some contract costs through the use of flexibilities provided 
for in Public Law 108-445; however, the results of these initiatives 
will likely not be seen until fiscal year 2008.
    Question 5. Do the Veterans Benefits Administration's production 
requirements for claims adjudication allow for thorough development and 
careful consideration of disability claims?
    Answer. The performance standards for Veteran Service 
Representatives (VSRs), who have primary responsibility for the 
development of evidence to support claims decisions, include a 
production element. However, that element is only one component of the 
VSR performance standards. Another critical requirement is that each 
VSR's output meet a quality standard, which is verified through local 
management review and oversight.
    Similarly, the standards for Rating Veterans Service 
Representatives (RVSRs) include production and accuracy components. The 
production standard for RVSRs assigns a weighted value to each type of 
claim according to its complexity. Since the more complex and time-
consuming claims are afforded greater weight by the production 
standard, RVSRs are able to carefully consider each disability claim 
without adversely affecting the quality of the decision.
    These standards have been tested and are regularly reassessed to 
ensure that they are appropriate and maintain the quality of service 
veterans deserve and expect.
    Question 6. Is VA's Vocational Rehabilitation and Employment 
Service appropriately staffed given the high numbers of OIF/OEF 
veterans who reside in rural areas?
    Answer. VBA's Vocational Rehabilitation and Employment (VR&E) 
Program has more than 120 out-based sites that serve veterans residing 
in areas not convenient to a VA regional office. In addition, 
contractors are utilized to supplement and complement the services 
provided by VR&E staff. We believe that our regional office and 
outbased staffs, along with the contract support, are adequate to 
ensure quality service to all OIF/OEF veterans.
    Question 7. I mentioned during last year's budget hearing that I am 
concerned that VA cannot always absorb changes in law, anticipated or 
not, without falling behind. In 2005, it took 167 days to rate a claim 
and that the number is expected to increase again before dropping in 
2007. How long will it take to get back down to the 2005 level?
    Answer. The average days to process a claim is projected to rise to 
185 days in fiscal year 2006. This projected increase is based on the 
expectation that we will receive nearly 100,000 additional claims as a 
result of the outreach required by the Veterans Affairs Appropriations 
Act of 2006. Timeliness will again begin to improve in the latter part 
of fiscal year 2007 as we are able to complete the processing of some 
of this additional workload and the inventory again begins to decline. 
If our projections hold true, timeliness improvements to the level 
achieved in fiscal year 2005 would not be realized until late in fiscal 
year 2008.
    Question 8. I am very concerned VA may not have enough doctors and 
nurses to take care of our veterans. Despite a projected increase in 
demand for care, VA plans for an increase of just 100 Physicians. 
Additionally, there is a flat line on staffing of Registered Nurses, 
Licensed Practical Nurses, Licensed Vocational Nurses and Nursing 
Assistants. How do we ensure that we maintain the current quality care 
for our veterans while it appears our staffing levels are not keeping 
pace with demand?
    Answer. VA's professional staff continually strives for increasing 
efficiencies while improving the quality of care of our veterans. For 
example, Advanced Clinic Access programs and reduction of missed 
appoints improve system efficiency. In addition, advances in technology 
will continue to allow us to provide more home and community-based 
services to an increasing number of veterans without a commensurate 
increase in staff. Veterans receive care based on their assessed needs. 
Although physicians and nurses provide direct medical care and 
interventions, other disciplines are often involved in the delivery of 
patient care, especially in home and community-based care. Other health 
care professionals augment the services provided by nurses and doctors.
    Programs are in place to assure there is an adequate supply of 
trained health care personnel to meet VHA workforce needs. The programs 
are the Employee Incentive Scholarship Program (EISP) the Education 
Debt Reduction Program (EDRP), and the National Recruitment and 
Marketing Program. The purpose of these programs is to assist in 
ensuring there is an adequate supply of trained health care personnel 
to meet VHA workforce needs.
     VHA helps ensure that nurses are educationally prepared to 
provide the highest quality of health care to veterans across the full 
range of clinical practice roles. As of September 30, 2005, 
participants who received awards to serve in registered nursing 
appointments upon completion of their education programs accounted for 
93.2 percent of all the EISP participants. VHA implemented EISP in 
March 2000. Academic year 2000/2001 was the first full year of 
operation. At the conclusion of fiscal year 2005, VHA had awarded a 
total of 5,521 EISP scholarships to employees. Just over 50 percent of 
those recipients have already completed their academic programs while 
others continue to progress toward degree completion. Registered nurses 
accounted for 2,599 of the 2790 employees who successfully completed 
their degrees; 37 employees successfully completed programs preparing 
them as Licensed Practical/Vocational Nurses and four completed 
programs as Certified Registered Nurse Anesthetists. Upon degree 
completion, each employee is required to fulfill an obligated service 
period of 1 to 3 years.
     Beginning in fiscal year 2004, VHA implemented a variation 
of the typical scholarship program and created a program that would 
provide replacement salary and benefits for employees completing their 
degree within 2 years if working toward a degree as a registered nurse 
and within 1 year for those seeking LPN/LVN licensure. There are 262 
employees seeking degrees as registered nurses and 32 LPN/LVN seeking 
participants. This program shortens the length of time to obtain a 
degree and become a licensed professional by allowing employees to 
attend school on a full time basis.
     Implemented by VA in May 2002, EDRP serves as both 
recruitment and a retention tool. VA authorized 4,379 EDRP awards 
through fiscal year 2005 with a total multi-year value of approximately 
$74.4 million through fiscal year 2011. Registered nurses accounted for 
the largest number of awards (2,061 awards or 47.1 percent), followed 
by pharmacists (665 awards or 15.2 percent) and physicians (564 awards 
or 12.9 percent). Data was reviewed for EDRP recipients hired from 
program inception through July 2005. The evaluation compared 
resignation rates between employees who received EDRP awards and those 
who did not receive EDRP awards. A study to evaluate potential budget 
needs to expand EDRP as a recruitment and retention tool is underway as 
a result of the preliminary findings that show a significant difference 
in attrition for employees not receiving awards. The results for the 
48-month period during which EDRP had been operational in VHA show that 
for nurses, the resignation rate for EDRP recipients is 14.3 percent 
while the resignation rate for non-EDRP recipients is 28 percent--which 
represents a 13.7 percent difference. VHA obligates approximately $1.31 
million annually for new Nurse EDRP awards, and $4.3 million annually 
for all nursing EDRP awards (includes a 5-year cohort).
     VA Healthcare Retention & Recruitment Office (HRRO) 
manages a national recruitment website for healthcare and allied 
healthcare occupations, and manages the national recruitment-marketing 
program for employment marketing/ad placement in professional journals, 
internet employment sites, television and radio. HRRO also supports a 
national presence by distributing employment information at national 
and regional professional meetings and job fairs.

    Question 9. Last year, VA briefed my staff that VA would save over 
$25 million in 2006 and $82 million in 2007 through Management Analysis 
and Business Process Reengineering. VA stated that these savings would 
result in an FTE Reinvestment of 484 in 2006 and 1,564 in 2007. Yet, we 
have been unable to find these savings or the FTE Reinvestment 
accounted for in the fiscal year 2007 Budget proposal. Please explain 
why these funds are not accounted for in the budget.
    The Department of Veterans Affairs was criticized by the Government 
Accountability Office (GAO) and others for lacking a methodology 
sufficiently rigorous for making the kinds of health care management 
efficiency savings assumptions reflected in the President's budget 
request for fiscal years 2003 through 2006. GAO went on to say that VA 
also lacked adequate support for the $1.3 billion in actual management 
efficiency savings reported for fiscal years 2003 and 2004 because we 
lacked a sound methodology and adequate documentation for calculating 
and reporting management efficiency savings.
    VA agreed with the GAO findings and is in the process of developing 
an improved methodology method for tracking and reporting actual 
savings achieved through implementation of proposed management 
efficiencies.
    As a result, VA chose not to identify any specific management 
efficiency initiatives in the Department's fiscal year 2007 Budget 
Request that might serve as a basis for budgetary offsets.
    However, VA will continue to implement the Management Analysis and 
Business Process Reengineering (MA/BPR) initiative as outlined to your 
staff in July 2005. Indeed, we are only now embarking on the first two 
pilot studies. VA expects to begin studies of the laundry and food 
service operations in each of VHA's Veterans' Integrated Service 
Networks (VISNs) by the end of the fiscal year. These studies are 
expected to be nine to twelve months in duration.
    As part of the MA/BPR implementation strategy, VA has developed a 
web-based Business Improvement Tracking System (BITS) to capture true 
baseline costs and key performance indicators; estimated costs, 
projected savings, and key performance indicators associated with the 
redesigned or reengineered organization to be implemented; and finally, 
actual costs, savings and key performance indicators associated with 
the Most Efficient Organization as actually implemented. At a minimum, 
cost data to be collected will include:
     Personnel--including salaries, fringe benefits, overtime, 
shift differential pay, and holiday and weekend pay;
     Material and supply costs;
     Overhead costs;
     Consulting expenses; and
     One time costs to perform the study and or implement the 
MEO.
    VA has every confidence that we will meet or exceed the projected 
savings previously identified with the MA/BPR initiative. VA also 
anticipates that estimated savings will be integrated with the budget 
once we are confident in the savings realized through implementation of 
the MEOs. VA's Office of Policy and Planning would be happy to brief 
you or your staff at your convenience on the method we will employ to 
track costs and savings through each stage of the MA/BPR process when 
those savings are actually realized.

                               __________

Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                       to Hon. R. James Nicholson

    Question 1. Secretary Nicholson, last year was your first year, and 
I realize that you ``inherited'' a budget, but there were real problems 
with that budget. What steps have been taken to improve the process so 
that we don't have similar problems with the models and estimates in 
the future?
    In particular, what has been done to improve and update the models 
for long term care costs, which I believe will continue to grow as our 
WWII population ages and needs more intensive care?
    Answer. In response to your first question regarding VA's model and 
estimates, we have made significant improvements to the actuarial model 
that was used to support our 2007 budget request, including development 
of an enhanced methodology for determining enrollee morbidity and a 
more detailed analysis of enrollee reliance on VA health care compared 
to other medical service providers. Also, we have added new data 
sources, including the Social Security Death Index, which resulted in a 
more accurate count of enrolled veterans. Finally, we have more 
accurately assigned veterans into the income-based enrollment priority 
groups by using data from the 2000 decennial census.
    VA continues to take steps to ensure the actuarial model accurately 
projects the needs of veterans from Operation Enduring Freedom and 
Operation Iraqi Freedom. However, many unknowns can impact the number 
and type of services the Department will need to provide these 
veterans, including the duration of the military action, when these 
veterans are demobilized, and the impact of our enhanced outreach 
efforts. Therefore, we have made additional investments in key 
services, such as mental health, prosthetics, and dental care to ensure 
we will be able to continue to meet the health care needs of these 
returning veterans and veterans from other eras seeking more of these 
same services.
    In response to your second question regarding the long-term care 
costs, the Department of Veterans Affairs (VA) developed the long-term 
care (LTC) demand model to estimate enrolled veteran demand for nursing 
home and home-and community-based care (HCBC). The model also projects 
what portion of enrolled veterans would prefer to seek care with VA. By 
the end of calendar year 2006, the LTC demand model will be updated to 
include functional status and LTC utilization data from the 2004 
National Long Term Care Survey and 2005 VA Survey of Enrollees. VA is 
also making several refinements to the model, including a methodology 
that will allow VA to better estimate LTC demand for those veterans who 
are cognitively impaired.
    Assessing demand for LTC services is very complex and multi-
factorial. The model uses data on veteran demographics, trends in 
disability rates, and utilization of services to estimate the type and 
amount of LTC services that enrolled veterans will seek from VA. The 
model evolves as new data and methodologies become available.
    In terms of overall veteran demographics, it is apparent that there 
is a growing need for LTC services for elderly and disabled veterans. 
The number of veterans over age 85 will more than double to 1.28 
million by fiscal year 2010 and peak at 1.32 million in fiscal year 
2012. These veterans are the most vulnerable of the older veteran 
population and are especially likely to require not only LTC but also 
health care services of all types. In addition, VA is providing a 
spectrum of LTC services for a small but growing number of younger 
veterans who have suffered polytraumatic injuries in the current armed 
conflicts in Iraq and Afghanistan.
    Question 2. When I travel back to West Virginia, I try to visit our 
Vet Centers and meet with staff and veterans recently returned from 
Iraq and Afghanistan. I listen, and I learn a great deal. I am pleased 
to see that VA is hiring more outreach workers to ensure that returning 
vets, including Guards and Reservists know that they can get help. But 
what is VA doing to improve and support the Vet Centers which are 
seeing more veterans, many with compelling mental health concerns?
    Answer. In the wake of the hostilities in Afghanistan and Iraq, the 
Vet Centers have prioritized providing timely and effective services to 
veterans of the Global War on Terrorism (GWOT) returning from combat 
duty in Afghanistan and Iraq. National Guard and Reserve component 
personnel who served in the combat theaters in Afghanistan and Iraq are 
also eligible for outreach and readjustment counseling through VA's Vet 
Centers. The Vet Center program's outreach campaign to intervene early 
and inform the new veterans has been enhanced through the hiring of 100 
new outreach workers from the ranks of recently separated GWOT 
veterans. The initial 50 GWOT veteran employees were authorized by the 
Under Secretary for Health in February 2004, and another 50 were 
authorized in March 2005. Located close to demobilization sites and 
National Guard and Reserve component facilities, the mission of the 
GWOT outreach specialists is to provide information that will 
facilitate the early provision of VA services to returning veterans and 
family members immediately upon their separation from the military. The 
proactive outreach campaign currently underway is providing VA with 
over 11,000 outreach contacts from OEF/OIF veterans on a monthly basis. 
VA's career conversion of the initial 50 GWOT veteran employees has 
added $2.5 million to the Vet Center program's recurring budget.
    VA has also requested a $7 million increase for the Vet Center 
program in fiscal year 2007 to help support the anticipated increase in 
workload from veteran returnees from Afghanistan and Iraq. Based upon 
the first 4 months of actual veteran visits for fiscal year 2006, VA is 
projecting a total of approximately 1.2 million veteran visits at its 
Vet Centers by the end of fiscal year 2006. This is an increase of 
150,000 visits for the Vet Center program compared to fiscal year 2005.
    Question 3. In West Virginia, we have over 4000 returning Guards 
and Reservists in addition to active duty military. What are we doing 
to be sure that these soldiers get the full care they need within 2-
year limits to VA coverage? What special efforts are being made to 
ensure that they get the service-connection needed to continue to 
receive VA care? Is 2 years enough time to offer mental health care to 
Guards and Reservists who have endured horrific conditions in Iraq with 
road side bombs? Isn't it true that it takes some veteran's time before 
they are willing to seek mental health care?
    Answer. VHA has coordinated with the Veterans Benefits 
Administration to ensure that information communicated through the 
Transition Assistance Program (TAP) provides detailed information 
concerning availability of VA health care benefits for returning 
veterans. Special emphasis has been placed upon informing 
servicemembers, prior to their discharge or release from active duty, 
of the enhanced enrollment authority available to combat veterans. In 
addition, VHA medical facilities have coordinated with the Department 
of Defense (DOD) in its new Post Deployment Health Reassessment (PDHRA) 
program. VHA has participated at PDHRA exam sites and by accepting 
referrals from physical exam locations and DOD contractor call centers. 
VA is working in very close partnership with DOD to provide follow-up 
evaluation and care to Reserve and Guard servicemembers identified by 
the PDHRA screen. The PDHRA will be offered to over 250,000 Reserve and 
Guard servicemembers who were mobilized during the period September 11, 
2001, to September 30, 2005. Approximately 113,000 Reserve and Guard 
servicemembers are required to undergo a PDHRA screen in fiscal year 
2006. As of January 31, 2006, over 52 percent of all Reserve and Guard 
servicemembers completing the PDHRA were referred to VA for care. 
Through January 2006, VHA has coordinated with DOD in its PDHRA 
assessment of almost 2,200 Reserve and National Guard veterans. The VA 
Seamless Transition Office has published guidelines and facilitated VA 
medical centers efforts to establish direct liaison with local Reserve 
and National Guard units to establish venues for VA benefit briefings 
and ``on-the-spot'' assistance with enrollment applications for VHA 
health care benefits. This combination of enhanced traditional 
transition services such as TAP, together with VA's close coordination 
with DOD and its Reserve Component units, helps to ensure that veterans 
have timely and seamless access to the full range of VA benefits that 
are available for them. In addition, Readjustment Counseling Service 
has been funded to hire 100 GWOT outreach workers to help Reserve and 
Guard servicemembers and their families access VA care. Readjustment 
Counseling Service, in partnership with Walter Reed Army Research 
Institute (WRARI), will be training all Vet Center staff during fiscal 
year 2006 on the WRAIR Battlemind Training Program. Battlemind is a 
behavioral health program to help servicemembers make the transition 
from the battle front to the home front. The focus will be on Reserve 
and Guard servicemembers and their families. Establishment of the VA 
Office of Seamless Transition is tangible evidence of VA's commitment 
to improve the delivery of benefits to America's newest veterans. The 
VA Office of Seamless Transition, in partnership with the National 
Guard Bureau, provided a week-long training program to the National 
Guard Bureau's newly hired 54 benefit advisors stationed in each State 
and Territory. The benefit advisors will help Guard servicemembers and 
their families in access VA care along with other community care.
    The combat veteran health care benefit helps ensure that these 
high-priority veterans have ready access to the full range of VA health 
care benefits. VA staff involved in care coordination for these 
veterans has been provided guidance on sensitive issues related to 
their combat-related injuries, and they routinely assist these veterans 
in their filing for VA disability compensation and other benefits.
    VA has placed emphasis on identification and treatment of combat 
related mental health problems. We are aware of the 2-year enhanced 
combat veteran eligibility period. However, the VA Readjustment 
Counseling (Vet Centers) benefit provides all combat veterans access to 
VA counseling with no time limits from their discharge date or subject 
to income thresholds. Vet Centers often refer patients to VA health 
care facilities when required and assist with submission of claims for 
service-connected compensation, specifically in cases where income 
thresholds may limit a veteran's access to enrollment in the VA health 
benefits program.

                               __________

 Response to Written Questions Submitted by Hon. James M. Jeffords to 
                        Hon. R. James Nicholson

    Question 1. Mr. Secretary, you would be very proud of the work 
being done at the Vet Centers in my state of Vermont. Vermont has one 
of the highest per-capita percentage of Guard and Reserve forces in 
Iraq and Afghanistan, and sustained some of the highest number of 
casualties per-capita. The Vet Centers have been outstanding in their 
efforts to find help to veterans and administer to their needs.
    Vermont still has about half of its Guard and Reserve forces in 
theater, and these groups have sustained heavy losses. Yet the Vet 
Centers and their outreach operations are not being scaled up to meet 
this need. These centers provide a unique service that is hugely 
important to reserve forces in areas far from military bases. Can you 
explain to me why the President's budget does not provide a greater 
increase in funding for Vet Centers?
    Answer. In the wake of the hostilities in Afghanistan and Iraq, the 
Vet Centers have prioritized providing timely and effective services to 
veterans of the Global War on Terrorism (GWOT) returning from combat 
duty in Afghanistan and Iraq. National Guard and Reserve component 
personnel who served in the combat theaters in Afghanistan and Iraq are 
also eligible for outreach and readjustment counseling through VA's Vet 
Centers. The Vet Center program's outreach campaign to intervene early 
and inform the new veterans has been enhanced through the hiring of 100 
new outreach workers from the ranks of recently separated GWOT 
veterans. The initial 50 GWOT veteran employees were authorized by the 
Under Secretary for Health in February 2004, and another 50 were 
authorized in March 2005. Located close to demobilization sites and 
National Guard and Reserve component facilities, the mission of the 
GWOT outreach specialists is to provide information that will 
facilitate the early provision of VA services to returning veterans and 
family members immediately upon their separation from the military. The 
proactive outreach campaign currently underway is providing VA with 
over 11,000 outreach contacts from OEF/OIF veterans on a monthly basis. 
VA's career conversion of the initial 50 GWOT veteran employees has 
added $2.5 million to the Vet Center program's recurring budget.
    VA has also requested a $7 million increase for the Vet Center 
program in fiscal year 2007 to help support the anticipated increase in 
workload from veteran returnees from Afghanistan and Iraq. Based upon 
the first 4 months of actual veteran visits for fiscal year 2006, VA is 
projecting a total of approximately 1.2 million veteran visits at its 
Vet Centers by the end of fiscal year 2006. This is an increase of 
150,000 visits for the Vet Center program compared to fiscal year 2005.
    Question 2. Mr. Secretary, I am concerned by the proposal to cut 
the highly acclaimed VA medical and prosthetic research account by $13 
million. This is a critical area, where medical technology is 
constantly improving and where no veteran should have to settle for 
less than the state-of-the-art medical device.
    While the VA has yet to provide a significant number of prosthetic 
devices to Gulf War veterans, these numbers will surely rise as more 
veterans transfer out of the defense health care system and demand more 
services from the VA. These veterans also have the right to demand that 
the VA be intensely focused on developing better prosthetic devices and 
using technology to improve their quality of life.
    I would appreciate your comment on the proposed cuts in medical and 
prosthetic research.
    Answer. The Department of Veterans Affairs (VA) is committed to 
improving the impact of its research program by ensuring that resources 
are targeted to the most pressing problems and spent on programs that 
prove to be most effective at developing new insights into their 
solutions.
    VA is projecting total resources of $1.649 billion in fiscal year 
2007 which is an increase of $17 million or 1.1 percent over the 2006 
level. These resources consist of $399 million in direct appropriation; 
$366 million in medical care support funding; $676 million in other 
Federal grants such as from Department of Defense and the National 
Institute for Health; and $208 million from private or university 
funding.
    In fiscal year 2007, VA expects to fund about 2,045 direct projects 
and 2,839 full-time equivalents. In fiscal year 2006 and 2007, the 
research account no longer pays for its IT equipment because the 
central Information Technology (IT) Systems appropriation now pays for 
this type of equipment. The funding which will support IT projects for 
research is about $15 million in each of these fiscal years.
    The goals for research are to ensure a balance among the competing 
needs for meritorious projects, to evaluate and fund existing programs 
at appropriate levels, and to fund new projects to ensure the 
advancement of health care for our veterans. Strategies to accomplish 
these goals include using attrition, transitioning to shorter durations 
of awards, and conducting competitive reviews of research centers. VA 
is using performance-based criteria to decide whether to modify, 
terminate, or expand programs.
    VA research is increasing its focus on newly emerging needs of 
veterans, especially those returning from Operation Iraqi Freedom and 
Enduring Freedom (OIF/OEF). This includes research in prosthetics and 
amputation health care. VA continues to expand its support of 
multidisciplinary research and examination of enabling technologies to 
ease the physical and psychological impacts of limb loss, including 
pain. While traditional amputation research has focused on mechanical 
limb prostheses, VA is expanding its focus to include novel approaches, 
such as tissue engineering and surgical treatment for residual limb 
lengthening, joint replacement and attachment of prostheses, as well as 
incorporating advanced materials, microelectro-mechanics and 
nanotechnologies into current prosthetic designs. One particularly 
innovative approach involves investigating the control of prostheses 
through direct brain activity. A primary goal of these activities is to 
generate rigorous data that can drive policy and shape clinical care 
guidelines.
    Question 3. Mr. Secretary, the current widespread call-up of the 
Guard and Reserve units has gone far beyond anything we have seen in 
recent times. There are Vermont Guard units serving in Iraq who were 
last activated for Federal service for the battle of Gettysburg. 
Deploying large numbers of National Guard troops has put great strains 
on the system of support for the Guard member, and the member's family.
    It is long established practice that the VA cares only for the 
veteran, and services are not provided to the veteran's immediate 
family.
    I urge a reconsideration of this policy however, particularly as it 
relates to mental health services. This need is particularly urgent in 
the many areas of the country with no military bases nearby to provide 
services. It has long been known that a soldier's effectiveness on the 
battlefield is compromised if he or she is worrying about problems at 
home. The sudden activation of Guard units with no previous expectation 
of combat duty has been very disruptive to families and therefore to 
servicemembers. The VA, and particularly the Vet Centers, have the 
expertise to deal effectively with these problems--an expertise that is 
not readily found in most communities.
    Have you given thought, Mr. Secretary, to allowing for mental 
health services for the families of activated Guard and Reservists?
    Answer. The care of families of those on active duty is a 
responsibility of the Department of Defense. VA would certainly be 
willing to work with the Department of Defense in any way possible to 
assist in addressing the concerns you raise.

                               __________

    Response to Written Question Submitted by Hon. Barack Obama to 
                        Hon. R. James Nicholson

    Question 1. An Amendment in last year's VA appropriations law 
requires a letter to be sent to veterans in six states, including 
Illinois, regarding their right to seek a re-review of past claims. 
When can Illinois veterans expect their letters from VA, and what can 
they expect after they receive those letters?
    Answer. From May 9 through May 16, 2006, VA released the mailing to 
veterans in the six states. Veterans receiving VA compensation in these 
states were sent a cover letter with an enclosure that explains the 
reasons for the mailing, the bases upon which their benefits claim 
might be reconsidered, and instructions for filing a claim for 
increased benefits.
    For veterans who do file such a claim, VA will obtain any VA and 
private medical treatment records identified by the veteran and 
schedule a re-evaluation examination for any conditions the veteran 
claims have worsened. If the veteran believes any conditions previously 
found unrelated to service by VA should be service connected, VA will 
ask the veteran for new and material evidence to support that claim. If 
the veteran claims new conditions (not previously reviewed by VA) are 
related to service, VA will review the veteran's service medical 
records and, if necessary, request an examination or medical opinion. 
If the veteran claims that he or she has additional conditions that are 
secondary to a condition already determined by VA to be service-
connected, VA will develop relevant evidence and, if necessary, request 
an examination or medical opinion.
    Question 2. Nationwide, you are projecting an increase in the wait 
time for processing claims by 20 days from 2005 to 2007. If that is the 
case, why haven't you requested increases in staffing levels to meet 
the increased demand and keep the wait time low, or perhaps even reduce 
it from its current average?
    Answer. The increase in average days to process was projected as a 
result of the special outreach to veterans mandated by the Veterans 
Affairs Appropriations Act of 2006. Nearly 100,000 claims are projected 
to result from this special outreach, but we then project claims 
receipts to return to more normal levels (i.e., increases of 2 to 3 
percent a year over 2005 levels). Because of the significant training 
time and resources required for newly hired decisionmakers to become 
productive, additional FTE in 2007 would not have an immediate impact 
on processing timeliness or inventory reductions. However, VBA expects 
that the employees hired in fiscal year 2005 and those we are currently 
hiring and training will be able to assist in improving timeliness and 
delivery of benefits to veterans in fiscal year 2007.
    Question 3. In Illinois, we have 391,000 veterans 65 and older, but 
only four state nursing homes that together have just more than 1,000 
beds and a waiting list topping 920. What is the rationale behind 
flatlining Federal funding for state veterans nursing home construction 
when the demand for such care is high?
    Answer. VA supports State Veterans Home construction and renovation 
through the State Home Construction Grant Program, which provides 
matching funds to assist states in purchasing, constructing, and 
renovating properties to serve as nursing homes, domiciliaries, and 
adult day health care centers. Funding allocated to this program must 
be balanced against other health care needs of veterans. States are 
invited to submit applications to compete for construction and 
renovation support. All applications are ranked annually by a process 
established in regulation into a priority list that is approved 
annually by the Secretary. Projects are then funded in priority order 
until available funds are exhausted. Highest priority is given to 
renovation projects needed to correct life safety deficiencies and for 
construction of new capacity in geographic areas of need. VHA has 
funded all life safety project submissions that qualify for this grant 
program for fiscal years 2000-2006. VA provided a grant to the State of 
Illinois to assist in construction of a new 40-bed dementia unit at the 
Manteno State Veterans Home in 2002. That facility is now operational. 
VA provided a grant of $4.2 million to reimburse the State of Illinois 
for costs of construction of a new 106-bed nursing home in Quincy in 
2005. Construction of that home was completed in 2002, but it has not 
yet been made operational by the state. VA has received applications 
for an 80-bed addition at the LaSalle facility and a new 200-bed 
nursing home at a location to be determined later by the state. When 
Illinois commits state matching funds for these two projects, they will 
become eligible for a VA grant. When they receive a grant will depend 
upon their priority ranking and the funds available to VA for this 
program.
    Question 4. This year's budget uses some of the same accounting 
gimmicks that we've seen in the past, making the increase in this 
year's request seem larger than it is. First, you have included $800 
million in funds from your proposed enrollment fee and prescription 
drug copay increase, both of which have been rejected repeatedly by 
Congress. Second, you include ``efficiencies'' of $1.1 billion, but the 
GAO has found that these savings claims cannot be substantiated. That 
is nearly $2 billion that either does not exist, or cannot be accounted 
for. So the $3.5 billion increase we've been hearing about is likely to 
be much less--maybe even less than half of that sum. How do we avoid 
another shortfall if that $2 billion never appears?
    Answer. VA's budget request reflects the total amount of resources 
required to provide quality health care to the number of veterans 
projected seek that care in VA facilities. VA further proposes fee 
policies as a potential reduction to the full cost of health care as 
options for the Congress to consider. To further address the increasing 
health care demand and to ensure that VA continues to provide timely, 
high-quality health care to our core population, those policy proposals 
apply only to Priority 7 and 8 veterans who have no compensable 
service-connected disabilities and do have the financial means to 
contribute modestly to the cost of care. The first proposal is to 
implement an annual enrollment fee of $250 and the second is to 
increase the pharmacy copayment from $8 to $15 for a 30-day supply of 
drugs. These proposals are similar to those included in the 2007 
President's budget for career military retirees under the age of 65 in 
the DOD health care system to align more closely with other public and 
private plans. The budget also includes a provision to eliminate the 
practice of offsetting or reducing VA first-party copayment debts with 
collection recoveries from third-party health plans. The three 
proposals, if accepted, reduce the need for appropriated funds by 
$795.5 million. If these three proposals are not enacted, VA will 
require an additional $795.5 million in direct appropriation.
    The GAO report cited above stated on page 12 that ``Although VA 
does not have a reliable basis for determining whether it has achieved 
its savings, it does not mean that new savings have not occurred.'' The 
recent GAO report did not find that actual efficiencies were not 
realized in fiscal years 2003 or 2004. To the contrary, during both 
years unobligated balances were carried forward and wait lists were 
dramatically reduced enhancing the overall quality of care delivered to 
our Nation's veterans. VA is confident that the savings of $197 million 
(less than 1 percent of the medical care budget) in new efficiencies 
for fiscal year 2007, is reasonable and attainable.

                               __________

    Response to Written Questions Submitted by Hon. Ken Salazar to 
                        Hon. R. James Nicholson

    Question 1. I am very pleased that the budget contains $52 million 
in construction funding for the VA hospital at Fitzsimons. Because that 
hospital means so much to the veterans' community in my state, it means 
a great deal to me, and I want to thank you for your personal 
involvement in that project. My question is: how can we be sure this 
funding will be enough to cover the startup costs of the Fitzsimons 
hospital? And how can we do a better job of ensuring the projected 
costs of that project are accurate?
    Answer. In addition to $52 million in the current budget request, 
$30 million in advance planning funds were appropriated in fiscal year 
2004. Additionally, the Department plans to reprogram $25 million from 
reserves to the project. Taken together, these funds will be sufficient 
to acquire the property; prepare construction design documents; and 
clear and prepare the site.
    Workload projections have changed since our initial programming 
efforts were completed in September 2004. VA is currently re-validating 
the design program for the Replacement Medical Center Facility and 
plans to begin preliminary design efforts this fiscal year. Cost 
projections based on completed schematic designs will be a more 
reliable forecast of our future funding needs.
    Question 2. The President's budget once again proposes to increase 
premiums and copayments for Priority 7 and 8 veterans, of which there 
are over 27,000 in my state of Colorado. Why does the Administration 
insist on including the revenue that would be generated from these 
policies--which have been consistently rejected by Congress--in its 
budget assumptions? Wouldn't it serve our Nation's veterans better to 
be more realistic in these assumptions?
    Answer. We are reintroducing them because we believe they are 
justifiable, fair, and reasonable policies. They are entirely 
consistent with the priority health care structure enacted by Congress 
several years ago, and would more closely align VA's fees and co-
payments with other public and private health care plans. The 
President's budget includes similar, small incremental fee increases 
for DOD retirees under age 65 in the TRICARE system. The VA fees would 
allow us to focus our resources on patients who typically do not have 
other health care options. Furthermore, these two provisions reduce our 
need for appropriated funds by $765 million as a result of the 
additional collections they would generate, and a modest reduction in 
demand.
    The 2007 budget also includes a provision to eliminate the practice 
of offsetting or reducing VA first-party copayment debts with 
collection recoveries from third-party health plans. Veterans receiving 
medical care services for treatment of nonservice-connected 
disabilities would receive a bill for their entire copayment. If 
enacted, this provision would yield about $30 million in additional 
collections that could be used to provide further resources for the 
Department's health care system.
    The combined effect of all three provisions reduces our need for 
appropriated funds by $795.5 million in 2007.
    Question 3. What can the VA do under the current budget climate to 
adequately prepare for the influx of veterans who fought in Iraq and 
Afghanistan into the VA system, particularly the Veterans Health 
Administration?
    Answer. The President's 2007 budget request provides the resources 
necessary to help ensure that the transition for servicemembers from 
active duty military status to civilian life is as smooth and seamless 
as possible. Last year through our aggressive outreach programs, VA 
conducted nearly 8,200 briefings attended by over 326,000 separating 
servicemembers and returning Reserve and National Guard members. We 
will continue to stress the importance of an informed and hassle-free 
transition for all of our forces coming off of active duty, their 
families, and especially for those who have been injured.
    If active duty servicemembers, Reservists, and members of the 
National Guard served in a theater of combat operations, they are 
eligible for cost-free VA health care and nursing home care for a 
period of 2 years after their release from active military service 
provided that the care is for an illness potentially related to their 
combat service. VA has already facilitated transfers from military 
medical facilities to VA medical centers for several thousand injured 
servicemembers returning from Operation Enduring Freedom and Operation 
Iraqi Freedom.
    There are many other initiatives underway that are aimed at easing 
the transition for servicemembers from active duty military status to 
civilian life. Within the last year, VA hired an additional 50 veterans 
of Operation Enduring Freedom and Operation Iraqi Freedom to enhance 
outreach services to veterans returning from Afghanistan and Iraq 
through our Vet Centers. They joined our corps of Vet Center outreach 
counselors hired earlier by the Department to brief servicemen and 
women about VA benefits and services available to them and their family 
members. They also encourage new veterans to use their local Vet Center 
as a point of entry to VA and its services. Our outreach counselors 
visit military installations, coordinate with military family 
assistance centers, and conduct one-on-one interviews with returning 
veterans and their families.
    Last year, VA signed a memorandum of agreement with Walter Reed 
Army Medical Center to give severely injured servicemembers practical 
help in finding civilian jobs. Under this agreement, VA off ers 
vocational training and temporary jobs at our headquarters in 
Washington, DC, to servicemembers recovering at the Army facility from 
traumatic injuries.
    VA and DOD are working together to establish a cooperative 
separation exam process so that separating servicemembers only need to 
have one medical exam that meets both military service separation 
requirements and VA's disability compensation requirements.
    VA is also committed to ensuring that no veteran returning from 
service in Operation Enduring Freedom and Operation Iraqi Freedom has 
to wait more than 30 days for a primary care or specialty care 
appointment.
    VA continues to take steps to ensure the actuarial model accurately 
projects the needs of veterans from Operation Enduring Freedom and 
Operation Iraqi Freedom. However, many unknowns can impact the number 
and type of services the Department will need to provide these 
veterans, including the duration of the military action, when these 
veterans are demobilized, and the impact of our enhanced outreach 
efforts. Therefore, we have made additional investments in key 
services, such as mental health, prosthetics, and dental care to ensure 
we will be able to continue to meet the health care needs of these 
returning veterans and veterans from other eras seeking more of these 
same services.

    Chairman Craig. Mr. Secretary, thank you very much for 
those opening comments, and I think this Committee has 
appreciated the relationship that we have developed with you 
and all of those who are with you as we work through these 
issues and as we serve our veterans.
    We will go through several rounds of questions for a 
reasonable period of time. We have another panel, and we want 
to get this done in a timely fashion. So the record will be 
open for any additional detailed questions that we might seek.
    Mr. Secretary, a major driver in the increases suggested by 
the Independent Budget is the assumption that VA's patient 
population will increase by 6.3 percent. Now, as I have 
mentioned, in your budget estimates, the growth is 
approximately 1 percent. How confident are you in the 
projections you have based this entire health budget on?
    Secretary Nicholson. We are very confident. We have spent a 
lot of time on this. We did go back to the model that the 
Department has used for years. It is the largest model in the 
world, probably. They model over a hundred million lives, 
mostly for other private insurers and actuarials, but we also, 
as some would say, have applied some Kentucky windage to it, 
because it doesn't model everything that we do, and while it 
does model for times of combat, we also went in beyond the 
model and looked at that because we are at war; and, believe 
me, we have been over it many times back at the Department and 
conclude that we think we are on target.
    Chairman Craig. This is the same modeling service that was 
used last year?
    Secretary Nicholson. Yes, it is, but in fairness to those 
who developed the budget for last year--I wasn't here--as we do 
in this cycling that we are in, we are sitting here working on 
the 2007 budget right now, and most of this work was done in 
2005. So it is based on 2004 data. When they did the budget for 
last year, they were modeling real data off of 2002 and there 
was no war in Iraq. So there is a sharp change in circumstance. 
Now, of course, that is not the case. We are budgeting real and 
modeling real data, including that combat reality.
    Chairman Craig. And you are confident that based on where 
we are in these conflicts we are involved in, that these 
figures reflect the incoming men and women who will need our 
care?
    Secretary Nicholson. Yes, sir. I am confident. This has 
gotten a lot of scrutiny and devil's advocacy in our 
Department. So I am confident.
    I will say this is a dynamic business and a dynamic 
environment that we are in. It was pointed out by one of the 
opening statements of one of the Members of the Committee about 
some of the States looking at Medicaid recipients with the view 
toward seeing if they maybe want to go to the VA to get their 
health care. So there are these dynamic elements out there, and 
that is why I think that it is so wise that you suggested and 
we readily agreed to come to you quarterly, meaning that we 
prepare ourselves and know where we are with our numbers and 
report to you quarterly. We also, I would add parenthetically, 
are doing that monthly now with OMB.
    Chairman Craig. Probably one of the more controversial 
areas of your budget proposal deals with the issue of 
enrollment fees for Priority 7 and 8. You have heard several 
express their concern and frustration this morning. You have 
heard my expression about how we fit all of this in reality 
with budgets and budget needs. You estimate that nearly 200,000 
current users of the VA system would choose not to continue 
using VA if the proposal were put in place. To what do you 
attribute the drop in users? That would be my first question.
    Are we pricing veterans out of the system, or will these 
initiatives cause veterans to go without health care coverage? 
Obviously, those are the concerns we all have as we start 
putting a price tag to these priority groups.
    Secretary Nicholson. First of all, Mr. Chairman, we have 
good data that suggest that of that number who would decide not 
henceforth to use the VA as a result of that, 95 percent of 
them have other health coverage. So we would not be driving 
them away from health coverage and making them uncovered.
    Chairman Craig. By that, you mean their own insurance or 
other access?
    Secretary Nicholson. Yes, sir, or Medicare or another 
alternative. There are different ways to analyze this. One 
certainly is an equitable basis. By that I mean, we have 
priorities. You have established priorities of veterans by law 
for us, enabling us to take care of those who depend on us the 
most. Enhanced resources would be a result of our proposal. 
There is another strong equity argument for this, which I think 
is very compelling being a retired member of the military 
myself, which is that our retirees who are on TRICARE pay 
annual enrollment fees, pay copays, and they pay them in 
amounts that are significantly higher than we are asking in 
this proposal, and we are asking it just from category seven 
and eight veterans who are veterans, who have no service-
connected disability and who are working.
    Chairman Craig. Thank you. My time is up. Let me turn to 
our Ranking Member Senator Akaka.
    Danny.
    Senator Akaka. Thank you. Thank you very much, Mr. 
Chairman.
    Mr. Secretary, thank you for your statement on the budget. 
As a World War II veteran along with Senators Warner, Stevens, 
Inouye, and Lautenberg, and as a Member of this Committee for 
the past 16 years, I want you to know that I feel strongly that 
we really need to work together for our veterans.
    We need to calculate VA's true costs which must include the 
cost of war. We have fiscal limitations, however, and we need 
to look at our priorities and re-evaluate them if we are going 
to maintain a strong all-volunteer military. We must treat our 
veterans well which means they should not be begging for 
service.
    Mr. Secretary, I am very concerned that this budget, like 
last year's proposal, does not adequately address the needs of 
returning servicemembers. The most recent data from the 
Department indicates that IOF and OEF veterans are coming to VA 
at the rate of nearly 30 percent, yet this proposal actually 
predicts that VA will see a decrease in the number of these 
veterans. While I understand that we are reducing the size of 
our forces deployed overseas, those who come back will still 
have the automatic eligibility for 2 years of care.
    Can you, Mr. Secretary, please elaborate on how you arrived 
at these numbers?
    Secretary Nicholson. Thank you, Senator. That is an 
important question, and that is a priority category of veterans 
that you are addressing with your question, those returnees 
from the combat zone, OIF and OEF. If you look at what we have 
seen so far, in our medical facilities, we have seen 
approximately 120,000, and in our Vet Centers we have seen 
approximately another 50,000 who come in and inquire about 
benefits and so forth and sometimes just to commiserate. We are 
showing 109,000 OEF/OIF veterans, and that is based on our 
projections as well as coordination with the Department of 
Defense, getting their release schedules sooner with more 
particularity, and it is improving. So that is in part a metric 
of that number.
    Senator Akaka. Mr. Secretary, I want to ask about the 
proposed cuts to the VA research program. I asked this question 
in my first round because I feel research is a critically 
important program. Researchers see patients in addition to 
conducting research, and they come to work at VA because they 
can do both in a high-quality setting. So when we cut research, 
we are cutting research staff and that, in turn, can jeopardize 
the quality of care for the entire system.
    Mr. Secretary, can you please detail the full impact that 
these cuts will have?
    Secretary Nicholson. I appreciate that question, Senator 
Akaka, and I think it is sort of confusing the way that appears 
in our budget, but we are, in fact, not requesting less in 
research. What happened last year, I don't know if you will 
recall, but we were given more in research than we requested 
because of particular research that we have been directed to 
ramp up and get underway on Gulf War illness in conjunction 
with the Southwest Medical Center in Dallas. So that was 
overlaying what we had requested. So that is taken care of.
    So we are requesting more than we requested last year in 
research.
    Senator Akaka. Thank you very much for that response, Mr. 
Secretary. My time has expired.
    Chairman Craig. Senator, thank you.
    Senator Murray.
    Senator Murray. Thank you very much, Mr. Chairman.
    Mr. Secretary, veterans are telling me that CMS, their 
doctors, and their pharmacists are all telling them when they 
to go to enroll in Medicare Part D that if they are a veteran 
to go into the veteran system rather than enroll in Medicare. 
Are you seeing an impact on that at this time? Are you seeing 
increased numbers because of that?
    Secretary Nicholson. Not that I am aware of. We are hearing 
those same anecdotal things, but we are not seeing a material 
impact of that yet, no.
    Senator Murray. Have you increased your budget to account 
for that?
    Secretary Nicholson. No, we have not.
    Senator Murray. OK. I am also confused by something you 
just mentioned to Senator Akaka, and that is the OIF and OEF 
veterans who are returning and the access numbers. I believe 
you said that you estimated to serve 109,000. Correct?
    Secretary Nicholson. In the medical centers.
    Senator Murray. In the medical centers. And that you have, 
indeed, served, I believe you said 120,000 plus 50,000 or 
170,000.
    Secretary Nicholson. Approximately 120,000 in our medical 
facilities and another 50,000 have visited our Vet Centers. We 
don't dispense medical care per se at the Vet Centers, but we 
do provide advice, counseling, resource referrals and so forth.
    Senator Murray. All right. But your budget projects a 
hundred thousand. So you are not projecting for an increase in 
the number of OIF and OEF veterans who are returning, yet we 
know that there are a high number who are going to be needing 
access for everything from PTSD to injuries to health care?
    Secretary Nicholson. I am going to ask Dr. Perlin to 
respond to that, because it is a matter of the cumulative 
versus the particular care.
    Would you address that, Dr. Perlin?
    Dr. Perlin. Yes, sir. Just as Secretary Nicholson said, 
Senator Murray, cumulatively, we will have seen more veterans. 
Fortunately, most come to us as young and active and generally 
healthy population, and many don't go on to require additional 
health care, and so cumulatively, the numbers the Secretary 
gave are absolutely correct.
    With respect to those who will not seek care in 2007, we 
estimate about 109,000 ultimately will be using VA for health 
care services during that fiscal year.
    Senator Murray. Well, I am very confused by that, because 
many of our Generals are telling me, many of our returning 
veterans, and, in fact, I was at the VA center in Seattle last 
week, that a very high number of veterans who are returning 
will seek care, particularly for post-traumatic stress 
syndrome, but it looks to me like with your numbers, you are 
projecting a decreased number over last year, which you 
estimate at 109,000. You served 120,000 plus 50,000 at your vet 
clinics, and now you are only projecting 100,000 for next year, 
so less?
    Dr. Perlin. No. If I might, the number that the Secretary 
cited as 120,000 cumulatively, including some veterans from 
fiscal year 2004 as well. So, again, it is the particular year 
versus the cumulative number of veterans. The number of 
veterans in a particular year who will require health care is 
less than the cumulative number of veterans who will have 
received health care at VA at any given time.
    Secretary Nicholson. That was the total. That 120,000 was 
the total.
    Senator Murray. OK. Do you believe there will be an 
increased number of OIF and OEF veterans who will be seeking 
access for care in fiscal 2007 and did you budget for that?
    Dr. Perlin. Our budget estimates approximately 109,200, and 
that is included in this budget.
    Senator Murray. OK. Well, we will be watching that very 
closely as to the actual number who are, because I am hearing 
on the ground that it will be higher than that, and that will 
have a critical impact on our budget.
    Let me ask you on the ban on category eight, are you making 
that a permanent ban?
    Secretary Nicholson. No. We do not anticipate any change in 
that at this time.
    Senator Murray. Is it just temporary?
    Secretary Nicholson. Yes.
    Senator Murray. Well, I will tell you, a lot of veterans 
are telling me that they feel like they have to have a service-
connected disability or be indigent, or the doors to the VA 
will be shut, and I think that is something we seriously all 
have to recognize is not what we want to be projected as an 
image.
    I just have a few seconds left, and I wanted to ask you two 
questions. So I will just leave them on the table for you. I 
would like you to get a response back to me. One of them is I 
am hearing from a number of our Vietnam vets that the impact of 
Agent Orange and Gulf War Syndrome from the Gulf War often 
doesn't become apparent until many years later and that they 
are concerned that men and women who served in Vietnam 
accessing a regular physician at this time may not have their 
symptoms recognized by a physician who is not at a VA and 
doesn't necessarily think to even ask them if they are a 
veteran, and the same for Gulf War Syndrome, that someone who 
served in the Gulf War may be seeing the effects of that, but a 
regular physician has no clue to even ask if they are a 
veteran.
    I would like to hear back from you separately, because my 
time is out, if we are doing outreach particularly to those 
veterans to make sure that they realize that there may be out-
year impacts to that. I would like to hear back from you on our 
efforts on that.
    Secondarily, and my time is out, is I am still hearing 
about hiring freezes all over the country, and I would like to 
hear from you directly are there hiring freezes in place and, 
if not, why are we hearing about positions not being filled? 
Why are we hearing about high burnout rate of our VA staff? We 
are hearing about a high turnovers continually on the ground. 
So, is there a hiring freeze in place today anywhere in the VA 
system?
    Secretary Nicholson. There is not a hiring freeze anywhere. 
There was in some locations a hiring freeze when we were 
operating under the continuing resolution.
    Senator Murray. Is the VA just having difficulty hiring 
people to replace people who are leaving?
    Secretary Nicholson. No. I would say we are not 
experiencing an unusual difficulty. You know, nurses 
particularly remain a challenge, although you have given us 
some good new tools to hire, to incentivize nurses, better pay 
and better much better educational benefits and much more 
flexible work schedules.
    No. I don't think that we are having an unusually difficult 
time, and there is not a freeze.
    Senator Murray. Well, I appreciate your comments in that.
    Mr. Chairman, I do think this is a conversation this 
Committee should have, because on the ground, that is what I am 
hearing, high burn out rates, high turnovers, lack of ability 
to hire staff. Is it the pay? Is it the hard work? Is it what 
they are seeing? Because our VA system needs to make sure that 
we have high-quality care for our veterans who come there.
    Chairman Craig. Well, thank you, Senator, points well made, 
and especially those as it relates to as we settle into the 
prescription drug program that Congress has passed that is now 
being implemented at a very rapid rate and the consequence of 
that and is there a population shift going on out there. I 
think we will need to monitor that closely, and certainly those 
returning from OEF and OIF, we will monitor that with the 
Secretary's staff, the value of those quarterly meetings, also 
the value of this Committee and the work we will do here.
    Yes.
    Secretary Nicholson. Mr. Chairman, could I just add another 
comment to Senator Murray?
    Chairman Craig. Yes.
    Secretary Nicholson. Dr. Perlin just handed me a note that 
said that our turnover rate among nurses is one-half of the 
national average turnover rate among nurses and that we have 
since the first of the year, which is now 6 weeks, added 500 
FTE to our rolls.
    Senator Murray. Hired or added?
    Secretary Nicholson. Hired 500 new employees.
    Chairman Craig. Thank you.
    Senator Jeffords, Jim.
    Senator Jeffords. In prior wars, the Department of Defense 
and VA were not well-equipped to deal with the servicemembers' 
mental health issues. Post-traumatic stress disorder was barely 
understood and little was known about successful treatment. 
Today, we know a great deal more about post-traumatic stress 
disorder and how to treat it, thanks in part to the 
groundbreaking work done by the VA's National Center for Post-
Traumatic Stress Disorder.
    The Center has proven that recognition of early symptoms 
and effective treatment can prevent the full manifestation of 
PTSD, but this takes a strong force of trained professionals 
who are able to do intensive work with veterans upon return 
from the combat zone and who can follow up regularly with 
veterans to prevent destabilizing changes in their conditions. 
I appreciate the VA's proposed increase of global war terror 
counselors, but I am concerned that the proposed increase in 
mental services is not sufficient to meet next year's needs.
    I would appreciate your comments on this.
    Secretary Nicholson. Well, thank you, Senator Jeffords, and 
we remain very proud of our PTSD research facility in your 
State at White River Junction. We have some of the world's 
foremost experts there doing very important research, and I 
would point out to you several things. We are making a real 
concerted effort as part of our seamless transition endeavor, 
which is putting people forward to brief servicemembers before 
they deploy back, before the Reserve and Guard units 
disassemble back in their home States on benefits in general 
and emphasizing the symptoms of PTSD, post-traumatic stress 
disorder, for obvious reasons. They have just been through a 
very unusual human experience. When they have the kind of 
encounters that they do, and now I am echoing what I have been 
told by the experts, these are quite usual reactions to that 
unusual experience of combat or the environment in Iraq or 
Afghanistan, and that they shouldn't think they are losing 
their mind. There should be no stigma attached to this by 
others or self-imposed, and we are trying to reach out to them 
to understand that about themselves and know that there are 
good treatment regimes for that.
    I think we are having some success and we are certainly 
getting the resources to do this with. For example, now in 
every one of our 154 major medical centers, we have a certified 
expert on PTSD. In our four polytrauma centers, we have 
enhanced our PTSD treatment. In the polytrauma facilities these 
are people that are very seriously injured in more than one way 
physically. We have $339 million in this budget request for 
mental health. We have an increase of $40 million in here for 
PTSD alone.
    So this is an obvious area of some concern to us both on 
the health side and the benefit side. Our responsibility, we 
feel, number one, is to try to make people healthy, how do you 
get them restored to the kind of people that they were prior to 
raising their hand and volunteering and serving us, and then to 
those that we cannot do that, we compensate them. That is why 
we are trying strenuously to get them to come in to us for 
treatment.
    Senator Jeffords. We all know that in addition to funding, 
the other critical component to delivering high-quality health 
care is personnel. The VA has an extremely dedicated and 
efficient workforce. I commend you for that, an area in which 
Vermont VA has received special recognition and we are proud of 
that. However, without sufficient personnel to run a high-
quality system and to react to new challenges, the value of 
additional funding is lost. For many years, Vermont's Veterans 
Hospital has been asked to do more with fewer people. Now faced 
with the return of a large number of National Guard troops from 
Iraq and Afghanistan, the VA is being asked to provide superior 
care with only a slight, slight increase in personnel.
    Health care delivery and benefits processing come down in 
the end to people. Without the personnel numbers, the VA won't 
be able to deliver the care that veterans deserve, it appears 
to us. I would appreciate knowing why there aren't greater 
increases in personnel in this budget to ensure proper delivery 
of VA services.
    Secretary Nicholson. Well, respectfully, sir, I would say, 
as I did in my opening statement, that the people that we are 
taking care of in our system are very satisfied, that is 
veterans are very expressive of their satisfaction, and that 
was measured by an outside independent agency, and we have a 
strong budget request, maintaining a very high personnel level. 
So we don't think that we are going to be undermanned and 
shorthanded in this budget cycle, and we are asking for more 
people, a net increase, I think, of around 650 in the VHA side 
and several hundred, I think, in the benefits side.
    But if we get into a situation where we are not doing the 
kind of job that we should be doing, we will seek to redress 
that with the transfer of people or hiring new people if 
necessary.
    Senator Jeffords. I know my time has expired, but I would 
like to have a follow-up on that sometime.
    Chairman Craig. We will do that. I am also going to 
admonish us to submit things in writing so that we give the 
other panel that is waiting full attention too.
    Thank you, Jim.
    Let me turn to Senator Graham.
    Lindsey.
    Senator Graham. Thank you, Mr. Chairman.
    Why should there be two health care systems, one for 
veterans and one for military retirees?
    Secretary Nicholson. That is a good question, Senator 
Graham. I have actually had that conversation with the 
President.
    Senator Graham. What did he say?
    Secretary Nicholson. Well, he was asking the question.
    Chairman Craig. Is this an on-the-record or off-the-record 
comment here?
    Senator Graham. I just threw that out there to wake 
everybody up.
    I really do believe that is a great question and we need to 
answer it wisely because it could be a win-win situation. We 
have got 1.7 million people eligible for TRICARE as military 
retirees. They have families, and the VA is doing a great job, 
and the more people you have in the system, we would have to 
put more money, obviously. I think the broader services you 
could provide people, it could be a big benefit for veteran 
community. You could have military retirees accessing VA health 
care facilities. You could have the VA accessing military 
health care.
    We need to think big here. We need to serve people well, do 
away with duplication where possible, get the best bang for 
taxpayer dollar and serve people.
    So I just throw that out there, Mr. Chairman. I know you 
have been very open-minded about looking for models in the 
future, and one last comment about that: In the Department of 
Defense budget, it is projected that 12 percent of their entire 
budget is health care costs. We are literally asking commanders 
down the road to pick between bullets and planes and ships and 
health care, and we need to take that pressure off the 
Department of Defense budget, give it to people like yourself 
and your organization who are really good at taking care of 
people as their primary mission.
    So I would just ask this Committee to try to think about 
the answer to that question, where should we go in the future?
    Category seven and eight veterans, who are they? Who is a 
category seven and eight veteran?
    Secretary Nicholson. Could I respond to the first part of 
your question?
    Senator Graham. Yes, sir.
    Secretary Nicholson. Because I did have that conversation 
with the President and we have had it with other people in and 
out of the military. One of the things you have to keep in mind 
is the deployability of the medical assets.
    Senator Graham. You will need a medical footprint in the 
military, but the retiree people are not going to be deployed, 
I hope.
    Secretary Nicholson. Was that your question, addressing the 
retired military?
    Senator Graham. Yes.
    Secretary Nicholson. Not the active military?
    Senator Graham. Right. We will need a military footprint 
for active duty people and their families because they are in 
the fight, but there are a bunch of us, me included, hopefully 
one day that will be retired that are getting health care that 
might benefit from a merger of the system and the country might 
benefit. Certainly, the Department of Defense would benefit.
    The question is why does the Department of Defense take 
care of retiree health care? That is the big question. Their 
job is to fight and win the wars.
    Now back to category seven and eight. Who is a category 
eight veteran?
    Secretary Nicholson. Senator Graham, the Congress when it 
reformed VA benefits created eight categories, as you know.
    Senator Graham. Right.
    Secretary Nicholson. And the least in the rank of priority 
are the category eights. A category eight veteran is a 
veteran--first of all, a veteran is a person who has served in 
the military of our country and was separated under conditions 
other than dishonorable. A category eight veteran, then, is 
that veteran who during his service had no service-connected 
disability or injury.
    Senator Graham. A non-retiree?
    Secretary Nicholson. A non-retiree.
    Senator Graham. Who typically serves 2 to 4 years?
    Secretary Nicholson. I am pausing. I think a category eight 
could be a retiree.
    Senator Graham. It could be a retiree?
    Secretary Nicholson. Yes, because a Priority 8 veteran is 
one who has no service disability.
    Senator Graham. They should be getting health care on the 
DOD side.
    Secretary Nicholson. They could be getting care from DOD.
    Senator Graham. Well, OK.
    Secretary Nicholson. An eight, then, is one who has an 
income above a geographically based means, and a seven is that 
same veteran whose income is below that, but above another 
income threshold that distinguishes between a Priority 7 and a 
Priority 5.
    Senator Graham. The reason I asked that question is there 
are some revenue-raisers, for lack of a better term here, in 
your proposal which I think makes sense to me, because a 
category--I want to introduce into the record some answers to 
questions submitted several years ago where the DAV and other 
veterans groups suggested that category seven and eight 
veterans should pay their own way. And right now, you are 
proposing an enrollment fee, and what I want the Committee to 
understand, very quickly, is that if you are a retiree in 
TRICARE, you pay an enrollment fee. If you are a National Guard 
member, thanks to the help of the bipartisan group, now you are 
eligible for TRICARE for the first time in the history of our 
country, but you and your family pay an enrollment fee and a 
premium.
    So I would argue that if we are asking category seven and 
eight veterans to pay an enrollment fee, that is not unfair, 
because we are asking people who served for 20 years to pay 
one. We are asking people who are still serving to pay one in 
the Guard and Reserves, and we need to think of this in terms 
of what is best for those people in category one and two 
because there is a limited amount of money.
    With that, I will close.
    Chairman Craig. Thank you, Senator Graham.
    Senator Thune.

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

    Senator Thune. Thank you, Mr. Chairman, and thank you, 
Secretary Nicholson and your team, for being here and 
presenting the President's 2007 budget request for the VA. As 
you know, budgets are an indication of where we as a Government 
place our priorities, and clearly by looking at that chart, the 
support that we provide to our veterans is a high priority and 
has received consistent increases in funding, and I think 
having said that, that there is always room for improvement and 
we obviously want to work with you to see that we are ensuring 
our veterans receive the benefits that they deserve.
    I also would add, because I had an opportunity last week to 
visit the transitional care unit of the Sioux Falls VA Medical 
Center as part of National Salute to Hospitalized Veterans 
Week, and I met with several of our veterans and came away, as 
I always do whenever I meet with them, with a great 
appreciation for the sacrifices that they have made for our 
country and the responsibility that we have as a Government to 
ensure that they are given the benefits that they have earned 
through their noble service. So like all Members of this 
Committee, I am committed to working on their behalf.
    I will say, too, in visiting with some of the employees 
there at the VA that I came away with somewhat a different 
point of view, perhaps, than Senator Murray had articulated 
earlier, that they were very bullish and upbeat and people who 
take very seriously and are very dedicated to the job that they 
have, and I am sure that that varies from facility to facility, 
but clearly the feedback that I was getting both from the 
veterans and from the people who work at the VA Medical Center 
there was very positive, and so I consistently, of course, ask 
them for things that we can do better and how we can perform a 
better job for our veterans.
    But I would like to ask one question, if I might, because 
it is a little peculiar to my area of the country, because I 
serve a large number of rural veterans and, therefore, I am 
always looking for ways to improve the access to VA health care 
that they have. One of the ways to improve access for our rural 
veterans is through community-based outpatient clinics, and we 
have had a number of those in my State that have been put in 
place. Vision 23 has targeted more recently the communities of 
Wagner and Watertown for the implementation of new CBOCs by the 
Year 2012, and that proposal was made through the 2004 CARES 
decision, Capital Realignment for Enhanced Services decision, 
because Vision 23 is currently below access standards.
    So I guess I am just wondering if someone on the panel 
might be able to update me on the progress of implementing that 
decision as it relates to developing community-based outpatient 
clinics.
    Secretary Nicholson. Yes. I can respond to that, Senator 
Thune. We are looking at Wagner and Watertown in the fiscal 
year 2007 cycle. There are considerably other locations 
throughout the country that are also in our scope, but they are 
also there. We are looking at it.
    Senator Thune. Well, I appreciate your considered support 
of that concept. It has been a very effective tool. We have one 
in Aberdeen, South Dakota and Pierre and Sioux City, Iowa just 
across the border. In understanding the geography of the West, 
there are long distances and also the climate of the West, it 
is not easy at certain times of the year to get to some of 
these facilities. So it has been a very effective tool and I am 
told a cost-effective one as well in the sense that in some 
ways if you are able to serve people through the committee out-
patient clinics, that it does help keep costs down in some of 
the hospitals.
    So one other question I have here, just as a follow-up, 
and, Dr. Perlin, we have had some discussions about this: Where 
is the VA with respect to the question about consolidation of 
IT services? That is something that this Committee has probed 
previously in hearings that the Chairman has had conducted on 
the subject.
    And maybe you have already asked that question. I don't 
know.
    Chairman Craig. Not today, but that is on going.
    Senator Thune. I would be curious to get an update on that, 
if I might.
    Secretary Nicholson. I will respond initially and then ask 
Dr. Perlin if he wants to add anything. This is an area, fair 
to say, that is undergoing a major transformation inside the VA 
and needs to. We are very proud of the achievements that we 
have made in transforming and changing the culture so that we 
are uniformly on electronic medical records. We now need to get 
as good in the information technology, because there are 
certain organic structures within the VA that tend to make it 
want to be stove pipes, a big medical arm, a benefit arm, a 
burial arm, and in the benefits particularly, there are many 
other smaller arms such as the sixth largest life insurance 
company in the United States and GI benefits and home loan 
guarantees and so forth. We realize that we could make 
substantial savings by the centralization and the 
standardization of information technology and information-
sharing within this large agency, and so we are underway in 
what we are calling a federated model of what we are doing, 
which is making the Assistant Secretary for information 
technology in charge strategically of the budgeting and the 
personnel now for IT within the agency.
    But because it is federated and not totally centralized in 
that model, we will allow, particularly, say people of the 
medical arm to model their own unique software for a research 
application or a certain medical application, because it just 
doesn't make sense to me to take that all the way from them and 
centralize that at the headquarters of the VA. Even in this 
federated model, I will tell you very frankly that we are 
having to butt up against a system that is not used to this. 
They are losing people because we are bringing people out of 
some of these administrations and putting them into a central 
IT facility.
    It is a very important area. It needs to happen. I am 
committed to it. I would like to get it done without your 
having to tell us by law to do it.
    And with that, I will ask Dr. Perlin if he wants to add 
anything.
    Dr. Perlin. Thank you, Mr. Secretary.
    Senator Thune, we appreciate your great support to the 
electronic health record. Like the President, I think you have 
seen the data where one in five laboratory tests in the country 
are repeated because previous records were not available, not 
in VA. For less than $80 per patient per year, we have those 
records every time. So that has improved our quality, our 
safety, our efficiency, even in the compassion with which we 
deliver health care services.
    In fact, just today, it was announced that VA won a 
Government excellence award for improvement in the ability to 
transfer health information from the Department of Defense, the 
bi-directional health information exchange, and so there is a 
great history. Also, just as the Secretary said, veterans 
should never have to face three VAs, and the opportunity to 
achieve some consolidation, some economies of scale through 
sharing and the purchasing of infrastructure while maintaining 
and even improving our ability to serve veterans of the Nation 
with topnotch electronic health records is their aspiration, 
and we are well on the way.
    Senator Thune. Thank you. Thank you very much. I appreciate 
that.
    Mr. Chairman, thank you.
    Chairman Craig. John, I appreciate that question. The 
Secretary and I and the Chairman on the House side have 
dialogued about this. As you know, the Chairman on the House 
side, Chairman Buyer, would like to legislate a specific model. 
I must say the Secretary is working very hard at this moment. I 
am willing to give them some running room. I say that because 
of the reputation they have established with their medical 
health records. Now, if they were the FBI, I would suggest that 
we don't do that, but this is not the case here and I know they 
are working hard to make these transitions.
    And we will monitor it very closely. I am appreciative of 
your interest in it. I think it is critically important we get 
there as we transition this agency into the information age in 
that sense.
    Senator Jeffords. Mr. Chairman.
    Chairman Craig. Yes.
    Senator Jeffords. I have other questions, but I would say 
that I would be willing to submit them for the record.
    Chairman Craig. Jim, thank you very much.
    Senator Akaka, we do need to move on to our second panel 
and I appreciate that consideration. So thank you. We would ask 
all of our Members who have additional questions to submit them 
to the Secretary and those who are with him. I have several and 
we will do that.
    Again, to you, Mr. Secretary, and to all who are with you, 
we thank you very much for your openness and your candidness 
this morning as we work our way through this. It is obviously a 
high priority to this Congress and to America and we thank you 
for your leadership in these areas.
    Secretary Nicholson. Thank you very much, Mr. Chairman.
    Chairman Craig. Gentlemen, trust me. It is not your 
presence or that which you are about to say that has emptied 
out the room. Again, let me thank the veterans service 
organizations for being before the Committee today, and let me 
introduce Steve Robertson, Director, National Legislative 
Commission of the American Legion; Quentin Kinderman, Deputy 
Director, National Legislative Service, Veterans of Foreign 
Wars; Brian Lawrence, Assistant National Legislative Director, 
Disabled American Veterans; Carl Blake, Senior Associate 
Legislative Director, Paralyzed Veterans of America; and David 
Greineder, Deputy National Legislative Director, AMVETS.
    Gentlemen, we understand some of you will take pieces of 
the unified budget. We appreciate that. Others will not.
    So we will start, Steve, with you. Please proceed.

 STATEMENT OF STEVE ROBERTSON, DIRECTOR, NATIONAL LEGISLATIVE 
                COMMISSION, THE AMERICAN LEGION

    Mr. Robertson. Thank you, Mr. Chairman.
    Mr. Chairman, I had some wonderful opening oral remarks 
that I wanted to make, and I am asking to submit them to the 
record because I think there are some questions that need to be 
answered that your colleagues have asked.
    Chairman Craig. All right.
    Mr. Robertson. And I would also like my written statement 
to be made part of the record.
    Chairman Craig. All of your written statements and any 
accompanying information will become a part of our official 
record.
    Mr. Robertson. I have to comment on a couple of the remarks 
that were made, number one, concerning the projected patient 
growth. They talked specifically about priority groups areas 
five and six. If I am not mistaken, I believe that that is the 
area that the OIF, OEF troops fall into, the priority group 
six, and from what we have seen talking to the veterans and 
visits in the field, I think that there is going to be a lot 
more people coming back to the system. As you know, for 2 
years, they are allowed to use the VA system, and I think that 
you are going to have a lot more repeat customers for a number 
of reasons. We know that the unemployment rate amongst those 
veterans is significantly high right now, and without any 
health care coverage, VA is going to be their health care 
coverage of choice.
    We also were concerned with the statements about the number 
of the veterans that may be forced out because of the 
enrollment fees and the copayments and the statement about 95 
percent of those veterans having insurance coverage, and I 
think it was pointed out that some of them are going to be 
TRICARE-eligible veterans. That is their extra health care 
coverage. Ironically, TRICARE is going to be increasing its 
premiums, and they are projecting over 600,000 leaving the 
system rather than paying the higher rates.
    So there is kind of a cross-figure here of how many are 
going to leave the system from the VA for other health care 
coverage and the ones that TRICARE thinks may be leaving the 
system because of their increases. The problem is that we may 
have a lot of veterans that are out there looking for other 
options.
    There is also an impact on your MCCF. If you are projecting 
moneys from third-party collections and veterans that are 
supposed to be paying these copayments and insurance companies 
that are supposed to be reimbursing, if they are leaving the 
system, what impact are you going to have on your MCCF 
collections?
    Obviously, the elephant in the room on third-party 
collections is Medicare. If I go in and register as a Priority 
7 or 8 veteran, they are going to ask me who is your primary 
insurance coverage so that they bill them for third-party 
reimbursements. If I say Medicare, that is the largest 
insurance company in the United States, and VA cannot collect 
$1 even if the veteran is paying Part A, Part B; and with the 
proposed enrollment fee, you are asking him to pay even more 
money to use the system that is an earned benefit.
    That is a major problem. In fact, in our budget, nowhere is 
VA credited for the mandatory dollars in Medicare money that it 
is saving Medicare by not being able to bill them. So I think 
that that is something else that needs to be seriously looked 
at. As you know, many of the major veterans organizations have 
asked about the possibility of having hearings to talk about 
alternative funding sources for the VA, and mandatory funding 
is obviously one of those items that we have talked about. In 
the 14 years that I have been working on Capitol Hill, we have 
never, ever, ever questioned the funding formula for VBA, 
never, and if the money came up short, there was a supplemental 
to restore it, because we know that every dollar of mandatory 
money is an earned benefit. It has been proven, disability 
ratings, death benefits, pension, whatever.
    It just seems ironic that when you come to health care for 
a disabled veteran, that that funding is under existing 
appropriations, whatever we can get from year to year. A 
Medicare patient is guaranteed, guaranteed, their funding. For 
people that are Medicare eligible, for people that are Social 
Security, I understand the consequences of having mandatory 
funding. I understand why that is necessary, but their 
contribution has been purely monetary and longevity of life. We 
do not present a flag at the funeral services-of Social 
Security beneficiaries or Medicare beneficiaries as a thanks of 
a grateful Nation.
    I guess what concerned me the most was the question that 
was asked, and I thought it was a very good question, about 
what is a seven and what is an eight. The difference between a 
seven and eight in some cases is their ZIP Code. The HUD 
geographical index is what separates a seven and an eight, so 
that if a veteran lives in Boise, he may qualify where a 
gentleman that lives in--I mean a gentleman that lives in 
Hawaii may qualify where the veteran in Boise may not, just 
because of the location of where they live.
    There are also service-connected disabled veterans that are 
part of group eight. They are non-compensable. So there are 
service-connected veterans in both those categories. Now, I 
understand that they allow those veterans to enroll because 
they have service-connected disabilities, but you need to know 
who is in that group. There are also combat veterans that fall 
into category seven and eight, and yet there are no veterans 
that fall into the lower core groups that aren't combat 
veterans.
    So I think there is a need to go back and revisit some of 
those criteria.
    The enrollment fees, I think are very unfair in one 
particular light. It doesn't buy you anything. It doesn't give 
you anymore timely access to care. In fact, for sevens and 
eights, they are the last on the priority list for getting 
timely access to care. So we are asking people who may have 
insurance companies to reimburse the VA who are Medicare-
Medicaid eligible that pay their premiums who may be in TRICARE 
to pay an additional fee because they are having to make a 
decision that is not maybe their best health care decision. It 
is their best financial decision. I think veterans earn a 
better choice than that.
    Thank you, Mr. Chairman. I appreciate your allowing me to 
go a little over the time.
    [The prepared statement of Mr. Robertson follows:]

 Prepared Statement of Steve Robertson, Director, National Legislative 
                    Commission, the American Legion

    Mr. Chairman of the Committee:
    On September 20, 2005, The American Legion's newly elected National 
Commander, Thomas L. Bock presented the views of its 2.7 million 
members on issues under the jurisdiction of your Committee. At the 
conclusion of The American Legion's 87th National Convention in 
Honolulu, Hawaii, over 3,100 delegates adopted 42 organizational 
resolutions with 36 having legislative intent. These organizational 
mandates will add to the legislative portfolio of The American Legion 
for the remainder of the 109th Congress.
    As Legionnaires gathered at the National Convention to once again 
determine the path of the Nation's largest veterans' service 
organization, it was with respect for those who have worn the uniform 
before us, friendship for those with whom we served and admiration for 
those who currently defend the freedoms of this great Nation. Each 
generation of America's veterans has earned the right to quality health 
care and transitional programs available through the Department of 
Veterans Affairs (VA). The American Legion will continue to work with 
this Committee and your colleagues in the House to ensure that VA is 
indeed capable of providing ``. . . care for him who shall have borne 
the battle and for his widow and his orphan.''
    The Administration's VA budget request for 2007 has been hailed for 
adding nearly $3 billion in real appropriations for veterans' health 
care, compared to 2006. Although there is a real increase in actual 
funding in some areas, it still relies on assumed collections from 
initiatives that seek to place the burden of payment on the veterans 
seeking treatment from VA. It's a budget request built on charging new 
annual enrollment fees for VA care, nearly doubling drug copayments, 
charging veterans for uncollected reimbursement from third-party 
payers, assumed efficiency savings. Even VA documents indicate that 
these proposals may lead to the loss of more than a million enrolled 
veterans from VA.
    This budget request relies on $1.1 billion in cost-saving 
``efficiencies''--the subject of a recent Government Accountability 
Office report that criticized past VA health-care projections from the 
president's Office of Management and Budget. The American Legion is 
extremely disappointed that this budget request continues to count 
``phantom savings'' as real healthcare dollars. Real veterans are 
suffering from real injuries and VA needs real dollars to treat them. 
Any increases in VA funding should be the result of actual funds and 
not assumed savings based on management efficiencies.
    The Military Construction and Veterans Affairs Appropriations 
Subcommittee, chaired by Senator Hutchison expressed concern over VA 
being underfunded due to unrealized legislative proposals that seek to 
charge veterans copayments and increased copayments. The American 
Legion agrees fully with the recommendation of that Subcommittee last 
year that VA ``request a funding level that adequately represents the 
real needs of veterans without devising new fees.''
    The American Legion is also concerned with the highly ambitious 
anticipated increase in third-party collections from insurance 
companies expected in fiscal year 2007. VA's estimate for third-party 
collections in 2006 was just over $2 billion and the fiscal year 2007 
budget request is relying on collecting almost $800 million more. The 
majority of which are expected to come from new enrollments and 
increased prescription copayments. Again, these numbers do not reflect 
actual funds and should not be considered a real increase to the VA 
budget. In early 2005, VA had $3 billion in uncollected debts. Assumed 
collections do not equate to real dollars and veterans health care 
should not be reliant on possible collections that never match the 
demand for dollars. Such miscalculations result in real budgetary 
shortfalls that lead to reduced care and treatment; hiring freezes; 
delays in nonrecurring maintenance; and, other tough spending 
decisions.
    VA Research will also suffer from this budget request. It takes a 
$13 million bite out of VA research in medical care support and relies 
on increased dollars from Federal Resources and other Non-Federal 
Resources. Reliance on other Federal and Non-Federal Resources subjects 
VA research funding to an overall decrease in funding if those 
resources are forced to slash their respective budgets. Medical Care 
Support funding should be increased, not decreased. The medical 
advances resulting from VA research not only benefit the veteran 
patient, but they also benefit all Americans. Over the years many 
medical breakthrough have resulted from research initiatives within VA 
healthcare facilities and through partnerships with civilian medical 
schools. Adequate funding to continue the important research of VA must 
be provided. Such budgetary shortfalls make VA's recruiting and 
retention of medical researchers extremely challenging.
    Additionally, The American Legion is disappointed in the lack of 
importance placed on the ever-increasing VA claims backlog in the 
proposed budget for fiscal year 2007. A new group of veterans are 
returning home with service-connected disabilities. VA must not only be 
prepared to assist with those new claims, but VA must be manned at a 
level that will prevent the backlog from continuing to increase. With a 
large number of Federal employees approaching retirement age VA is 
facing a major loss of experienced employees vital to the success of 
the agency. This budget fails to plan for the impending retirement of a 
large number of claims adjudicators from the VA workforce.
    It is imperative that any budget request submitted for VA reflects 
a true estimate of the patient population. The under-estimated number 
of VA patients returning from Iraq and Afghanistan contributed to the 
$1.5 billion budget shortfall for VA health care in 2005. While we 
applaud Congress for responding with supplemental funding for VA in 
2005, the estimates must accurately reflect the demand for care VA can 
expect.
    With that in mind and on behalf of The American Legion, I reiterate 
the following budgetary recommendations for VA's discretionary funding 
in fiscal year 2007:

     BUDGET RECOMMENDATIONS FOR SELECTED DISCRETIONARY PROGRAMS FOR
           DEPARTMENT OF VETERANS AFFAIRS FOR FISCAL YEAR 2007
------------------------------------------------------------------------
                                       President's      Legion's FY 2007
              Program                 budget request        request
------------------------------------------------------------------------
Medical Care                           $32.1 billion
Including:
------------------------------------------------------
 Medical Services              $25.5 billion
------------------------------------------------------
 Medical                        $3.1 billion      $33.5 billion
Administration
------------------------------------------------------
 Medical Facilities             $3.5 billion
------------------------------------------------------------------------
Medical Care Collections              ($2.8 billion)       $2.1 billion
------------------------------------------------------------------------
Emergency Supplemental
------------------------------------------------------------------------
Medical & Prosthetics Research          $399 million       $469 million
------------------------------------------------------------------------
Construction
------------------------------------------------------------------------
 Major                          $399 million       $343 million
------------------------------------------------------------------------
-CARES                                                       $1 billion
------------------------------------------------------------------------
 Minor                          $198 million       $274 million
------------------------------------------------------------------------
State Extended Care Facilities           $85 million       $250 million
------------------------------------------------------------------------
State Veterans' Cemeteries               $32 million        $44 million
------------------------------------------------------------------------
NCA Operations                          $161 million       $174 million
------------------------------------------------------------------------
General Administration                  $1.5 billion       $1.9 billion
------------------------------------------------------------------------
* Third-party reimbursements should supplement rather than offset
  discretionary funding.

            MEDICAL CONSTRUCTION AND INFRASTRUCTURE SUPPORT

Major Construction
    Over the past several years, The American Legion has testified on 
the inadequacy of funding for VA's major and minor construction 
programs. This inadequacy has become even more apparent in light of the 
congressionally imposed moratorium on construction funding during the 
CARES process. The American Legion is both relieved and encouraged to 
see that the first 2 years worth of VA designated high-priority 
projects include critically needed seismic corrections to nine 
vulnerable structures in California and Puerto Rico. The American 
Legion has consistently expressed its concern about veterans being 
treated in unsafe facilities. There are over 60 patient care and other 
related use buildings in danger of collapse or heavy damage in the 
event of an earthquake. The sorely needed seismic corrections, along 
with the necessary ambulatory care and patient safety projects, will 
require a significant increase in funding to address VHA's current 
major construction requirements. We believe these designated seismic 
projects, other seismic corrections and life safety upgrades, should be 
dealt with first on an emergency basis.
    The American Legion opposes the use of medical care appropriations 
for construction and urges Congress to separately and fully fund these 
projects.
    The American Legion recommends $343 million for Major Construction 
and a separate $1 billion for the implementation of the CARES 
recommendations in fiscal year 2007.
Minor Construction
    VA's minor construction program has likewise suffered significant 
neglect over the past several years. The requirement to maintain the 
infrastructure of VA's buildings is no small task. When combined with 
the added cost of the CARES program recommendations and the request for 
minor infrastructure upgrades in several research facilities, it is 
easy to see that a major increase over the previous funding level is 
crucial. We question the transfer of prior-year minor construction 
funds into CARES. During our site visits to all VHA medical centers 
over the past 3 years, we noted a recurrent theme in which facilities 
managers are routinely forced to divert funds from other priorities to 
repair roofs, replace boilers and upgrade utilities and life safety and 
other critical systems. The American Legion believes that these funds 
should be used for the purposes for which they were intended and that 
the ``transfer authority'' does not include monies designated for 
patient care.
    The American Legion recommends $274 million for Minor Construction 
in fiscal year 2007.

                    THE AGING OF AMERICA'S VETERANS

    A landmark July 1984 study, Caring for the Older Veteran, predicted 
that a ``wave'' of elderly World War II and Korean Conflict veterans 
would occur some 20 years ahead of the elderly in the general U.S. 
population and had the potential to overwhelm the VA Long Term Care 
(LTC) system if not properly planned for. The most recent available 
data from VA, 2000 Census-based VetPop2001 Adjusted, show there were 
25.6 million veterans in 2002. Of that number, 9.76 million, or 37 
percent are aged 65 or older. According to the 2003 National Survey of 
Veteran Enrollees' Health and Reliance on VA enrolled in VA health care 
14 percent of the veteran population was under the age of 45, 39 
percent were between the ages of 45 and 64, and 47 percent of veterans 
were 65 years or older. Compared to the 2001 Survey, in which the age 
distribution was 21 percent, 41 percent and 39 percent, respectively, 
it is clear that the ``demographic imperative'' predicted by the 1984 
study is now upon us.
    The study cited an ``imminent need to provide a coherent and 
comprehensive approach to long-term care for veterans.'' Twenty-one 
years hence, the coherent and comprehensive approach called for has yet 
to materialize. The American Legion supports a requirement to mandate 
that VA publish a Long Term Care Strategic Plan.
    The Veterans Millennium Health Care and Benefits Act of 1999 
provided VA authority to act on these projections. Based on an ``aging 
in place'' continuum of care model, VA was mandated to begin providing 
a variety of non-institutional services to aging veterans, including; 
home-based primary care, contract home health care, adult day health 
care, homemaker and home health aides, respite care, telehealth and 
geriatric evaluation and management.
    On March 29, 2002, GAO issued a report that stated that nearly 2 
years after The Millennium Act's passage, VA had not implemented its 
response to the requirements that all eligible veterans be offered 
adult day health care, respite care and geriatric evaluation. At the 
time of GAO's inquiry, access to these services was ``far from 
universal.'' While VA served about one-third of its 3rd Quarter 2001 
LTC workload (23,205 out of an Average Daily Census of 68,238) in non-
institutional settings, VA only spent 8 percent of its LTC budget on 
these services. Additionally, VA had not even issued final regulations 
for non-institutional care, but was implementing the services by 
issuing internal policy directives, according to GAO. Of 140 VAMCs, 
only 100 or 71 percent were offering adult day health care in non-
institutional settings.
    By May 22, 2003, over 1 year later, GAO testified before the House 
Veterans' Affairs Subcommittee on Health that things had not improved 
and that veterans' access to non-institutional LTC was still limited by 
service gaps and facility restrictions. GAO's assessment showed that 
for four of the six services, the majority of facilities either did not 
offer the service or did not provide access to all veterans living in 
the geographic service area. GAO summed up the problem nicely when it 
testified that ``[f]aced with competing priorities and little guidance 
from headquarters, field officials have chosen to use available 
resources to address other priorities.''
    In the area of nursing home care, VA is equally recalcitrant in 
implementing the mandates of the Millennium Act. The Act required VA to 
maintain its in-house Nursing Home Care Unit (NHCU) bed capacity at the 
1998 level of 13,391. In 1999 there were 12,653 VA NHCU beds, 11,812 in 
2000, 11,672 in 2001, 11,969 in 2002 and 12,339 beds in 2003. VHA 
estimates it had 11,000 beds in 2004 and projects only 8,500 beds for 
fiscal year 2005. VA claims that it cannot maintain both the mandated 
bed capacity and implement all the non-institutional programs required 
by the Millennium Act. Providing adequate inpatient LTC capacity is 
good policy and good medicine. The American Legion opposes attempts to 
repeal 38 U.S.C. Sec. 1710B(b).
    The American Legion believes that VA should take its responsibility 
to America's aging veterans much more seriously and provide the quality 
of care mandated by Congress. Congress should do its part and provide 
adequate funding to VA to implement its mandates.
State Extended Care Facility Construction Grants Program
    Since 1984, nearly all planning for VA inpatient nursing home care 
has revolved around State Veterans Homes (SVHs) and contracts with 
public and private nursing homes. The reason for this is obvious; for 
fiscal year 2004 VA paid a per diem of $59.48 for each veteran it 
places in SVHs, compared to the $354.00 VA said it cost in fiscal year 
2002 to maintain a veteran for 1 day in its own NHCUs.
    Under the provisions of title 38, U.S.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. Grants for 
Construction of State Extended Care Facilities provide funding for 65 
percent of the total cost of building new veterans homes. 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. 
State authorizing legislation has been enacted and state funds have 
been committed. The West Los Angeles State Veterans Home, alone, is a 
$125 million project. Delaying this and other projects will result in 
cost overruns from increasing building materials costs and may lead 
states to cancel these much-needed facilities.
    The American Legion supports increasing the amount of authorized 
per diem payments to just 50 percent for nursing home and domiciliary 
care provided to veterans in State Veterans Homes. The American Legion 
also supports the provision of prescription drugs and over-the-counter 
medications to State Homes Aid and Attendance patients, along with the 
payment of authorized per diem to State Veterans Homes. Additionally, 
VA should allow for full reimbursement of nursing home care to 70 
percent service-connected veterans or higher, if the veteran resides in 
a State Veterans Home.
    The American Legion recommends $250 million for the State Extended 
Care Facility Construction Grants Program in fiscal year 2007.

                      MEDICAL SCHOOL AFFILIATIONS

    VHA and its medical school affiliates have enjoyed a long-standing 
and exemplary relationship for nearly 60 years that continues to thrive 
and evolve to the present day. Currently, there are 126 accredited 
medical schools in the United States. Of these, 107 have formal 
affiliation agreements with VA Medical Centers (VAMCs). More than 
30,000 medical residents and 22,000 medical students receive a portion 
of their medical training in VA facilities annually. VA estimates that 
70 percent of its physician workforce has university appointments. At 
some medical schools, 95 percent of medical staff at affiliated VAMCs 
has dual appointments.
    VHA conducts the largest coordinated education and training program 
for health care professions in the Nation and medical school 
affiliations allow VA to train new health professionals to meet the 
health care needs of veterans and the Nation. Medical school 
affiliations have been a major factor in VA's ability to recruit and 
retain high quality physicians and to provide veterans access to the 
most advanced medical technology and cutting edge research; VHA 
research has made countless contributions to improve the quality of 
life for veterans and the general population.
    The American Legion affirms its strong commitment and support for 
the mutually beneficial affiliations between VHA and the medical 
schools of this Nation.

                    MEDICAL AND PROSTHETICS RESEARCH

    VA's Medical and Prosthetic Research Service has a history of 
productivity in advancing medical knowledge and improving health care 
not only for veterans, but all Americans. VA research has led to the 
creation of the cardiac pacemaker, nicotine patch, and the Computerized 
Axial Tomography (CAT) scan, as well as other medical breakthroughs. 
Most recently, VA research has shown that an experimental vaccine 
against shingles prevented about 51 percent of cases of shingles, a 
painful nerve and skin infection, and dramatically reduced its severity 
and complications in vaccinated persons who got shingles. Over 3,800 VA 
physicians and scientists conduct more than 9,000 research projects 
each year involving more than 150,000 research subjects.
    The American Legion supports adequate funding for VA research 
activities, including basic biomedical research as well as bench-to-
bedside projects. Congress and the Administration should encourage 
acceleration in the development and initiation of needed research on 
conditions that significantly affect veterans--such as prostate cancer, 
addictive disorders, trauma and wound healing, post-traumatic stress 
disorder, rehabilitation, and others jointly with the Department of 
Defense (DOD), the National Institutes of Health (NIH), other Federal 
agencies, and academic institutions.
    The American Legion recommends $469 million for Medical and 
Prosthetics Research in fiscal year 2007.

                           HOMELESS VETERANS

    VA has estimated that there are at least 250,000 homeless veterans 
in America and approximately 500,000 veterans experience homelessness 
in a given year. Most homeless veterans are single men; however, the 
number of single women with children has drastically increased within 
the last few years. Homeless female veterans tend to be younger, are 
more likely to be married, and are less likely to be employed. They are 
also more likely to suffer from serious psychiatric illness.
    Approximately 40 percent of homeless veterans suffer from mental 
illness and 80 percent have alcohol or other drug abuse problems. It 
cannot go unnoticed that the increase in homeless veterans coincides 
with the under-funding of VA health care, which resulted in the 
downsizing of inpatient mental health capabilities in VA hospitals 
across the country. Since 1996, VA has closed 64 percent of its 
psychiatric beds and 90 percent of its substance abuse beds. It is no 
surprise that many of these displaced patients end up in jail, or on 
the streets. The American Legion applauds VA's recent plan to restore a 
good portion of this capacity. The American Legion believes there 
should be a focus on the prevention of homelessness, not just measures 
to respond to it. Preventing it is the most important step to ending 
it.
    The American Legion has a vision to assist in ending homelessness 
among veterans, by ensuring services are available to respond to 
veterans and their families in need before they experience 
homelessness. Toward that objective, The American Legion in partnership 
with the National Coalition for Homeless Veterans created a Homeless 
Veterans Task Force in the fall of 2002. The mission of the Task Force 
is to develop and implement solutions to end homelessness among 
veterans through collaborating with government agencies, homeless 
providers and other veteran service organizations. In the last 2 years, 
16 homeless veterans workshops were conducted during The American 
Legion National Leadership Conferences, National Convention and Mid-
Winter Conferences. Currently, there are 51 Homeless Veterans 
Chairpersons within The American Legion who act as liaison to Federal, 
state and community homeless agencies and monitor fundraising, 
volunteerism, advocacy and homeless prevention activities within 
participating American Legion Departments. The American Legion Homeless 
Veterans Outreach Award is presented to the Department that made the 
greatest effort to end veteran homelessness within their area. At last 
year's National Convention, the Department of Indiana was presented 
this award.
    The current Administration has vowed to end the scourge of 
homelessness within 10 years. The clock is running on this commitment, 
yet words far exceed deeds. While less than 9 percent of the Nation's 
population are veterans, 34 percent of the Nation's homeless are 
veterans and of those 75 percent are wartime veterans.
    Homelessness in America is a travesty. Veterans' homelessness is a 
national disgrace. Left unattended and forgotten, these men and women, 
who once proudly wore the uniforms of this Nation's Armed Forces and 
defended her shores, are now wandering streets in desperate need of 
medical and psychiatric attention and financial support. While there 
have been great strides in ending homelessness among America's 
veterans, there is much more that needs to be done. We must not forget 
them. The American Legion supports funding that will lead to the goal 
of ending homelessness in the next 10 years.
Homeless Providers Grant and Per Diem Program Reauthorization
    In 1992, VA was given authority to establish the Homeless Providers 
Grant and per Diem Program under the Homeless Veterans Comprehensive 
Services Programs Act of 1992, P.L. 102-590. The Grant and Per Diem 
Program is offered annually (as funding permits) by the VA to fund 
community agencies providing service to homeless veterans.
    The American Legion strongly supports changing the grant and Per 
Diem Program to be funded on a 5-year period instead of annually. The 
American Legion also supports a funding level increase of $200 million 
annually.

                    NATIONAL CEMETERY ADMINISTRATION

    The National Cemetery Administration (NCA) is charged with meeting 
the interment needs of the Nation's veterans and their eligible 
dependents. NCA is striving to meet its accessibility goal of 90 
percent of all veterans living within 75 miles of open national or 
state veterans cemeteries. There are approximately 14,200 acres within 
established installations in NCA. Just over half are undeveloped and, 
with available gravesites in developed acreage, have the potential to 
provide more than 3.6 million gravesites. More than 301,050 full-casket 
gravesites, 58,500 in-ground gravesites for cremated remains, and 
37,900 columbarium niches are available in already developed acreage in 
our 120 national cemeteries.
National Cemetery Expansion
    The NCA's budget proposal totals $161 million and 1,589 FTE for 
fiscal year 2007. The fiscal year 2007 outlay proposal earmarks $53 
million for major and $25 million for minor construction. This reflects 
cemetery expansion projects in Dallas/Fort Worth and Saratoga, NY as 
well as Phase 1B development at Great Lakes.
    The American Legion supported P.L. 108-109, the National Cemetery 
Expansion Act of 2003 authorizing VA to establish new national 
cemeteries to serve veterans in the areas of: Bakersfield, Calif.; 
Birmingham, Ala.; Jacksonville, Fla.; Sarasota County, Fla.; 
southeastern Pennsylvania; and Columbia-Greenville, S.C. All six areas 
have veteran populations exceeding 170,000, which is the threshold VA 
has established for new national cemeteries.
    Congress must provide sufficient major construction appropriations 
to permit NCA to accomplish its stated goal of ensuring that burial in 
a national or state cemetery is a realistic option by locating 
cemeteries within 75 miles of 90 percent of eligible veterans.
National Shrine Commitment
    Maintaining cemeteries as National Shrines is one of NCA's top 
priorities. This commitment involves raising, realigning and cleaning 
headstones and markers to renovate gravesites. The work that has been 
done so far has been outstanding; however, adequate funding is key to 
maintaining this very important commitment. At the rate that Congress 
is funding this work, it will take twenty-eight years to complete. The 
American Legion supports NCA's goal of completing the National Shrine 
Commitment in 5 years. This Commitment includes the establishment of 
standards of appearance for national cemeteries that are equal to the 
standards of the finest cemeteries in the world. Operations, 
maintenance and renovation funding must be increased to reflect the 
true requirements of the NCA to fulfill this Commitment.
    The American Legion recommends $174 million for the National 
Cemetery Administration in fiscal year 2007.
State Cemetery Construction Grants Program
    The fiscal year 2007 budget requested $32 million for State 
Veterans Cemetery Grant Program. This is ``no-year money'' and so any 
monies not spent in the previous fiscal year can be carried over into 
the next fiscal year. This program is not intended to replace National 
Cemeteries, but to complement them. Grants for state-owned and operated 
cemeteries can be used to establish, expand and improve on existing 
cemeteries. States are planning to open 18 new state cemeteries between 
2007 and 2010.
    Individual states are encouraged to pursue applications for the 
State Cemetery Grants Program. Fiscal commitment from the state is 
essential to keep the operation of the cemetery on track. NCA estimates 
it takes about $300,000 a year to operate a state cemetery.
    The American Legion recommends $47 million for the State Cemetery 
Grants Program in fiscal year 2007.

                          DEPARTMENT OF LABOR

Veterans' Employment and Training Service
    The American Legion's position regarding VETS is that it should 
remain a national program with Federal oversight and accountability. 
The mission of VETS is to promote the economic security of America's 
veterans. This stated mission is executed by assisting veterans in 
finding meaningful employment. The American Legion views the VETS 
program as one of the best-kept secrets in the Federal Government. It 
is comprised of many dedicated individuals who struggle to maintain a 
quality program without substantial increases in both funding and 
staffing.
    Annually, DOD discharges approximately 250,000 servicemembers. 
Recently separated service personnel are likely to seek immediate 
employment or continue their formal or vocational education. In order 
for the VETS program to assist these veterans to achieve their goals, 
it needs to:
     Improve by expanding its outreach efforts with creative 
initiatives designed to improve employment and training services for 
veterans.
     Provide employers with a labor pool of quality applicants 
with marketable and transferable job skills.
     Provide information on identifying military occupations 
that require licenses, certificates or other credentials at the local, 
state, or national levels.
     Eliminate barriers to recently separated service personnel 
and assist in the transition from military service to the civilian 
labor market.
     Strive to be a proactive agent between the business and 
veterans' communities in order to provide greater employment 
opportunities for veterans.
    The American Legion believes staffing levels for Disabled Veterans' 
Outreach Program (DVOP) specialists and Local Veterans' Employment 
Representatives (LVERs) should match the needs of the veteran community 
in each state and not be based solely on the fiscal needs of the state 
government. Such services will continue to be crucial as today's active 
duty servicemembers, especially those returning from combat in Iraq and 
Afghanistan, transition into the civilian world. Education and 
vocational training and employment opportunities will enable these 
veterans to succeed in their future endeavors. Adequate funding will 
allow the programs to increase staffing to provide comprehensive case 
management job assistance to disabled and other eligible veterans.
    Title 38 U.S.C. Sec. 4103A requires that all DVOP specialists shall 
be qualified veterans and that preference be given to qualified 
disabled veterans in appointment to DVOP specialist positions. 38 
U.S.C. Sec. 4104(a)(4) states:

          ``[I]n the appointment of local veterans' employment 
        representatives on or after July 1, 1988, preference shall be 
        given to qualified eligible veterans or eligible persons. 
        Preference shall be accorded first to qualified service-
        connected disabled veterans; then, if no such disabled veteran 
        is available, to qualified eligible veterans; and, if no such 
        eligible veteran is available, then to qualified eligible 
        persons.''

    The American Legion believes that the military experience is 
essential to understanding the unique needs of the veteran and that all 
LVERs, as well as all DVOPs, should be veterans.
    The American Legion recommends a funding level of $342 million for 
the Veterans' Employment and Training Service in fiscal year 2007.

               MANDATORY FUNDING FOR VETERANS HEALTH CARE

    A new generation of young Americans is once again deployed around 
the world, answering the Nation's call to arms. Like so many brave men 
and women who honorably served before them, these new veterans are 
fighting for the freedom, liberty and security of us all. Also like 
those who fought before them, today's veterans deserve the due respect 
of a grateful Nation when they return home.
    Unfortunately, without urgent changes in health care funding, new 
veterans will soon discover their battles are not over. They will be 
forced to fight for the life of a health care system that was designed 
specifically for their unique needs. Just as the veterans of the 20th 
century did, they will be forced to fight for the care each one is 
eligible to receive.
    The American Legion continues to believe that the solution to the 
Veterans Health Administration (VHA) recurring fiscal difficulties will 
only be achieved when its funding becomes a mandatory spending item. 
Funding for VA health care currently falls under discretionary spending 
within the Federal budget. VA's health care budget competes with other 
agencies and programs for Federal dollars each year. The funding 
requirements of health care for service-disabled veterans are not 
guaranteed under discretionary spending. VA's ability to treat veterans 
with service-connected injuries is dependent upon discretionary funding 
approval from Congress each year.
    Under mandatory funding, VA health care would be funded by law for 
all enrollees who meet the eligibility requirements, guaranteeing 
yearly appropriations for the earned health care benefits of enrolled 
veterans.
    The American Legion is pleased to support legislation pending in 
the 109th Congress that would establish a system of capitation-based 
funding for VHA by combining the total enrolled veteran population with 
the number of non-veterans who received services from VHA, then 
dividing that number into 120 percent of the current VHA budget or to 
another amount, depending on the bill. This baseline per-capita amount 
is then adjusted for medical inflation each year and is multiplied by 
the veteran and non-veteran population for the prior fiscal year to 
arrive at a total budget for VHA for each succeeding fiscal year. This 
new funding system would provide the bulk of VHA's Medical Services 
funding, except funding of the State Extended Care Facilities 
Construction Grant Program, which would be separately authorized, and 
third-party reimbursements. Annual funding would be without fiscal year 
limitation, meaning that any savings VHA realized in a fiscal year 
would be retained rather than returned to the Treasury, providing VHA 
with incentives to develop efficiencies and creating a pool of funds 
for enhanced services, needed capital improvements, expanded research 
and development and other purposes.
    The Veterans Health Administration is now struggling to maintain 
its global preeminence in 21st century health care with funding methods 
that were developed in the 19th century. No other modern health care 
organization could be expected to survive under such a system. The 
American Legion believes that health care rationing for veterans must 
end. It is time to guarantee health care funding for all veterans.
    Mr. Chairman, as a member of the Partnership for Veterans Health 
Care Budget Reform, we strongly encourage you to hold a hearing on the 
VA funding process to explore the best way to meet the budgetary needs 
of VA health care.

                     MEDICAL CARE COLLECTIONS FUND

    The Balanced Budget Act of 1997, P.L. 105-33, established the VA 
Medical Care Collections Fund (MCCF), requiring that amounts collected 
or recovered from third party payers after June 30, 1997 be deposited 
into this fund. The MCCF is a depository for collections from third-
party insurance, outpatient prescription copayments and other medical 
charges and user fees. The funds collected may only be used for 
providing VA medical care and services and for VA expenses for 
identification, billing, auditing and collection of amounts owed the 
government. In fiscal year 2004, VHA collected $1.7 billion, a 
significant increase over the $540 million collected in fiscal year 
2001. In fiscal year 2005 VA collected $1.9 billion and the VA fiscal 
year 2006 budget estimate called for $2.1 billion to supplement 
appropriations, a 10.8 percent increase over fiscal year 2005. VA's 
ability to capture these funds is critical to its ability to provide 
quality and timely care to veterans.
    Government Accountability Office (GAO) reports have described 
continuing problems in VHA's ability to capture insurance data in a 
timely and correct manner and raised concerns about VHA's ability to 
maximize its third-party collections. At three medical centers visited, 
GAO found inability to verify insurance, accepting partial payment as 
full, inconsistent compliance with collections follow-up, insufficient 
documentation by VA physicians, insufficient automation and a shortage 
of qualified billing coders were key deficiencies contributing to the 
shortfalls. VA should implement all available remedies to maximize its 
collections of accounts receivable.
    Technically, the MCCF is not considered a Treasury offset because 
the funds collected do not actually go back to the MCCF treasury 
account, but remain within VHA and are used as operating funds. When 
developing the agency's budget proposal, the total appropriations 
request is reduced by the estimate for MCCF for the fiscal year in 
question. We fail to see the difference in the net effect on VISNs and 
VAMCs. Offsetting estimated MCCF funds largely defeats the purpose of 
realigning VHA's financial model to more closely approximate the 
private sector.
    The American Legion opposes offsetting annual VA discretionary 
funding by the MCCF recovery.
Medicare
    As do all other citizens, veterans pay into the Medicare system 
without choice throughout their working lives. A portion of each earned 
dollar is allocated to the Medicare Trust Fund and although veterans 
must pay into the Medicare system they cannot use their Medicare 
benefits to reimburse allowable treatment and services received in VA 
health care facilities. VA, unlike the Department of Defense or Indian 
Health Services, cannot bill Medicare for the treatment of allowable 
Medicare eligible veterans' nonservice-connected medical conditions. 
This prohibition constitutes a multibillion-dollar annual subsidy to 
the Medicare Trust Fund. The American Legion does not agree with this 
policy and supports Medicare reimbursement for VHA for the allowable 
treatment of nonservice-connected medical conditions of enrolled 
Medicare-eligible veterans.
    Mr. Chairman, nowhere in this budget request does VA receive any 
credit for the real savings in mandatory appropriations through VA not 
billing Medicare for the care and treatment of Medicare-eligible 
enrolled veterans. By denying VA the opportunity to bill Medicare for 
the treatment of Medicare-eligible veterans, the VA is picking up the 
care and cost of thousands of veteran patients who would otherwise be 
billing Medicare for treatment from another health care provider.

            CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES

    VA's Capital Asset Realignment for Enhanced Service (CARES) has 
entered into the final steps of the process--implementation and 
integration. The CARES decision released in May 2004 directed VHA to 
conduct 18 feasibility studies at those health care delivery sites 
where final decisions could not be made due to inaccurate and 
incomplete information. The 18 studies fall into two broad categories: 
(1) studies of sites where no specific decisions have been made to date 
for the delivery of health care, i.e., do we decide to merge these 
facilities or not; and (2) studies of sites where the Secretary's 
decision defines the health care solution to be implemented, i.e., how 
to best use or re-use the campus as a capital planning decision. VHA 
contracted Pricewaterhouse Cooper (PwC) to identify and determine the 
best approach to provide veterans with health care services equal to or 
better than is currently provided and evaluate in terms of access, 
quality, and cost effectiveness, while maximizing any potential re-use 
of all or portions of the current real property inventory. The entire 
process was scheduled for 13 months with a completion date of no later 
than February 2006.
    One of the components of the CARES Phase II process was stakeholder 
input. In order to ensure the concept was not lost during the ongoing 
studies, Local Advisory Panels (LAPs) were set up at each of the study 
sites. The membership of the LAPs consist of key stakeholders including 
community leaders, veterans groups, VA affiliated medical schools and 
VA representation. The LAPs are to hold four public meetings to gather 
and share stakeholder input during the yearlong studies. Ideally, PwC 
and LAPs will work together to develop options that PwC will eventually 
present to the Secretary. The American Legion was concerned when the 
first meetings had to be pushed back from March to the end of April. 
This could only mean that the final decision was going to be delayed. 
VA was already behind their established timeline. When the meetings 
were finally held, The American Legion was present at every single one. 
We will ensure our presence at all of LAPs throughout the process. The 
American Legion intends to hold accountable those who are entrusted to 
provide the best health care services to the most deserving 
population--the Nation's veterans.
    The implementation of the CARES decision promises to be long. VA 
has estimated that it will require $1 billion per year for the next 6 
years, with continuing substantial infrastructure investments into the 
future. The American Legion is opposed to CARES funding coming out of 
the discretionary medical care account. The American Legion believes 
the CARES implementation must occur in the context of a fully utilized 
VA health care system. It must take into consideration VA's role in 
emergency preparedness, organizational capacity for services such as 
long-term care and Homeland Security. Further, there must be continued 
oversight of the integration of the CARES process into the strategic 
planning process. Without that oversight, plans and promised services 
may be overlooked.

                               CONCLUSION

    Thank you for the opportunity for The American Legion to reiterate 
its budget recommendations for fiscal year 2007.
    Clearly, The American Legion remains deeply concerned with VA 
medical funding in recent years. Repeatedly, the President advanced 
seriously flawed legislative initiatives that undermined the ``thanks 
of a grateful Nation.'' Fortunately, Congress joined the veterans' 
community in rejecting them. The American Legion will continue to 
oppose any ``enrollment fees'' targeted toward a selected group of 
veterans with the goal of discouraging enrollment or that does not 
guarantee timely access to quality health care in return.
    The American Legion has joined with eight other veterans' service 
organizations in calling for an immediate fix of the broken annual 
Federal appropriations process that is budget driven rather than demand 
driven. In recent years, the Office of Management and Budget's 
budgetary recommendations to Congress fell well short of the mark. 
Congress, not OMB, is responsible for providing adequate funding for VA 
medical care. We do not see lengthy discussions on the ``right amount'' 
for funding Social Security benefits, Medicare, Veterans' Compensation 
and Pension, TRICARE for Life or even your salaries as Members of 
Congress because they are scored as mandatory funding items and, 
therefore, an entitlement--funding that is guaranteed.
    If an entitlement is a statement of national priority, where should 
the care and treatment of veterans rank among Federal spending 
programs?
    The American Legion respectfully requests a future Committee 
hearing on evaluating the best funding methodology for VA medical care. 
This hearing would also address alternative revenue streams to 
complement annual Federal appropriations.
    Mr. Chairman, that concludes my testimony.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Larry E. Craig to 
Steve Robinson, Director, National Legislative Commission, The American 
                                 Legion

    Thank you for allowing The American Legion an opportunity to 
testify on the President's budget request for VA funding in fiscal year 
2007. As always, The American Legion welcomes your additional questions 
provided in your February 22 letter to me:
    Question 1. Does the Legion believe that at some point it is 
reasonable to place less emphasis on the construction of new homes and 
instead focus on the maintenance of the existing structures? If so, 
where is that point of reduced emphasis?
    Answer. Requests for State Extended Care determined a need for 
extended care should be the driving force behind decreases, then the 
emphasis on new Facilities Grants come from individual states that have 
facilities to accommodate their veterans' community. That the funding 
of grants. As that demand for new requests construction should decrease 
as well.
    The American Legion places equal emphasis on the construction of 
new homes as well as the maintenance of existing homes.
    Question 2. What is the increase in patient population that the 
American Legion expects to see for fiscal year 2007?
    Answer. Clearly, there is a significant number of Priority Group 8 
veterans currently being denied enrollment and access to quality health 
care is determined by the Priority Group assignment. As more and more 
Americans become uninsured, those uninsured veterans may turn to VA for 
their health care needs, but only if they qualify as Priority Group 1-7 
veterans. The American Legion is concerned as to the limited options 
available to those Priority Group 8 veterans with no health care 
coverage. Without access to preventive medicine, they may very well 
become VA patients at a later date when their medical condition becomes 
much more serious and more costly to treat.
    The American Legion also believes VA has under-estimated the number 
of recently separated Operation Enduring Freedom and Operation Iraqi 
Freedom veterans seeking health care from VA. These newest wartime 
veterans are guaranteed free VA health care for 2 years after 
discharge. Once that 2-year timeline has passed these veterans are 
reassigned to their respective Priority Group. The question remains 
will they continue to receive timely access to VA health care after 
that 2-year window is closed and they are reassigned to other Priority 
Groups like 7 and 8, or will they be denied access.
    As we hear reports of recently separated veterans having a higher 
unemployment rate than their non-veteran counterparts, we anticipate an 
increase in potential Priority Group 5 veterans who are economically 
indigent or Priority Group 7 veterans who are beneath the HUD 
geographical index threshold.
    Question 3. What is the basis for that (State Cemetery Grant 
Program) recommended increase? Are there states with approved 
applications for cemetery construction or expansion that cannot be 
funded within the $32 million requested by the Administration?
    Answer. Grants for state-owned and operated cemeteries can be used 
to establish, expand and improve on existing cemeteries. Currently, 
there are 61 operating state cemeteries in 32 states. In fiscal year 
2004, NCA supported State cemeteries provided more than 19,000 
interments. NCA currently has 43 active applications for grants to 
build new state cemeteries and expand existing ones.
    Since NCA concentrates its construction resources on large 
metropolitan areas, it is unlikely that new national cemeteries will be 
constructed in all states. Therefore, individual states are encouraged 
to pursue applications for the State Cemetery Grants Program. Fiscal 
commitment from the state is essential to keep the operation of the 
cemetery on track. NCA estimates it takes about $300,000 a year to 
operate a state cemetery. The American Legion recommends $47 million 
for the State Cemetery Grants Program in fiscal year 2007.
    The American Legion believes the recommended funding level should 
meet the requirements of the approved applications for cemetery 
construction. It is inevitable that more states will be considering the 
State Cemetery Grant Program and funding needs to be available to meet 
this increasing demand.
    Your continued leadership on behalf of America's military personnel 
and veterans is greatly appreciated.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Akaka to 
Steve Robinson, Director, National Legislative Commission, The American 
                                 Legion

    Question 1. I would like to know your opinion on VA's proposed $250 
user fee and increase in the prescription drug copayment for Priority 7 
and 8 veterans, a plan the Administration has tried to implement for 
the past few years. In the American Legion's testimony in particular, I 
believe you described this as an attempt ``to balance the VA budget on 
the backs of America's veterans.'' What would the real impact be if 
Congress enacted these proposals?
    Answer. The American Legion adamantly opposes both of these 
legislative initiatives for one major reason--upon enrollment, these 
veterans agreed to make copayments and allow third-party reimbursements 
from their health insurance providers. The proposed ``annual enrollment 
fee'' is really a ``user fee'' to generate additional revenue from an 
earned benefit from a grateful Nation. This ``user fee'' provides 
absolutely no ``value'' since it does not guarantee the veteran timely 
access to care (not even VA own access standards are guaranteed).
    This is also an issue of fairness:
     Why should a Medicare-eligible veteran (paying Part A and 
Part B premiums) be required to make an additional payment to the 
Federal Government, when VA is prohibited from collecting any third-
party reimbursements for allowable treatment of nonservice-connected 
medical conditions?
     Why should an insured veteran be required to make an 
additional payment to the Federal Government, when VA is receiving 
third-party reimbursements from his or her private health insurance 
company?
     Why should a Native American veteran be required to make 
an additional payment to the Federal Government, when Indian Health 
Service does not?
     Why should a military retiree be required to make an 
additional payment to the Federal Government, when enrolled in TRICARE 
or TRICARE for Life?
    The prescription copayment is another ``revenue enhancer'' in that 
there is absolutely no bearing between the amount of the copayment and 
VA's cost for the medication. VA enjoys deep discounts on the purchase 
of medications, yet the proposed increase in copayment has absolutely 
not correlation to the medications received by the Priority Group 7 or 
8 veteran--in fact, their copayment could very well exceed the actual 
cost of the medication to VA.
    The real impact of these initiatives would be placing fiscal 
barriers before Priority Group 7 and 8 veterans forcing financial-based 
decisions rather than health-based decisions--the sicker the veteran, 
the more costly the medication. For many veterans on fixed incomes, 
these initiatives would create avoidable hardships.
    Question 2. The President is clear on who should be eligible for VA 
health care: those with service-connected health needs. I would like to 
ask you all a three-point question related to this topic. Do you think 
the system as we know it today, can survive if eligibility is severely 
narrowed? Can we continue to train nearly half of all physicians in the 
U.S.; maintain specialty programs unparalleled in the community; and 
teach the rest of the health care system about quality management if 
eligibility is limited to service-connected health care needs? And 
last, don't we want veterans who have other forms of insurance to come 
into the system to help finance it?
    Answer. The system as we know it today would indeed suffers 
drastically if eligibility is severely narrowed. Attempting to solve 
VA's crisis of under-funding by denying veterans access to the VA 
health care system is not the answer. The Administration and Congress 
must provide VA with a budget that will allow all eligible veterans 
access to the system and not attempt to narrow eligibility to meet an 
inadequate budget.
    Narrowing eligibility to the VA healthcare system will also 
drastically limit the partnerships and affiliations that VA enjoys with 
medical schools nationwide. VA has served as a training ground for 
nearly half of all U.S. physicians for years and as a result of that 
partnership, VA has lead the way in developing major medical advances 
that have benefited every American, not just the veteran patients at 
VAs. VA would suffer dramatically if eligibility continues to be 
narrowed.
    Prior to ``eligibility reform'' in 1996, VA was a hospital-based 
system treating primarily only service-connected disabled and 
economically indigent veterans. The greatest complaints The American 
Legion received was concerning the quality of care, followed closely by 
the draconian rules and regulations concerning who was entitled to what 
degree of care in which setting. Once ``eligibility reform'' was 
enacted, VA transformed into the ``best health care delivery system in 
the entire industry.''
    Veterans began seeing the quality care being provided in the most 
appropriate setting. Prior to 1996, only 2.5 million entitled veterans 
could use the VA health care system. Today, nearly 8 million veterans 
are enrolled (and over 250,000 more denied enrollment), of which 5.5 
million were actual patients. The cost of care per veteran is ``rock-
bottom'' compared to any other health care delivery system. If VA 
reverted back to the pre-1996 numbers, most of the medical centers and 
outpatient clinics would be underutilized and not cost-effective. 
Veterans would, once again, be the victim of budgetary constraints 
rather than health care needs.
    ``Eligibility reform'' significantly changed the patient 
population. Clearly, this is advantageous to training of health care 
professionals and medical research. The more diverse the patient 
population, the greater the educational and research opportunities 
available for health care professionals to address. The entire health 
care community is clearly gainfully employed; in fact, the demand 
resulted in the prohibition (in January 2003) against enrollment of any 
new Priority Group 8 veterans (except the new OEF/OIF veterans 
reassigned after 2-years of ``free'' health care). Without question, 
since ``eligibility reform'' VA has become the ``role model'' for the 
rest of the health care industry (public and private) to emulate.
    The ``failure'' of ``eligibility reform'' is the prohibition on VA 
from receiving third-party reimbursements from the treatment of 
allowable, nonservice-connected medical conditions from enrolled 
Medicare-eligible veterans. In fact, VA isn't even credited with the 
billions of dollars in annual savings in mandatory funds due to this 
restriction. Over half of VA patient population is Medicare-
eligibility. Second, OMB and CBO score third-party reimbursement as an 
offset rather than a supplement. Repeatedly, the MCCF projection has 
exceeded VA ability to collect--the end result is a real budgetary 
shortfall within the system.
    Prohibition of enrollment of Priority Group 8 veterans simply 
because they have the ``fiscal means'' to make copayments and ``other 
health care options'' (third-party insurance coverage) is somewhat 
confusing. Why ``lock the doors'' to paying customers? The prohibition 
is based on ``individual worth'' rather than the honorable military 
service that made them eligible in the first place.
    Ironically, the current Priority Group System has service-connected 
disabled veterans in Priority Groups 6-8 and nonservice-connected 
disabled veterans in Priority Groups 4 and 5. Seems that all service-
connected disabled veterans would be included Priority Groups 1-3 at a 
minimum.
    Question 3. This year's Medical and Prosthetics Research Budget 
request actually amounts to a cut of about $13 million in appropriated 
dollars--which in turns translates to the loss of 286 employees and 96 
projects. By VA's own account, this will result in the reduction of 
projects in areas such as aging, cancer, heart-disease research, and 
traumatic injury. This is yet another year of proposed cuts to VA's 
Research Program by the President. What are your thoughts on the 
Administration's vision for the future of VA research? What impact do 
these continuing assaults on the program have on physician satisfaction 
and recruitment?
    Answer. As a Nation at war, especially with returning severely 
wounded veterans in unprecedented numbers, this decision seems 
illogical. Clearly, this Nation owes these solider-citizens the very 
best medical and prosthetics care. For decades, VA's medical and 
prosthetics research is well documented as world-class. VA research has 
benefited not only the veterans' community, but many of its 
groundbreaking achievements have benefited the nonveterans' community 
as well.
    Job security is a major factor in attracting and retaining the best 
of the best researchers. A questionable annual funding level is the 
quickest vehicle for losing dedicated and capable health care 
professions that strive for meaningful gains through medical and 
prosthetics research. VA provides a fertile and rewarding research 
environment. Save a nickel and lose a fortune is never good business 
practice.
    Question 4. As you may know, VA assisted me in attending college 
after I left military service. I am thankful for my education and the 
opportunities in life that have been afforded me because of that 
education. I am concerned that some in military service may not receive 
benefits that mirror their service comment. Can you please explain that 
main nuances of the Total Force MGIB restructuring?
    Answer. This bill would provide MGIB reimbursement rate levels 
based on an individual's service in the Armed Forces, including the 
National Guard and Reserve.
    1. The first tier--similar to the current Montgomery GI Bill--
Active Duty (MGIB-AD) 3-year rate--would be provided to all who enlist 
for active duty. Service entrants would receive 36 months of benefits 
at the AD rate.
    2. The second tier or level would be for all who enlist or re-
enlist in the Selected Reserves for 6 years, and this would entitle 
them to 36 months of benefits at a pro-rata amount of the active duty 
rate (the suggested rate is 35 percent of the MGIB-AD rate).
    3. The third tier would be for members of the Selected Reserves or 
Inactive Ready Reserves who are activated for at least 90 days. They 
would receive 1 month of benefit for each month of activation, up to a 
total of 36 months, at the active duty rate. The intent is to provide 
the same level of benefit as the active duty rate for the same level of 
service.
    3a. These months of full benefits would replace, month for month, 
any Selected Reserves entitlements at the second tier.
    3b. The maximum benefit a member of the Selected Reserves could 
receive under this program would be the equivalent of 36 months at the 
active duty rate.
    An individual would have up to 10 years to use the active duty or 
activated-service benefit from their last date of active/activated duty 
or reserve service, whichever is later. A Selected Reservist could use 
remaining second tier MGIB benefits as long as he/she were 
satisfactorily participating in the Selected Reserves, and for up to 10 
years following separation from the reserves, in the case of separation 
for disability or qualification for a reserve retirement at age 60.
    Question 5. The Independent Budget suggests that the VA Schedule 
for Ratings Disabilities does not provide a compensable evaluation for 
hearing loss. The Independent Budget asserts that a general principle 
of disability compensation is that ratings are not offset by artificial 
restoration because of use of prosthetics. Can you point to other areas 
in the VA Rating Schedule where ratings are not offset by this 
artificial restoration?
    Answer. Because The American Legion is not a partner in the 
Independent Budget we choose not to respond to this IB specific issue.
    Question 6. The Independent Budget calls for VA to establish 
recruiting programs that will enable VHA to remain competitive for 
hiring nurses by using private-sector marketing strategies. Can you 
give some examples of what they could do to become more competitive?
    Answer. During the CARES process, The American Legion made a 
recommendation that VA give serious consideration toward creating its 
own nursing school program on VAMC campuses where excess space could be 
better utilized as classrooms and dormitory facilities. This would 
expand VA educational role in a potentially critical-shortage of health 
care providers--nurses. Additionally, Magnet certification of a 
hospital has proven to be a powerful recruitment and retention tool for 
nurses.
    Question 7. Public Law 108-445, the Department of Veterans Affairs 
Personnel Enhancement Act of 2004, was intended to reform the pay and 
performance system used by VA for hiring and retaining its physicians 
and dentists. Can you give us a sense of how well you feel VA has 
implemented this legislation and if it can and will assist VA in 
attracting and retaining the best and brightest physicians?
    Answer. As stated previously, job security is a great motivator. 
Uncertain annual appropriations that result in ``management 
efficiencies'' that are budget-driven rather than health care delivery-
driven does not promote a healthy vocational environment that is 
rewarding and attractive to career-development. A personnel shortage 
that increases an already demanding workload does not enhance 
recruitment and retention. Failure to procure state-of-the-arts 
technology, failure to replace broken medical equipment, or medical 
supply shortages due simply to budgetary shortfalls create more reasons 
for leaving than staying.
    Once again, I apologize for the delay in responding to your 
questions. The American Legion deeply appreciates your continued 
support of and leadership for critical issues concerning America's 
veterans and their families.

    Chairman Craig. Steve, thank you very much.
    Quentin. We will proceed with you.

   STATEMENT OF QUENTIN KINDERMAN, DEPUTY DIRECTOR, NATIONAL 
         LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS

    Mr. Kinderman. Thank you, Mr. Chairman. Since I am part of 
the Independent Budget partnership, I think I will stay on 
script.
    Chairman Craig. Fine enough.
    Mr. Kinderman. I do associate myself with his remarks, and 
we have got a few other things to say on that subject. So I 
hope we will have an opportunity for a dialogue.
    On behalf of the 2.4 million men and women of the Veterans 
of Foreign Wars, I thank you for the opportunity to present our 
views today. We are part of the Independent Budget partnership 
with four veterans organizations represented here. My remarks 
will be limited to the VA's construction programs.
    The President has asked for a total of $704 million for 
construction. This is $209 million cut from the previous year's 
funding level, and is over $1.4 billion less than we, as part 
of the IB, have called for. Over the past several years, the 
construction budget has been overshadowed by the Capital Assets 
Realignment for Enhanced Services, CARES, process. CARES, which 
aims to reorganize the VA health care system to properly plan 
for the future and in turn realize improved health care 
services for veterans and greater efficiency, has been a long 
and difficult process. We will continue to support CARES as 
long as VA returns to its primary emphasis and intent, the 
``ES'' portion of CARES, namely enhanced services.
    We accept that the locations and missions of some VA 
facilities may need to change to improve veterans' access to 
CARES and to allow more resources to be devoted to medical 
care. In July of 2004, then Secretary Principi testified on the 
House side that CARES reflects a need for additional 
investments of about $1 billion a year for the next 5 years to 
modernize VA's medical care infrastructure and enhance 
veterans' access to medical care. Using that as a baseline and 
accounting for the 18 CARES-related projects still being 
assessed, the IB calls for $860 million to be allocated for 
CARES projects. We must, however, keep in mind that as projects 
advance and ground is broken, the funding levels will be 
increased dramatically.
    Over the last several years, the funding for major 
construction has ebbed. This moratorium was caused by the 
planning for the CARES process, which I think is 
understandable, but now is the time to move forward and advance 
this important plan. Delays cost money with the rate of 
construction inflation roughly 9 percent nationwide and 
regionally as high as 35 percent in some parts of the South. 
This inflation is driven by international concerns. The 
emerging world is running up the price of steel. Delays will 
only increase the amount of money Congress will need to provide 
to maintain this Nation's commitment to veterans' health care.
    Of particular importance is the funding for seismic 
corrections. Currently 890 of VA's 5,300 buildings have been 
deemed at significant seismic risk and 73 VA hospital buildings 
are at exceptionally high risk of catastrophic collapse or 
major damage in the event on an earthquake.
    As you prepare your views and estimates and the entire 
Congress begins the budget process, there are a few other 
issues we feel you should keep in mind. With the reticence over 
the last few years to provide construction funding, the amount 
appropriated for maintenance has lagged far behind what has 
been necessary. These small projects, such as replacing a roof 
or improving the fire alarm system, are necessary for safety of 
patients, but also to maintain the integrity of the building so 
that it is viable for its entire life span. Accordingly, VA 
should spend no less than $1.6 billion for nonrecurring 
maintenance in fiscal year 2007. Unfortunately, the 
Administration has only allocated $514 million for maintenance, 
which only makes the already backlogged maintenance list grow 
longer.
    The VA needs to cover deferred maintenance. In fact, during 
the VA's own assessment, which is conducted on 3-year cycles, 
the investment necessary to bring all facilities currently 
rated ``D'' or ``F'' on a scale from ``A'' to ``F'' up to an 
acceptable level is $4.9 billion. There should not be a choice 
between fixing a roof and medical supplies. Funding for 
maintenance is allocated to the VISN level using the VERA 
methodology. While this moves money to the growing demands for 
veterans health care, it tends to move the money away from the 
oldest capital structures which need the most maintenance. It 
also increases the tendency in some VISNS to use maintenance 
money to address shortfalls in medical care funding.
    Mr. Chairman, 2006 has presented major challenges for the 
VA, Congress, and veterans. The unprecedented requests for 
multiple emergency supplementals in 2005 to provide necessary 
funding for a VA that was rapidly running out of money is a 
step that none of us want to see again. That is why it is so 
vitally important that we get things right the first time this 
year. What we learned last year is that no matter how 
sophisticated a model one uses to forecast health care, it must 
account for real world situations and be adaptable to account 
for any emerging developments.
    Thank you for the opportunity to testify today.
    [The prepared statement of Mr. Kinderman follows:]

  Prepared Statement of Quentin Kinderman, Deputy Director, National 
             Legislative Service, Veterans of Foreign Wars

    On behalf of the 2.4 million men and women of the Veterans of 
Foreign Wars of the U.S. (VFW), this Nation's largest combat veterans 
organization, I would like to thank you for the opportunity to testify 
today on the fiscal year 2007 budget for the Department of Veterans 
Affairs (VA).
    Today, I am not just representing the VFW, but also the Independent 
Budget (IB). The IB is a partnership of four veterans' service 
organizations, AMVETS, Disabled American Veterans, Paralyzed Veterans 
of America, and the VFW. For today's hearing, the VFW's testimony will 
be limited to VA's construction programs.
    The VA construction budget includes major construction, minor 
construction, grants for construction of state extended-care 
facilities, and grants for state veterans' cemeteries. The President 
has asked for a total of $714 million for construction. This is a $209 
million cut from the previous year's funding level, and is over $1.4 
billion less than what we, as part of the IB, have called for.
    Over the last few years, the construction budget has been 
overshadowed by the Capital Assets Realignment for Enhanced Services 
(CARES) process. CARES, which aims to reorganize the VA health care 
system to properly plan for the future, and, in turn, realize improved 
health care service for veterans, has been a long and difficult 
process.
    We will continue to support CARES as long as VA returns to its 
primary emphasis and intent: the ``ES'' portion of CARES. We accept 
that locations and missions of some VA facilities may need to change to 
improve veterans' access, to allow more resources to be devoted to 
medical care rather than to the maintenance of old buildings, and to 
accommodate more modern methods of health-care delivery. Accordingly, 
we concur with VA's plans to proceed with the feasibility studies of 
the remaining 18 facilities contained in the Secretary's decision 
document. We note that those processes are moving forward on the local 
level with establishment of local advisory committees and public 
hearings, allowing the veterans, who are stakeholders in this complex 
process, to have a voice. We support this transparent approach to 
public policy, and intend to remain active in it.
    In July 2004, the previous VA Secretary testified before the 
Subcommittee on Health of the House Veterans' Affairs Committee. He 
stated that CARES ``reflects a need for additional investments of 
approximately $1 billion per year for the next 5 years to modernize 
VA's medical infrastructure and enhance veterans' access to care.''
    Using that as a baseline, and accounting for the 18 CARES-related 
projects being assessed, the IB calls for $860 million to be allocated 
for CARES projects. We must, however, keep in mind that as projects 
advance and as ground is broken, funding levels will need to be 
increased dramatically.
    Over the last few years, the funding for major construction has 
ebbed. This moratorium was caused by the planning of the CARES process. 
There was much political resistance to funding any projects before the 
planning process took place. Now that it has occurred, it is time to 
move forward, and advance this important plan.
    Delays cost money. With the rate of construction inflation roughly 
9 percent nationwide (and regionally as high as 35 percent in some 
parts of the South), pushing these projects further into the future 
will only increase the amount of money Congress will need to provide to 
maintain this Nation's commitment to veterans' health care.
    Under the major construction account, we are calling for a total 
investment of $1.447 billion, which includes the CARES funding outlined 
above:

      Construction, Major Appropriation: FY 2007 IB Recommendation
                         [Dollars in thousands]
------------------------------------------------------------------------

------------------------------------------------------------------------
CARES................................................           $860,000
Architectural Master Plans Program...................            100,000
Historic Preservation Grant Program..................             25,000
Seismic..............................................            285,000
Advanced Planning Fund (VHA).........................             43,000
Asbestos Abatement...................................              6,000
Claims Analyses......................................              3,000
Judgment Fund........................................             10,000
Hazardous Waste......................................              3,000
NCA..................................................             89,000
Design Fund..........................................              6,000
Advanced Planning Fund...............................             11,000
Staff Offices........................................              6,000
                                                      ------------------
  Total, Major Construction..........................         $1,447,000
------------------------------------------------------------------------

    The President's request comes far below that, providing just $399 
million for major construction.
    Of particular importance on that list is the funding for seismic 
corrections. Currently, 890 of VA's 5,300 buildings have been deemed at 
``significant'' seismic risk, and 73 VHA buildings are at 
``exceptionally high risk'' of catastrophic collapse or major damage. 
We understand that the list of major construction priorities that VA 
has provided to Congress includes the seven facilities most at risk of 
damage. Accordingly, this will increase VA's need for construction 
funding. This is a chance to be proactive and fix a problem before the 
health and safety of VA's patients and workers is further compromised.
    We also call for funding for an architectural master plan. Without 
this plan, the benefits of CARES will be jeopardized by hasty and 
shortsighted construction planning. Currently VA plans construction in 
a reactive manner--i.e., first funding the project then fitting it on 
the site. Furthermore, there is no planning process that addresses 
multiple projects; each project is planned individually. ``Big 
picture'' design is critical so that a succession of small projects 
don't ``paint'' the facility into the proverbial corner. If all 
projects are not simultaneously planned, for example, the first project 
may be built in the best site for the second project. The development 
of master plans will prevent shortsighted construction that restricts, 
rather than expands, future options. As the cost of construction rises 
with inflation, the importance of optimal planning becomes paramount.
    We believe that architectural master planning will also provide a 
mechanism to address the three critical programs that the CARES study 
omitted. Specifically, these are long-term care, severe mental illness, 
and domiciliary care. These programs should be addressed as quickly as 
possible.
    For Minor Construction, VFW and the IB are calling for $505 million 
in funding. The President has called for $198 million, which is about 
$1 million less than fiscal year 2006's level.

        Construction, Minor Appropriation: FY 2007 Recommendation
                         [Dollars in thousands]
------------------------------------------------------------------------

------------------------------------------------------------------------
CARES/Non-CARES............................................     $392,000
NCA........................................................       32,000
VBA........................................................       38,000
Staff......................................................        6,000
Advanced Planning Fund.....................................       35,000
Inspector General..........................................        2,000
                                                            ------------
    Total, Minor Construction..............................     $505,000
------------------------------------------------------------------------

    The funds for minor construction comprise construction projects 
costing less than $7 million. This appropriation includes funding for 
the National Cemetery Administration, the Veterans Benefits 
Administration, and the Inspector General.
    As you prepare your views and estimates, and as the entire Congress 
begins the budget process, there are a few other issues we feel you 
should keep in mind.
    With the reticence over the last few years to provide construction 
funding, the amount appropriated for maintenance has lagged far behind 
what has been needed. Price-Waterhouse, following standard industry 
practices, has recommended that VA spend at least 2-4 percent of the 
value of its building for nonrecurring maintenance. These small 
projects, such as replacing a roof or improving the fire alarm system, 
are necessary for the safety of patients, but also to maintain the 
integrity of the building so that it is viable for its entire lifespan. 
Accordingly, VA should spend no less than $1.6 billion for nonrecurring 
maintenance in fiscal year 2007. Unfortunately, the Administration has 
only allocated $514 million for maintenance, which will only make the 
already backlogged maintenance lists grow.
    Further, because maintenance comes out the medical care account, 
not the construction budget, much of the funding for the last few years 
has been used to provide medical care. VA needs to cover deferred 
maintenance. In fact, according to VA's own assessment, which is 
conducted on 3-year cycles, the investment necessary to bring all 
facilities currently rated ``D'' or ``F'' up to an acceptable level is 
$4.9 billion. There should not be a choice between fixing a roof and 
buying medical supplies. It is Congress' job to properly allocate 
funding for both.
    It is also important that VA recapitalize their infrastructure 
beyond nonrecurring maintenance. Properly reinvesting in facilities 
extends their useable life, and saves costs over the long run. Both 
Price-Waterhouse and the American Society of Hospital Engineers say 
that a 35 to 50-year recapitalization rate is required for VA 
facilities. Of note, most hospitals rely on a 25-year or less rate of 
recapitalization. VA traditionally has a historically low rate of 
recapitalization. From fiscal years 1996-2001, for example, it was just 
a paltry 0.64 percent of VA's total plant replacement value. To 
overcome this shortfall, a minimum of 5-8 percent investment of plant 
replacement value is necessary to maintain a healthy infrastructure. If 
not improved, veterans could be receiving care in potentially unsafe, 
dysfunctional settings. Congress must ensure that VA has adequate 
funding to ensure the life of its infrastructure.
    Before I conclude, there is one more important issue I would like 
to raise. Last year's disastrous storms in the Gulf Coast region 
resulted in the total destruction of the Gulfport VA Medical Center, 
near-destruction of the New Orleans VA Medical Center, and major damage 
to other VA facilities in the region. Understand that we have the 
deepest sympathies for the veterans and VA staff in the Gulf Coast 
region, but we urge Congress not to allow a diversion of funds VA needs 
to revamp infrastructure nationwide. The Gulf emergency must be managed 
with a special allocation outside VA's regular construction and medical 
care appropriations. It would be patently unfair to delay other 
projects for lack of funds necessitated by reallocation of available 
funds to the Gulf Coast region.
    Mr. Chairman, fiscal year 2006 has presented major challenges for 
VA, Congress, and veterans. The unprecedented request for multiple 
emergency supplementals in 2005 to provide necessary funding for a VA 
that was rapidly running out of money is a step that none of us want to 
see again. That is why it is so vitally important that we get things 
right the first time this year. What we learned last year is that no 
matter how sophisticated a model one uses to forecast health care, it 
must account for real word situations and be adaptable to account for 
any emerging developments.
    We thank you for allowing us to testify today, and we would be 
happy to answer any questions that you or the Committee may have.

    Chairman Craig. Quentin, thank you very much.
    Now let's turn to Brian Lawrence. Welcome.

  STATEMENT OF BRIAN LAWRENCE, ASSISTANT NATIONAL LEGISLATIVE 
              DIRECTOR, DISABLED AMERICAN VETERANS

    Mr. Lawrence. Good afternoon, Mr. Chairman. I am pleased to 
appear before you on behalf of the 1.2 million members of the 
Disabled American Veterans, and I will be presenting the IB 
recommendations regarding the Veterans Benefit Administration.
    We view adequate staffing levels for the VBA business lines 
is one of the most important issues for consideration in this 
component of the VA budget. So I will first address recommended 
numbers of full-time employees, or FTEs, and, time permitting, 
I will include some IB recommendations regarding programs.
    The level of funding sought in the President's 2007 budget 
would increase VA operating expense by nearly $114 million. 
That is a 10.8 percent increase over last year's level, and we 
are greatly encouraged that the Administration has proposed a 
substantial increase in resources. The need for such an 
increase has become critical, and we deeply appreciate the 
President's bearing on this issue.
    With the proposed budget, VBA staffing would be increased 
in 2007 by 173 FTEs. C and P service would be authorized at 
approximately 9,500 which is a total increase of 14; however, 
the number of FTE under the subcategory direct compensation 
would be reduced by 149. The net gain of FTE would be as a 
result of increases in other VBA activities. This 
recommendation is somewhat perplexing since one of the 
Administration's stated goals is to decrease the number of 
backlogged compensation claims.
    Additionally, ongoing hostilities in Iraq and Afghanistan 
and an aging veteran population will almost certainly increase 
the number of claims for compensation. In the 5-year period 
from the end of fiscal year 2000 to the end of fiscal year 
2005, the volume of disability claims increased 36 percent or 
on average 7.2 percent annually. VA projects that the number of 
claims will increase only 3 percent during 2006 and 2 percent 
in 2007, but even with those modest projections for increased 
work, the number of direct program FTEs should be increased, 
especially since VA estimates that above of the projected 
increases in regular claims work, it will receive an additional 
98,000 claims from its outreach to veterans in the six States 
with the lowest average compensation payments.
    It appears VA contemplates an exceptional increase in the 
claims backlog during these 2 years despite the fact that it 
projects an increase in production. In the IB, we have 
recommended a substantially higher staffing level that we 
believe reflects a more realistic assessment of what VA needs 
to deliver in benefits in a timely manner. The IB recommends 
that the fiscal year 2006 staffing of 9,431 FTE for C and P be 
increased to 10,820, and I would invite your attention to the 
IB and my written statement for the bases of that 
recommendation.
    Similarly, we have recommended staffing levels for the 
educational program and vocational rehabilitation and 
employment programs that we think are necessary to get the job 
done in an acceptable manner. Though the Administration's 
budget seeks an increase for these programs, the IB 
recommendations are slightly higher. In addition to ensuring 
that VBA has resources necessary to accomplish its mission, 
Congress must also make adjustments to the program from time to 
time to address increases in the cost of living and needs for 
other improvements. The IB makes a number of such 
recommendations, and we invite your attention to that section 
of the IB.
    Before closing, I would also like to add that the DAV 
encourages the Committee to conduct hearings in the upcoming 
year to consider alternative methods for VA health care system.
    Thank you, Mr. Chairman. That completes my statement. I 
will be happy to answer any questions.
    [The prepared statement of Mr. Lawrence follows:]

 Prepared Statement of Brian Lawrence, Assistant National Legislative 
                  Director, Disabled American Veterans

    Mr. Chairman and Members of the Committee:
    I am pleased to appear before you on behalf of the Disabled 
American Veterans (DAV), which is one of the four member organizations 
of the Independent Budget (IB). We are grateful for the opportunity 
comment on, and compare, the President's proposed fiscal year (FY) 2007 
budget for veterans' programs with the recommendations of the 2007 IB. 
As you know, the IB is a budget and policy document that sets forth the 
collective views of the DAV, AMVETS, the Paralyzed Veterans of America 
(PVA), and the Veterans of Foreign Wars of the United States (VFW). 
Each organization has a principal responsibility for a major component 
of the budget. My testimony focuses on Department of Veterans (VA) 
benefit programs, which are administered by the Veterans Benefits 
Administration (VBA). VBA is further divided into the following 
services: Compensation and Pension (C&P), Vocational Rehabilitation and 
Employment (VR&E), Education, Loan Guaranty, and Insurance. VBA and its 
constituent departments are funded under the General Operating Expenses 
(GOE).
    The level of funding sought in the President's 2007 budget would 
increase VBA operating expenses by nearly $114 million, a 10.8 percent 
increase over last year's level. We are greatly encouraged that the 
Administration has proposed a substantial increase in resources for 
VBA. The need for such an increase has become critical, and we deeply 
appreciate the President's bearing on this issue.
    We view adequate staffing levels for the VBA business lines as the 
most important issue for consideration in this component of the VA 
budget. While the Administration's move is in the right direction, we 
believe sufficient staffing levels for VBA are more closely reflected 
by the following IB recommendations regarding VBA services.

                              C&P SERVICE

    With the Administration's proposed budget, VBA staffing would be 
increased in fiscal year 2007 by 173 full-time employees (FTE). C&P 
Service would be authorized 9,445 FTE, which is a total increase of 14; 
however, the number of FTE under the subcategory, Direct Compensation, 
would be reduced by 149. The net gain of FTE would be as a result of 
increases in other VBA activities.
    This recommendation is somewhat perplexing since one of the 
Administration's stated goals is to decrease the number of backlogged 
compensation claims. Additionally, ongoing hostilities in Iraq and 
Afghanistan and an aging veteran population will almost certainly 
increase the number of claims for compensation. In the 5-year period 
from the end of fiscal year 2000 to the end of fiscal year 2005, the 
volume of disability claims increased 36 percent, or an average of 7.2 
percent annually. However VA projects that the number of disability 
claims will increase by only 3 percent during 2006 and 2 percent in 
2007. Even with such modest projections for increased work, the 
Administration's budget request for fewer direct program FTE will 
result in a greater amount of pending claims. What makes this proposed 
reduction in staffing all the more questionable is VA's estimate that, 
above these projected increases in regular claims work, it will receive 
an additional 98,000 claims from its outreach to veterans in the six 
states with the lowest average compensation payments, as mandated by 
last year's legislation. VA admittedly anticipates increases in the 
already unacceptable claims backlogs in these 2 years, despite the fact 
that VA projects it will increase its 2005 production by 75,102 
completed claims in 2006 and 85,740 completed claims in 2007. The 
backlog of pending rating cases would grow from 346,292 at the end of 
fiscal year 2005 to 417,852 cases at the end of fiscal year 2006, and 
396,834 in fiscal year 2007.
    The IB recommends 10,820 FTE for C&P Services. In its budget 
submission for fiscal year 2006, VA projected production based on an 
output of 109 claims per direct program FTE. The IB organizations have 
long argued that VA's production requirements do not allow for thorough 
development and careful consideration of disability claims, resulting 
in compromised quality, higher error and appeal rates, and even more 
overload on the system. In addition to recommending staffing levels 
more commensurate with the workload, we have maintained that VA should 
invest more in training adjudicators and that it should hold them 
accountable for higher standards of accuracy. In response to survey 
questions from VA's Office of Inspector General, nearly half of the 
adjudicators responding admitted that many claims are decided without 
adequate record development. They saw an incongruity between their 
objectives of making legally correct and factually substantiated 
decisions and management objectives of maximizing decision output to 
meet production standards and reduce backlogs. Nearly half reported 
that it is generally or very difficult to meet production standards 
without sacrificing quality. Fifty-seven percent reported difficulty 
meeting production standards if they make sure they have sufficient 
evidence for rating each case and thoroughly review the evidence. Most 
attributed VA's inability to make timely and high quality decisions to 
insufficient staff. They indicated that adjudicator training had not 
been a high priority in VA.
    To allow for more time to be invested in training, we believe it 
prudent to recommend staffing levels based on an output of 100 cases 
per year for each direct program FTE. Based on an estimated 930,000 
claims in fiscal year 2007, 9,300 direct program FTE would be required 
to handle the caseload efficiently. With the fiscal year 2006 level of 
1,520 support FTE added, this would require C&P to be authorized 10,820 
total FTE for fiscal year 2007.
    For Education Service, the President's budget seeks funding for 34 
additional direct program FTE and 10 additional support FTE. This 
recommendation would bring the total number of FTE to 930. While we 
appreciate the additional support, we believe the President's 
recommended staffing level for Education Service falls short of what is 
needed. As it has with its other benefit programs, VA has been striving 
to provide more timely and efficient service to its claimants for 
education benefits. Though the workload (number of applications and 
recurring certifications, etc.) increased by 11 percent during fiscal 
year 2004 and fiscal year 2005, direct program FTE were reduced from 
708 at the end of fiscal year 2003 to 675 at the end of fiscal year 
2005. Based on experience during fiscal year 2004 and fiscal year 2005, 
it is very conservatively estimated that the workload will increase by 
5.5 percent in fiscal year 2007. VA must increase staffing to meet the 
existing and added workload, or service to veterans seeking educational 
benefits will decline. Based on the number of direct program FTE at the 
end of fiscal year 2003 in relation to the workload at that time, VBA 
must increase direct program staffing in its Education Service by 149 
for direct-program FTE. In total, the IB recommends that Education 
Service should be provided 1,033 FTE for fiscal year 2007.
    For VR&E Service, the President's budget seeks funding for 1,255 
FTE. The IB recommends 1,375 FTE for this business line. VR&E's 
workload is expected to continue to increase primarily as a consequence 
of the war in Iraq and ongoing hostilities in Afghanistan. Also, given 
its increased reliance on contract services, VR&E needs approximately 
50 additional FTE dedicated to management and oversight of contract 
counselors and rehabilitation and employment service providers. As a 
part of its strategy to enhance accountability and efficiency, the VA 
Vocational Rehabilitation and Employment Task Force recommended in its 
March 2004 report the creation of new staff positions and training for 
this purpose. Other new initiatives recommended by the Task Force also 
require an investment of personnel resources. To meet its increasing 
workload and implement reforms to improve the effectiveness and 
efficiency of its programs, it is projected that VR&E will need a 
minimum of 1,375 direct program FTE in fiscal year 2007.

                  OTHER SUGGESTED BENEFIT IMPROVEMENTS

    The benefit programs are effective for their intended purposes only 
to the extent VBA can deliver benefits to entitled veterans and 
dependents in a timely fashion. However, in addition to ensuring that 
VBA has the resources necessary to accomplish its mission in that 
manner, Congress must also make adjustments to the programs from time 
to time to address increases in the cost of living and needed 
improvements. The IB makes a number of recommendations to adjust rates 
and improve the benefit programs administered by VBA. Some of those 
recommendations are:
     cost-of-living-adjustments for compensation, specially 
adapted housing grants, and automobile grants, with provisions for 
automatic annual increases in the housing and automobile grants based 
on increases in the cost of living
     a presumption of service connection for hearing loss and 
tinnitus for combat veterans and veterans who had military duties 
involving high levels of noise exposure who suffer from tinnitus or 
hearing loss of a type typically related to noise exposure or acoustic 
trauma
     removal of the provision that makes persons who first 
entered service before June 30, 1985, ineligible for the Montgomery GI 
Bill, along with other improvements to the program
     no increase in, and eventual repeal of, funding fees for 
VA home loan guaranty
     increase in the maximum coverage and adjustment of the 
premium rates for Service-Disabled Veterans' Life Insurance
     increase in the maximum coverage available on policies of 
Veterans' Mortgage Life Insurance
     legislation to restore protections for veterans' benefits 
against awards to third parties in divorce actions.
    We invite the Committee's attention to the section of the IB 
addressing the Benefit Programs for details on these and other IB 
recommendations for improvement.
    Another important component of our system of veterans' benefits is 
the right to appeal VA's benefits decisions to an independent court. 
The IB includes recommendations to improve the processes of judicial 
review in veterans' benefits matters. Again, we invite the Committee's 
attention to the IB for the details of these recommendations. In 
addition, the IB recommends that Congress enact legislation to 
authorize and fund construction of a courthouse and justice center for 
the United States Court of Appeals for Veterans Claims.

                                CLOSING

    In preparing the IB, the four partners draw upon their extensive 
experience with the workings of veterans' programs, their firsthand 
knowledge of the needs of America's veterans, and the information 
gained from their continual monitoring of workloads and demands upon, 
as well as the performance of, the veterans' benefits system. 
Historically, this Committee has acted favorably on many of our 
recommendations to improve services to veterans and their families, and 
we hope you will give our recommendations full and serious 
consideration again this year.

    Chairman Craig. Brian, thank you very much.
    Carl, please proceed.

STATEMENT OF CARL BLAKE, SENIOR ASSOCIATE LEGISLATIVE DIRECTOR, 
                 PARALYZED VETERANS OF AMERICA

    Mr. Blake. Thank you, Mr. Chairman.
    PVA is pleased to present our views today on behalf of the 
Independent Budget regarding the fiscal year 2007 VA health 
care budget request. We are proud that this will mark the 
twentieth year that PVA along with AMVETS, the Disabled 
American Veterans, and the Veterans of Foreign Wars have 
presented the IB, a comprehensive budget and policy document 
that reflects the true funding needs of the VA.
    Mr. Chairman, we would like to thank you for taking time 
out of your busy schedule a couple of weeks ago to come 
acknowledge this anniversary with us.
    Chairman Craig. Absolutely.
    Mr. Blake. The Independent Budget uses commonly accepted 
estimates of inflation, health care costs, and health care 
demand to develop our funding recommendations. This year, the 
document is endorsed by over 60 veteran service organizations 
and medical and health care advocacy groups. For the first 
time, a reasonable starting point has been established by the 
President to fund the VA health care system. For fiscal year 
2007, the Administration has requested $31.5 billion for total 
veterans health care. Although this is a significant step 
forward, we still have some concerns about proposals, as has 
been discussed today.
    The IB for fiscal year 2007 recommends approximately $32.4 
billion for total medical care, an increase of 3.7 billion over 
the fiscal year 2006 appropriation and about $900 million over 
the Administration's request. We believe that the 
recommendations of the IB have been validated once again this 
year as the Administration indicated that it will actually take 
about $25.5 billion to fund medical services, an amount that 
was very close to what we recommended; however, they only 
request 24.7 billion in appropriated dollars. The 
Administration hopes to add an additional $800 million by 
instituting a new enrollment fee and an increase in the 
prescription drug copayments.
    We are deeply concerned that, once again, the President's 
recommendation proposes a $250 new enrollment fee for Priority 
7 and 8 veterans and an increase in prescription drug 
copayments from 8 to 15 dollars. These proposals will put 
serious financial strain on many veterans, including certain 
PVA members with non-service-connected spinal cord injuries. 
These veterans, because of their catastrophic disabilities, are 
enrolled in priority category four as veterans; however, due to 
a glitch in the drafting of eligibility reform legislation in 
1996, because of their income, they are still required to pay 
all fees and copays as though they are Priority 7 and eight 
veterans. We urge the Committee to look at this and to take 
corrective action.
    The VA estimates that these proposals will force nearly 
200,000 veterans out of the system and more than 1 million to 
choose not to enroll. Congress has soundly rejected these 
proposals for the past few years, and we would urge you to do 
so once again.
    Our health care recommendation does not include additional 
money to provide for the health care needs of category eight 
veterans; however, it is included in our bottom line for total 
discretionary funds needed by the VA to provide health care to 
these veterans. Despite our clear desire to have the VA health 
care system open to these veterans, Congress and the 
Administration has shown little desire to overturn this policy 
decision. The VA estimates that a total of over 1 million 
category eight veterans will have been denied enrollment into 
the VA health care system by fiscal year 2007. We believe that 
it would take approximately $684 million to meet the health 
care needs of these veterans if the system were reopened.
    For medical and prosthetic research, the Administration has 
recommended $399 million, a cut of approximately $13 million 
below the fiscal year 2006 appropriation. The Independent 
Budget recommends $460 million. Research is a vital part of 
veterans health care and a central mission for our national 
health care system. Despite a reasonable request this year, the 
budget and appropriations process over the last number of years 
demonstrates conclusively how the VA labors under the 
uncertainty of how much money it is going to get and when it is 
going to get that money. In order to address this problem, the 
IB has proposed, once again, that funding for veterans health 
care be removed from the discretionary budget process and be 
made mandatory.
    In closing, Mr. Chairman, I would just like to address one 
point made by Senator Graham regarding retiree health care 
versus veterans health care. I think it is important that we 
understand that retirees are not part of a health care system. 
They have access to a health insurance plan known as TRICARE. 
It is an entitlement for both them and their families. Veterans 
have access to the VA health care system which is, in fact, a 
direct provider of care. Because it is subjected to the 
discretionary process of the budget, these veterans could be 
cut out of the VA health care system at any time. This is not, 
in fact, true of TRICARE enrollees. They will be able to get 
their care regardless of what the funding situation may be.
    Mr. Chairman, I would like to thank you again for the 
opportunity to testify, and I would be happy to answer any 
questions that you might have.
    [The prepared statement of Mr. Blake follows:]

    Prepared Statement of Carl Blake, Senior Associate Legislative 
                Director, Paralyzed Veterans of America

    Chairman Craig, Ranking Member Akaka, and Members of the Committee, 
Paralyzed Veterans of America (PVA) is pleased to present the views of 
the Independent Budget regarding the funding requirements for the 
Department of Veterans Affairs (VA) health care system for fiscal year 
2007.
    We are proud that this will mark the 20th year that PVA, along with 
AMVETS, Disabled American Veterans and Veterans of Foreign Wars, have 
presented the Independent Budget, a comprehensive budget and policy 
document that represents the true funding needs of the Department of 
Veterans Affairs (VA). The Independent Budget uses commonly accepted 
estimates of inflation, health care costs and health care demand to 
reach its recommended levels. This year, the document is endorsed by 60 
veterans' service organizations, and medical and health care advocacy 
groups.
    Last year proved to be perhaps the most unique year ever in the 
debate over the VA budget. The VA was forced to admit that it did not 
have the resources necessary to meet the demands being placed on its 
health care system. Congress was forced to react quickly and decisively 
to address this situation. These events served to validate the 
recommendations made every year, by the Independent Budget.
    For the first time, a reasonable starting point was offered by the 
President to fund the VA health care system. For fiscal year 2007, the 
Administration has requested $31.5 billion for veterans' health care, a 
$2.8 billion increase over the fiscal year 2006 appropriation. Although 
this is a significant step forward, we still have some concerns about 
proposals contained within the request.
    The Independent Budget for fiscal year 2007 recommends 
approximately $32.4 billion for veterans' health care, an increase of 
$3.7 billion over the fiscal year 2006 appropriation and about $900 
million over the Administration's request. The medical care 
recommendation is comprised of three accounts--Medical Services, 
Medical Administration, and Medical Facilities--with the bulk of the 
funding going to Medical Services.
    For fiscal year 2007, the Independent Budget recommends 
approximately $26 billion for Medical Services, an increase of $3.5 
billion over the fiscal year 2006 appropriation and nearly $1.3 billion 
more than the request of the Administration. Our Medical Services 
recommendation includes the following recommendations:


Current Services Estimate..........................      $23,350,760,000
Increase in Patient Workload.......................        1,470,817,000
Increase in FTE....................................          118,886,000
Policy Initiatives.................................        1,050,000,000
                                                    --------------------
  Total fiscal year 2007 Medical Services..........       25,990,463,000


    In order to develop our current services estimate, we used the 
Obligations by Object in the President's Budget to set the framework 
for our recommendation. We believe this method allows us to apply more 
accurate inflation rates to specific accounts within the overall 
account. Our inflation rates are based on 5-year averages of different 
inflation categories from the Consumer Price Index-All Urban Consumers 
(CPI-U) published by the Bureau of Labor Statistics every month.
    Our increase in patient workload is based on a 6.3 percent increase 
in workload. The policy initiatives include $500 million for 
improvement of mental health and long term care services, $250 million 
for funding the fourth mission, and $300 million to support centralized 
prosthetics funding. In previous testimony, the VA testified that it is 
already spending more than $250 million per year on homeland security, 
emergency preparedness, and fourth mission requirements.
    For Medical Administration, the IB recommends approximately $2.9 
billion. The Administration requested approximately $3.2 billion for 
this account. The difference in our recommendations centers around the 
fact that we assumed that for fiscal year 2006, the entire $1.2 billion 
for Information Technology was removed from the Medical Administration 
account as set for in the fiscal year 2006 appropriations bill. 
However, the Administration assumed only a portion of this amount being 
removed from this account, thereby giving them a higher figure to start 
with. Finally, for Medical Facilities the IB recommends approximately 
$3.5 billion, approximately $100 million less than what the 
Administration recommends.
    We believe that the recommendations of the Independent Budget have 
been validated once again this year as the Administration indicated 
that it will actually take $25.5 billion to fund Medical Services, an 
amount very close to what we recommend. However, they only request 
$24.7 billion in appropriated dollars. The Administration hopes to 
raise an additional $800 million by instituting a new enrollment fee 
and an increase in prescription drug copayments to achieve the 
necessary funding level.
    We are deeply concerned that once again the President's 
recommendation proposes the $250 enrollment fee for Priority 7 and 8 
veterans and an increase in prescription drug copayments from $8 to 
$15. These proposals will put a serious financial strain on many 
veterans, including certain PVA members with non-service connected 
spinal cord injuries. These veterans, because of their catastrophic 
disabilities, are enrolled in VA health care as Priority 4 veterans. 
However, due to a glitch in the drafting of eligibility reform 
legislation in 1996, because of their income, they are still required 
to pay all copayments and fees as though they are Priority 7 or 8 
veterans. We urge the Committee to correct this unfair situation.
    The VA estimates that these proposals will force nearly 200,000 
veterans to leave the system and more than 1,000,000 veterans will 
choose not to enroll. Congress has soundly rejected these proposals for 
the past 3 years and we urge you to do so once again.
    Our health care recommendation does not include additional money to 
provide for the health care needs of Category 8 veterans being denied 
enrollment into the system. However, it is included in our bottom line 
for total discretionary dollars needed by the VA to provide health care 
to all eligible veterans. Despite our clear desire to have the VA 
health care system open to these veterans, Congress and the 
Administration have shown little desire to overturn this policy 
decision. The VA estimates that a total of over 1,000,000 Category 8 
veterans will have been denied enrollment into the VA health care 
system by fiscal year 2007. Assuming a utilization rate of 20 percent, 
we believe that it would take approximately $684 million to meet the 
health care needs of these veterans, if the system were reopened. We 
believe that the system should be reopened to these veterans and this 
money appropriated on top of our medical care recommendation for this 
purpose.
    For Medical and Prosthetic Research, the Administration has 
recommended $399 million, a cut of approximately $13 million below the 
fiscal year 2006 appropriation. The Independent Budget recommends $460 
million. Research is a vital part of veterans' health care, and an 
essential mission for our national health care system. VA research has 
been grossly underfunded in comparison to the growth rate of other 
Federal research initiatives. We call on Congress to finally correct 
this oversight.
    In order to address the problem of adequate resources provided in a 
timely manner, the Independent Budget has proposed that funding for 
veterans' health care be removed from the discretionary budget process 
and made mandatory. The budget and appropriations process over the last 
number of years demonstrates conclusively how the VA labors under the 
uncertainty of not only how much money it is going to get, but, equally 
important, when it is going to get it. No Secretary of Veterans 
Affairs, no VA hospital director, and no doctor running an outpatient 
clinic knows how to plan and even provide care on a daily basis without 
the knowledge that the dollars needed to operate those programs are 
going to be available when they need them.
    Making veterans health care funding mandatory would not create a 
new entitlement, rather, it would change the manner of health care 
funding, removing the VA from the vagaries of the appropriations 
process. Until this proposal becomes law, however, Congress and the 
Administration must ensure that VA is fully funded through the current 
process. We look forward to working with this Committee in order to 
begin the process of moving a bill through the House, and the Senate, 
as soon as possible.
    Health care delayed is health care denied. If the health care 
system cannot get the funds it needs when it needs those funds the 
resulting situation only fuels efforts to deny more veterans health 
care and charge veterans even more for the health care they receive. It 
is easy to forget, that the people who are ultimately affected by 
wrangling over the budget are the men and women who have served and 
sacrificed so much for this Nation. We hope that you will consider 
these men and women when you develop your budget views and estimates, 
and we ask that you join us in adopting the recommendations of the 
Independent Budget.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

    Chairman Craig. Carl, thank you much.
    David, we will turn to you.

 STATEMENT OF DAVID G. GREINEDER, DEPUTY NATIONAL LEGISLATIVE 
                        DIRECTOR, AMVETS

    Mr. Greineder. Thank you, Mr. Chairman. As a co-author of 
The Independent Budget, AMVETS is pleased to give you our best 
estimates on the resources necessary to carry out our 
responsible NCA budget for fiscal year 2007. The Administration 
requests $160.7 million in discretionary funding for NCA 
operation, $53.4 million for major construction, $25 million 
for minor construction, as well as $32 million for the State 
Cemetery Grant Program. The members of the Independent Budget 
recommend Congress provide $214 million for the operational 
requirements of NCA, the National Shrine Initiative, and the 
backlog of repairs. In total, our funding recommendation for 
NCA represents a $54 million increase over the Administration's 
request, an increase almost entirely aimed at the National 
Shrine Initiative.
    The members of the Independent Budget and the veteran and 
military groups who endorse our recommendations asked Congress 
to establish a 5-year $250 million National Shrine Initiative 
to restore and improve the condition and character of NCA 
cemeteries. We recommend $50 million for fiscal year 2007 to 
begin this program.
    As the veterans population ages and the global war on 
terrorism continues, demand for NCA services, unfortunately, 
will remain high. In recent years, the burial rate has averaged 
more than 90,000 interments per year and is expected to exceed 
110,000 before too long. To meet this demand for services, the 
IB recommends hiring an additional 30 FTE for fiscal year 2007, 
an increase of 7 over the Administration's request. Additional 
employees are necessary to staff and maintain existing and new 
national cemeteries across the country.
    For funding the State Cemetery Grants program, the IB 
recommends $37 million for fiscal year 2007. The State 
Cemeteries Grant Program is an important component of NCA. It 
assists States in increasing their burial services to veterans, 
especially those living in less densely populated areas not 
currently served by a national veterans cemetery. The grants to 
States play a crucial role in achieving NCA's strategic target 
of providing 90 percent of veterans a burial option within 75 
miles of their residence. In fact, 18 new State cemeteries are 
planning to open between 2007 and 2010.
    The State grant program provides up to 100 percent of the 
development cost for an improved cemetery project, including 
design, construction, and administration. In addition, new 
equipment such as mowers and backhoes can be provided for new 
State cemeteries. Through the partnership between the State and 
Federal Governments, VA has more than double acreage available 
and has accommodated more than a 100 percent increase in 
burials.
    The Independent Budget also recommends Congress to review a 
series of burial benefits that have eroded in value over the 
years. While these benefits were never intended to cover the 
full cost of burial, they now pay for only a fraction of what 
they covered in 1973. These recommendations are contained in my 
written statement, but I would like to say our recommendations, 
which represent a modest increase, would restore the allowance 
to its original proportion of expense and tell veterans that 
their sacrifice is given the appreciation it deserves.
    The NCA honors veterans with a final resting place that 
commemorates their service to this Nation. More than 2.6 
million soldiers who died in every war or conflict are honored 
by burial in a national cemetery. Each Memorial Day and 
Veterans Day, we honor the last full measure of devotion they 
gave for this country. Our national cemeteries are more than a 
final resting place. They are hallowed ground to those who died 
in our defense and a memorial to those who survive.
    Mr. Chairman, this concludes my statement. Thank you again 
for the opportunity to testify before you this morning.
    [The prepared statement of Mr. Greineder follows:]

 Prepared Statement of David G. Greineder, Deputy National Legislative 
                            Director, Amvets

    Chairman Craig, Ranking Member Akaka, and Members of the Committee:
    AMVETS is honored to join our fellow veterans service organizations 
and partners at this important hearing on the Department of Veterans 
Affairs budget request for fiscal year 2007. My name is David G. 
Greineder, Deputy National Legislative Director of AMVETS, and I am 
pleased to provide you with our best estimates on the resources 
necessary to carry out a responsible budget for VA in fiscal year 2007.
    AMVETS testifies before you as a co-author of The Independent 
Budget. Since 1987, AMVETS, the Disabled American Veterans, the 
Paralyzed Veterans of America, and the Veterans of Foreign Wars have 
pooled their resources to produce a unique document, one that has stood 
the test of time. It is hard to believe that twenty years have elapsed 
since the first Independent Budget was formulated.
    The IB, as it has come to be called, is our blueprint for building 
the kind of programs veterans deserve. Indeed, we are proud that over 
60 veteran, military, and medical service organizations endorse these 
recommendations. In whole, these recommendations provide decisionmakers 
with a rational, rigorous, and sound review of the budget required to 
support authorized programs for our Nation's veterans.
    In developing this document, we believe in certain guiding 
principles. Veterans must not have to wait for benefits to which they 
are entitled. Veterans must be ensured access to high-quality medical 
care. Specialized care must remain the focus of VA. Veterans must be 
guaranteed timely access to the full continuum of health care services, 
including long-term care. And, veterans must be assured burial in a 
state or national cemetery in every state.
    Today, I will specifically address the National Cemetery 
Administration (NCA), however, I would like to briefly comment on the 
Administration's budget request coming out of the Office of Management 
and Budget (OMB) just last week.
    The administration's budget requests a total of $80.6 billion for 
the Department of Veterans Affairs. Included in the spending plan is 
nearly $31.5 billion for veterans' health care. However, an estimated 
$2.8 billion actually would come out of veterans' pockets, not the 
Federal treasury. AMVETS, along with our Independent Budget partners, 
recommend Congress provide $32.4 billion for veterans health care, an 
increase of $3.7 over the fiscal year 2006 appropriation, and $1 
billion over the Administration's fiscal year 2007 budget request.
    AMVETS notes that the Administration has re-introduced several 
proposals aimed at increasing revenues (via collections) through a $250 
enrollment fee and copayment increase from $8 to $15. These new fees 
will have a dramatic impact on veterans. According to estimates, they 
will force over one million veterans, almost half of the Priority 7 and 
Priority 8 veterans, to drop out of the VA healthcare system. AMVETS 
disagrees with this policy and we ask Congress to reject it.
    It is no secret that the VA healthcare system is the best in the 
country, and responsible for great advances in medical science. It is 
highly successful in containing cost and provides excellent care. The 
VHA is uniquely qualified to care for veterans' needs because of its 
highly specialized experience in treating service-connected ailments. 
The delivery care system can provide a wide array of specialized 
services to veterans like those with spinal cord injuries and 
blindness. This type of care is very expensive and would be almost 
impossible for veterans to obtain outside of VA.
    The system also prides itself in research and development, which 
AMVETS strongly supports because of its contributions to veterans' 
healthcare and the common good. Public investments in research projects 
have lead to an explosion of knowledge that promises to advance science 
and unlock new strategies for treatment and prevention.
    Because veterans depend so much on VA and its services, AMVETS 
believes it is absolutely critical that the VA healthcare system be 
fully funded. It is important our Nation keep its promise to care for 
the veterans who made so many sacrifices to ensure the freedom of so 
many. With the expected increase in the number of veterans, a need to 
increase VA health care spending should be an immediate priority this 
year. We must remain insistent about funding the needs of the system, 
and the recruitment and retention of vital health care professionals, 
especially registered nurses. Chronic under funding has led to 
rationing of care through reduced services, lengthy delays in 
appointments, higher copayments and, in too many cases, sick and 
disabled veterans being turned away from treatment.
    One option, and we believe the best choice, to ensure VA has access 
to adequate and timely resources is through mandatory, or assured, 
funding. I would like to clearly state that AMVETS along with its 
Independent Budget partners strongly supports shifting VA healthcare 
funding from discretionary funding to mandatory. We recommend this 
action because the current discretionary system is not working. Moving 
to mandatory funding would give certainty to healthcare services. VA 
facilities would not have to deal with the uncertainty of discretionary 
funding, which has been inconsistent and inadequate for far too long. 
Most importantly, mandatory funding would provide a comprehensive and 
permanent solution to the current funding problem.

                  THE NATIONAL CEMETERY ADMINISTRATION

    Before I address the budget recommendation for the NCA, I would 
like to acknowledge the dedicated and committed NCA staff who continue 
to provide the highest quality of service to veterans and their 
families despite funding shortfalls, aging equipment, and increasing 
workload. The devoted staff provides aid and comfort to hurting 
veterans' families in a very difficult time, and we thank them for 
their consolation.
    The Department of Veterans Affairs National Cemetery Administration 
currently maintains more than 2.6 million gravesites at 125 national 
cemeteries in 39 states and Puerto Rico. There are approximately 14,500 
acres of cemetery land within established installations in the NCA. 
Over half are undeveloped and have the potential to provide more than 
3.6 million gravesites. Of the 125 national cemeteries, 62 are open to 
all interments; 19 can accommodate cremated remains and family members 
of those already interred; and 41 are closed to new interments.
    VA estimates that about 26.6 million veterans are alive today. They 
include veterans from World War I, World War II, the Korean War, the 
Vietnam War, the Gulf War, and the Global War on Terrorism, as well as 
peacetime veterans. With the aging veterans population continuing to 
climb, nearly 676,000 veteran deaths are estimated in 2008, with the 
death rate increasing annually and peaking at 690,000 by 2009. It is 
expected that one in every six of these veterans will request burial in 
a national cemetery.
    The Administration requests $160.7 million and 23 additional FTE 
for NCA for fiscal year 2007. The members of the Independent Budget 
recommend that Congress provide $214 million and 30 FTE for the 
operational requirements of NCA, the National Shrine Initiative, and 
the backlog of repairs. We recommend your support for a budget 
consistent with NCA's growing demands and in concert with the respect 
due every man and woman who wears the uniform of the United States 
Armed Forces.
    In regards to the National Shrine Initiative, if the NCA is to 
continue its commitment to ensure national cemeteries remain dignified 
and respectful settings that honor deceased veterans and give evidence 
of the Nation's gratitude for their military service, there must be a 
comprehensive effort to greatly improve the condition, function, and 
appearance of the national cemeteries. The Independent Budget 
recommends Congress provide $50 million in fiscal year 2007 to begin a 
5-year, $250 million program to restore and improve the condition and 
character of NCA cemeteries.
    The National Shrine Initiative is in response to the 2002 
Independent Study on Improvements to Veterans Cemeteries. Volume 2 of 
the Study identifies over 900 projects for gravesite renovation, 
repair, upgrade, and maintenance. According to the Study, these project 
recommendations were made on the basis of the existing condition of 
each cemetery after taking into account the cemetery's age, its burial 
activity, burial options and maintenance programs.

                   THE STATE CEMETERY GRANTS PROGRAM

    For funding the State Cemetery Grants Program (SCGP), the members 
of the Independent Budget recommend $37 million for fiscal year 2007, 
an increase of $5 million over the Administration proposal. The State 
Cemetery Grants Program is an important element to the NCA. It 
complements the NCA mission to establish gravesites for veterans in 
those areas where the NCA cannot fully respond to the burial needs of 
veterans.
    Six western states do not have a single national veterans cemetery: 
Idaho, Montana, Nevada, North Dakota, Utah, and Wyoming. The large land 
areas and spread out population centers in these and most western 
states make it difficult for them to meet the ``170,000 veterans within 
75 miles'' national veterans cemetery requirement. Recognizing these 
challenges, VA has implemented several incentives to assist states in 
establishing a veterans cemetery. For example, the NCA can provide up 
to 100 percent of the development cost for an approved cemetery 
project, including design, construction, and administration. In 
addition, new equipment, such as mowers and backhoes, can be provided 
for new cemeteries. Since 1973, the Department of Veterans Affairs has 
more than doubled acreage available and accommodated more than a 100 
percent increase in burials.

                            BURIAL BENEFITS

    There has been serious erosion in the value of burial allowance 
benefits over the years. While these benefits were never intended to 
cover the full costs of burial, they now pay for only a small fraction 
of what they covered in 1973 when the Federal Government first started 
paying burial benefits.
    In 2001, the plot allowance was increased for the first time in 
more than 28 years, to $300 from $150, which covers approximately 6 
percent of funeral costs. The Independent Budget recommends increasing 
the plot allowance from $300 to $745, an amount proportionally equal to 
the benefit paid in 1973, and expanding the eligibility for the plot 
allowance to all veterans who would be eligible for burial in a 
national cemetery, not just those who served during wartime.
    In the 108th Congress, the burial allowance for service-connected 
deaths was increased from $500 to $2,000. Prior to this adjustment, the 
allowance had been untouched since 1988. The Independent Budget 
recommends increasing the service-connected benefit from $2,000 to 
$4,100, bringing it up to a proportionate level of burial costs. The 
non-service-connected burial benefit was last adjusted in 1978, and 
also covers just 6 percent of funeral costs. The Independent Budget 
recommends increasing the non-service-connected benefit from $300 to 
$1,270. These modest increases will make a more meaningful contribution 
to the burial costs for our veterans.
    The NCA honors veterans with a final resting place that 
commemorates their service to this Nation. More than 2.6 million 
soldiers who died in every war and conflict are honored by burial in a 
VA national cemetery. Each Memorial Day and Veterans Day we honor the 
last full measure of devotion they gave for this country. Our national 
cemeteries are more than the final resting place of honor for our 
veterans, they are hallowed ground to those who died in our defense, 
and a memorial to those who survived.
    Mr. Chairman, this concludes my testimony. I thank you again for 
the privilege to present our views, and I would be pleased to answer 
any questions you might have.

    Chairman Craig. Gentlemen, thank you, all, very much for 
your testimony and your advocacy as we work our way through 
these difficult questions, but important ones to be asked and 
ultimately the budget to be developed for 2007.
    I think all of us are generally pleased and satisfied with 
the levels of increases as a comparative measure against last 
year's budget proposals initially and where Congress ultimately 
took the VA budget. The issue that concerns me most, and I am 
not going to sit here and tell you that we have the votes to 
pass what the Administration has proposed as it relates to new 
revenue measures, but those revenue measures recognize in both 
real dollars and dollars saved upwards of 800 million, 
somewhere in that figure, I understand.
    If we are to assume that Congress does not choose to do 
that, the ultimate question will be how do we replace those 
dollars if we are to stay at least at those levels of funding. 
I don't need to tell you the difficulty that is underway at 
this time with overall budgets, because we are talking better 
than three-quarters of a billion that would need to be 
replaced. That is one of the difficulties that we are going to 
struggle with.
    So, Steve, I don't question, or I should say, I accept your 
challenge. I think we have to collectively look at alternative 
revenue sources, and you know my position on mandatory 
spending. To just move that veterans health care and other 
veterans benefits over to mandatory--obviously some of the 
veterans benefits are mandatory--doesn't solve the problem in 
any respect. I believe my opening statement was reflective of 
very, very big issues that this Congress is simply ignoring at 
this moment. The onslaught of baby-boomers, the Medicare 
budgets, Medicaid budgets, Social Security, and our very clear 
need to serve our veterans. All of those are rapidly consuming 
all discretionary spending and ultimately could consume all of 
the Federal budget and the defense budget if we are not to make 
significant changes in the out years.
    Those are our projections, budget projections, in reality 
that nobody is refuting at this moment, both sides. Democrat, 
Republican, all of our best thinkers do not dispute those 
facts, and the consequence of simply offsetting them by tax 
increases is to deny the reality of an economy that will employ 
these folks out there who are seeking employment for and 
lagging behind as it relates to those leaving service at this 
moment.
    So those are the struggles we are in, and I don't deny that 
in any way. Those are tough choices to be made. So in the 
coming months, I accept your challenge to look at, to vet 
ourselves through, if you will, alternatives and realities as 
to where we go. TRICARE, an entitlement? Well, I suspect it 
isn't if you don't pay the fees. You have got to pay the cost 
to get through the gate. That is not an entitlement. That is an 
insurance program.
    You know, I don't deny the importance of health care to 
anyone, but I do and I am going to be very curious about who 
might opt in and who might opt out as it relates to any 
increase anywhere. When all of a sudden the citizen is exposed 
to the health care market, there is a very real reality check 
that they have to make if, in fact, they have been shouldered 
inside a health care environment before, and, I mean, those are 
the simple realities that we are all facing when we look at 
health care costs today.
    So, I think I am obviously anxious to sustain a very robust 
and quality health care delivery system for our veterans, but 
those are some of the kinds of things I am going to struggle 
with.
    Let me ask one question that concerns me as it relates to 
the area of disability compensation. VA expects a backlog of 
disability compensation claims to grow in 2006 and the amount 
of time it takes to adjudicate disability claims to worsen as a 
result of the 98,000 extra claims it expects will be filed by 
veterans responding to congressionally mandated outreach in six 
States.
    I have been told that VA expects very few of these claims 
to be successful. I am concerned that these new claims filed by 
recently separated combat veterans may be delayed as a result 
of this policy and that 98,000 veterans are being set up for 
failure. Would any of you give me your thoughts on this? Would 
you recommend that Congress revisit this policy?
    Mr. Kinderman. Mr. Chairman, first of all, VA for a long 
period of time has been running a 15 percent error rate in 
their decisions. We catch some of those decisions with our 
advocates. We don't catch them all.
    Chairman Craig. Right.
    Mr. Kinderman. So I think it is grossly optimistic of the 
VA to think that these are claims that are not going to be 
worth revisiting. Having said that, picking out the six States 
that at a point in time had the lowest average payment, I think 
is probably not the most rational way to approach any 
cumulative error rate and bad decisionmaking in VA.
    If I could just expand a little bit on that, I understand 
your position. I understand your challenge, and I understand 
what you have to do this year to keep the budget going, but I 
really do believe that the solutions to all VA's issues is in 
the long run the decisions that you make that are not going to 
affect just the budget this year, but set in motion things that 
will happen in the long term. Maybe with this generation, as 
they get older, you will have a better outcome and the expense 
curve won't be going up, and the tax contributions of that 
generation will be going up instead. I think those are 
decisions that we can't allow the current crisis to cloud at 
this point in time.
    We want to work with you on that. I think it includes the 
benefits programs. We heard Secretary Nicholson in his well-
justified pride talking about the VA health care system, which 
I think is a jewel for this country. It is one of the few major 
health care systems that is working well. Pushing 200,000 of 
the people that it now serves onto Medicare just creates a 
bigger problem for you in other areas. You said in your opening 
statement MEDICARE is crowding out the other parts of the 
budget as well.
    So I think we can't look at it just in the short context of 
one budget. We have to make decisions like we are suggesting in 
CARES that are going to have great long-term effects to make 
the infrastructure what it should be for future generations.
    Mr. Robertson. Mr. Chairman.
    Chairman Craig. Steve.
    Mr. Robertson. This is a much bigger issue than VA 
budgeting, because this is really a national security issue. 
When I came in the service in 1973, there were a lot of 
decisions I made about a career that were based upon what was 
available and what the Government was promising me, that if I 
got hurt, they would compensate me, that if I needed medical 
attention, it would be there.
    When my wife, who is completing over 20 years of military 
service in September of this year, when she made her decision 
to stay in the military, a lot of those same benefits were 
there. Our son, who just returned from Iraq about 6 months ago, 
is of a different view. He is beginning to ask himself is it 
worth staying in.
    I think that when you make a promise, you have to do 
everything in your power to keep that promise. The biggest 
problem I see with the VBA right now is the lack of experienced 
adjudicators. That contributes to the slowness of claims 
processing. It contributes to the inaccuracy rates and causes 
remands, which begin to stack up.
    I think that there really needs to be a focus on getting 
people into the VBA that will make it a career, that are 
willing to stay for 30 years or more as a Federal employee, 
doing the business of taking care of veterans and reviewing the 
process. If people are coming into the system and just using 
the VBA as stepping stone to another Federal job, that is not 
the solution, because it takes about 5 years for an adjudicator 
to become confident, and I think that is where the focus needs 
to be, whether we need to readjust pay scales to where it makes 
it an attractive position to make a career in, whether there is 
advancement, whether there is recurring training that makes 
sure that we are keeping the best and the brightest sharp.
    We are trying to do our part at the local level. We have 
classes for service officers trying to make better case 
development so that it makes it easier for the adjudicators. 
But this is a much bigger problem than just this budget, and I 
really think that it has a retention and recruitment impact on 
national defense, which we all know is the highest priority of 
this country. That is the highest priority.
    Chairman Craig. Thank you.
    Let me turn to Senator Akaka. I have never limited the 
Ranking Member to one question. I did make a comment and ask 
one question.
    Danny, for sake of time, please proceed with discretion.
    Senator Akaka. Yes.
    Chairman Craig. All right.
    Senator Akaka. Thank you very much, Mr. Chairman. I have 
enjoyed working with you on the challenges that have been made 
by our second panelists.
    Mr. Robertson, I am very concerned about reports that we 
are getting that veterans from Afghanistan and Iraq are 
becoming homeless. In your testimony, you state that 40 percent 
of homeless veterans suffer from mental illness, and we look 
upon that as PTSD. Further, you add that 34 percent of the 
Nation's homeless are veterans, and 75 percent of those are 
war-time veterans. Looking at the veterans' needs, this is 
tremendous.
    My question to you is, what more should this Nation be 
doing to keep young veterans off the street?
    Mr. Robertson. Mr. Akaka, thank you for the question. 
Secretary Principi during his tenure made a challenge to try to 
end homelessness in the veterans community over the next 10 
years, and the American Legion has been very aggressive in that 
effort. In fact, we have created a homeless veterans task force 
within our organization. I think it is in every State now where 
we are trying to collect additional data and to take proactive 
actions to try to solve some of the problems.
    We have homeless programs that are actually in place where 
we are housing veterans across the country that are homeless. 
In fact, we are beginning to see Iraqi War veterans showing up 
at some of our shelters in need of assistance. We are trying to 
help them with employment issues. We are very concerned with 
some of the changes that recently occurred in VETS, the 
Veterans Employment Training, over in DOL. We are not really 
sure they have got their act together since the Jobs for 
Veterans Act passed in 2003, and we are not sure that the 
recently separated veterans are getting the attention that they 
needed.
    Clearly, PTSD is a major concern of the young men and women 
that are coming back. Because of the type of warfare that we 
are fighting, this is quite different than just about any other 
combat that we have had since, I guess, World War II. So we are 
trying to stay on top of that and referring them to the VETS 
centers across the country. Many of them are reluctant to come 
forward because the stigma that is still attached to admitting 
that you are having mental health problems.
    So we are trying to educate our members to reach out to the 
veterans in their community and address those exact problems.
    Senator Akaka. In keeping with our time constraints, I 
would like to ask the rest of you to make comments on the 
following: What more should this Nation be doing to keep young 
veterans from being homeless?
    Mr. Kinderman. Senator Akaka, I am no expert on 
homelessness, but I think it is characterized by a very large 
dynamic, that there is a lot of turnover in the population of 
homeless, and it is very difficult to get any sort of really 
good information in order to base programs on. So I would urge 
the Committee to make sure that the VA and other agencies that 
have a role in helping veterans who are homeless or down on 
their luck or are suffering from PTSD or some of the attendant 
problems that go along with PTSD to aggressively reach out and 
get that information, because without the information on that 
population, and it changes quickly, any program is at great 
risk of being misdirected.
    Senator Akaka. Thank you.
    Mr. Lawrence. Senator, I think probably one of the key 
issues to solving homelessness has probably been previously, is 
identifying problems prior to separation--I know there are 
steps being made in that regard--and also helping these 
veterans establish benefits so they have some financial 
support, the ones that do have problems prior to their 
separation.
    The Benefits Delivery at Discharge Centers, BDD Centers, 
have had a high rate of success. They have had the lowest 
amount of errors in their rating decisions, and they are also 
the most efficient way of delivering benefits to veterans as 
they are getting out, and the veterans have a higher 
satisfaction rate, and, again, there is a lower turnover rate 
on those decisions.
    So one of the things that we would recommend is increasing 
the number of BDD Centers, or Benefits Delivery at Discharge 
Centers.
    Senator Akaka. Thank you very much.
    Mr. Blake. Senator Akaka, along those lines, also one of 
the other things that we have been an advocate for as a 
participant in the National Coalition for Homeless Veterans, as 
I know some of the other organizations here are, we have been a 
strong advocate for the Homeless Veterans Reintegration Program 
that is managed by the Veterans Employment Training Service. It 
is authorized, I believe, at $50 million, and yet the amount of 
funds that program receives every year is significantly less 
than that, and yet its success rate is well proven and is 
perhaps the most cost-effective and cost-efficient program in 
the Federal Government, and yet it continues to do so with a 
significantly lower budget than what it is authorized for.
    So I think that is something else that we can look at down 
the road for improving, because that program has proven to be 
so successful in keeping veterans off the street and getting 
veterans who are on the street back out into society and 
becoming fully functioning citizens again.
    Senator Akaka. Thank you.
    Mr. Greineder. Senator, I certainly agree with all the 
statements of my colleagues here, and on behalf of AMVETS, I 
think we need to seriously talk to separating veterans and take 
a look at the transition assistance program in making sure that 
these transitioning servicemembers have and understand all the 
benefits that are available to them to prevent homelessness to 
begin with. I think if we start there, we can prevent a large 
percentage of homelessness in the streets.
    Senator Akaka. Thank you very much for your responses.
    Mr. Chairman, I would like to submit my questions for the 
record.
    Chairman Craig. Without objection, of course, Senator 
Akaka, that will be done, and I have additional questions that 
will be addressed to you all. I appreciate not only your 
question, obviously, Senator Akaka, and I have held one hearing 
and we are going to monitor and follow up very closely what is 
going on over at the Department of Labor with the VETS program.
    I agree with the observation that we don't think they get 
it yet either as well as it needs to be or as it relates to 
what the intent of the change of public policy was in that 
area, because this is an important issue and those numbers are 
abnormally high in an environment and in an economy where it 
can be pretty well judged we are nearly at full employment. 
Except in spots around the Nation, the economy in general is 
very good. So if you were experiencing a high level of 
unemployment in the civilian population, you would understand 
that a little better. We are not. There is a very real 
disconnect there by all reality that certainly we have got to 
address.
    Well, gentleman, thank you again, and to the organizations 
you represent, as I have said and I say most sincerely, for 
your great dedication to America's veterans. This Committee 
will do its job and we will work to get a budget out that 
meets, obviously, these demands. We have a foundational base 
with the Administration's budget that is by all accounts 
substantially stronger than a year ago, and we will see where 
it takes us as we work both here as an authorizing Committee 
and with the appropriating committee to work our way through 
this, of course in conjunction with the House and where they 
choose to go.
    So, again, thank you for your presence, and I don't have to 
tell you to stay tuned. I know you will and you will be back 
before us again. We appreciate working with you.
    Thank you.
    The Committee will stand adjourned.
    [Whereupon, at 1:10 p.m., the Committee was adjourned.]


                            A P P E N D I X

                              ----------                              

 Prepared Statement of Hon. John D. Rockefeller IV, U.S. Senator from 
                             West Virginia

    Mr. Chairman, Secretary Nicholson, and my colleagues, I am pleased 
to see what seems to be a better budget for our veterans, especially 
for additional funding for VA health care. Last year was problematic 
for the VA health budget, and I hope that we never have to go through 
such a struggle again. I was pleased that Chairman Craig sought 
quarterly reports on the VA budget and I would like to be kept apprised 
of these updates.
    VA health care funding has been on a steady rise, but it has to be. 
We are serving more and more veterans. We have brave men and women 
returning from Iraq and Afghanistan, too many with devastating physical 
wounds that will require a lifetime of care. Others will need mental 
health care to cope with the problems of Post-Traumatic Stress Disorder 
(PSTD) and the challenge of returning to civilian life after grueling 
combat duty in Kabul or Baghdad.
    It takes a real toll on a soldier to deal with this type of combat. 
I learned this through private roundtables with recently returned 
veterans in West Virginia, and meeting soldiers currently serving in 
the field.
    Simultaneously, we face the aging of our World War II veterans, 
known as the Greatest Generation. The needs of these veterans must also 
be met with the dignity they truly deserve.
    I know that the VA health care budget is $3.5 billion more, but the 
real questions are:
     Is this budget enough to meet the compelling and immediate 
needs of our veterans from every era?
     Is it sufficient to maintain the high quality of care that 
VA has achieved and sufficient to appropriately staff our VA medical 
centers and our Vet Centers?
    VA certainly deserves congratulations for its quality ratings for 
its health care. This is a real accomplishment, and our veterans 
deserve no less than the best care in America. How can we retain this 
distinction and the quality if we do not have a consistent, reliable 
funding stream for our VA health care system?
    Also, I understand that the Administration once again is suggesting 
enrollment fees and nearly doubling the costs of each prescription drug 
for our veterans. Many older veterans have multiple daily prescriptions 
so this proposal really does impose a hardship. I oppose such fees, and 
I hope Congress will reject now as it has in the past. Caring for all 
of our veterans is a solemn obligation in my view, and we should not 
impose fees on them to drive some out of VA care or to cover costs that 
the Administration won't. VA health care must be among our highest 
priorities.
    As always, I stand ready to work with my colleagues to deliver the 
best care for our veterans.
                               __________

   Prepared Statement of Hon. Ken Salazar, U.S. Senator from Colorado

    I want to thank Chairman Craig, Senator Akaka, Secretary Nicholson 
and representatives of the Nation's largest Veterans Service 
Organizations for all of their hard work.
    The budget request before the Committee today is an improvement 
over the budget request we considered a year ago. I am particularly 
encouraged that, in the wake of last year's troubling shortfall, the 
budget includes a relatively substantial increase in funding for 
veterans' medical services.
    As our Nation struggles with a growing healthcare crisis, we can 
all agree that the VA healthcare system serves as an example for how 
healthcare should be provided. In addition, through its medical 
research programs, the VA is frequently responsible for great strides 
in medical science that contribute significantly to the quality of 
healthcare services across the country.
    Given the significance of the Veterans Health Administration to our 
Nation's healthcare system, and the paramount importance of providing 
our Nation's veterans with the high-quality care that our government 
has promised them, we owe it to our servicemembers, our veterans, and 
our Nation to be honest about our needs, and to provide funding 
adequate to meet those needs.
    While, as I mentioned, I believe this budget does a better job of 
meeting those standards than the one we considered a year ago, I remain 
troubled by a handful of proposals that, if enacted, will serve to 
undercut our mission to provide quality healthcare to our Nation's 
veterans, and to provide support to a system that has been consistently 
exemplary.
    For example, the Administration has once again proposed to raise 
premiums and copays for Priority 7 and 8 veterans, and has factored 
into its budget calculations the revenue it expects to generate from 
such policies. But we all know the impact these policies will have on 
veterans in our states--over 27,000 veterans in my state of Colorado 
alone would be forced out of the system. That's why this Committee has 
rejected them on several previous occasions, and it's why I expect we 
will roundly reject them again.
    I'm also troubled by the proposal to cut $13 million from the VA's 
medial research programs. In light of the enormous contributions VA 
scientists have made to the field of healthcare, we should be giving 
these programs more funding, not less.
    Finally, with more and more servicemembers returning from Iraq and 
Afghanistan, we need to fully confront the uphill battle we face with 
respect to providing these veterans with the care they deserve, and 
that we have promised to them.
    So, as we laud the positive aspects of the budget that is before 
us, let's also not kid ourselves about the very real challenges we 
face. Let's work to meet those challenges head on.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Larry E. Craig to the 
  Independent Budget (AMVETS, Paralyzed Veterans of America, Disabled 
  American Veterans and Veteran of Foreign Wars of the United States)

    Question 1. The Independent Budget recommends $26 billion for 
medical services. As I read the Administration's budget--even without 
the new fees--the President is asking for $26.9 billion. I understand 
you don't assume collections. But, Congress does. Assuming collections 
at last year's level, is the President's budget adequate to meet the 
health care needs you identify in the Independent Budget? To what use 
would you recommend over $2 billion in collections be put if not to 
support all of the medical services and policy initiatives contained in 
the IB? And if collections were obligated on the services you 
recommend, wouldn't those services then become part of VA's medical 
care baseline and, therefore, need to be included in future annual 
budget requests?
    Answer. The Independent Budget has never considered medical care 
collections as part of its recommendation for health care funding. We 
believe that adequate funding should be provided through direct 
appropriations. We certainly do not believe that collections from care 
provided from some veterans be used to subsidize the care of other 
veterans. In fact, we believe that any money raised through collections 
should be used as a supplement to, not a substitute for, direct 
appropriations. In the past, the Office of Management and Budget (0MB) 
has used projections for collections to offset requesting real dollars 
needed. As a result, the VA has been forced to operate with severe 
under funding.
    We also do not believe that it is a safe decision to assume that 
the VA will be able to achieve its collection levels that it estimates. 
We recognize that the VA did a very good job last year. However, 
historically the VA has done a terrible job. In previous years, the VA 
never came close to achieving the collection levels it projected.
    We do believe that the $2 billion could be used to overturn the 
policy decision that currently restricts Category 8 veterans from being 
able to enroll in the VA health care system. The money could also be 
used to expedite much needed construction to upgrade the ever-aging 
infrastructure of the VA.
    Question 2. VA expects the backlog of disability compensation 
claims to grow in fiscal year 2006 and the amount of time it takes to 
adjudicate disability claims to worsen as a result of 98,000 claims it 
expects will be filed by veterans responding to Congressionally 
mandated outreach in six states. I am told that VA expects very few of 
these claims to be successful. I am concerned that new claims filed by 
recently separated combat veterans, and other veterans awaiting an 
initial decision, may be delayed as a result of this policy, and that 
98,000 veterans are already in receipt of compensation would be given 
false hope of a successful outcome. What are your thoughts on this? 
Would you recommend that Congress revisit this policy?
    Answer. We share Chairman Craig's concern. While this provision has 
the good intention of ensuring that veterans in the lowest average 
payment states receive levels of compensation and service-connection 
consistent with the law, the review mandated by law is unlikely to 
accomplish that goal. Once a VA rating decision denying service-
connection becomes final, it can only be revised based on clear and 
unmistakable error. Some cases will, no doubt be reversed on this 
basis, given that VA has an established error rate of 15 percent and 
some of these errors would have resulted in CUE. Generally, this is a 
difficult standard to meet, and most historic ratings will not be 
changed on this basis.
    More likely, since VA plans to send these letters to veterans 
currently receiving disability compensation, will be numerous responses 
from veterans who believe that their current condition is under 
evaluated, either as a result of the previous evaluation by VA, or as a 
result of deterioration over time. Unless VA can determine that the 
veteran is not stating that the condition has gotten worse, they should 
treat these as claims for increase, schedule an examination, solicit 
supporting evidence from the veteran, and rate (evaluate) the veteran's 
condition, and provide notification and due process. Thus, this 
outreach will provide for an increase in benefits for some proportion 
of the veterans who respond to it.
    VA estimates that about 16 percent of the letter recipients will 
respond. We think that within this population, a large number will have 
meritorious claims, especially among those who first seek clarification 
of the VA letter from VA or VSO representatives, and file a claim for 
an increased evaluation. However, entertaining these claims with what 
may be a confusing letter will prove to be an inefficient use of, VA 
resources. While a number of veterans may receive increased benefits as 
a result of this process, the review would add a great deal of work to 
a system that is already overburdened. It is highly unlikely that VA 
could get all these cases worked during the current fiscal year.
    Since this is an undertaking of significant impact both on VA's 
resources, and implications for the veteran population, we have 
reservations about the investment of so many VA resources on the basis 
of historic statistics that are not completely understood. The 
diversion of resources to accomplish this effort rather than to a 
coherent strategy to improve, service to the larger veteran 
constituency is not be the best strategy, especially given the pressing 
need to serve veterans returning from the war zones. Unless Congress is 
willing to provide the resources necessary to accomplish this 
initiative, and still improve benefits delivery in general, this does 
not best serve the interests of America's veterans.
    Question 3. I noticed that the Independent Budget recommends an 
increase in patient population of 6.3 percent. Even without the new 
fees, VA only assumes a growth of just over 1 percent. To what do you 
attribute this glaring difference in the projection of patient 
population? Is the IB based. on historical trends or a different 
actuarial model?
    Answer. The IB projector for the increase in patient population is 
based on recent historical, trends. It is important to note that last 
year the VA projected a very similar growth rate and it proved to be 
terribly wrong. The VA estimated that the growth rate for fiscal year 
2005 would be 2.3 percent when in fact it was approximately 5.2 
percent. This seems to be proof positive that the VA's actuarial model 
is seriously flawed.
    In formulating our projection, we returned to data provided by the 
VA in 2004. Based on projections made by the VA in budget testimony in 
February 2004, and including the actual growth in the patient 
Population last year (5.2 percent), we project a growth rate of 
approximately 6.3 percent.
    We believe that it is disingenuous for the VA to assume a reduction 
in the number of Operation Iraqi Freedom and Operation Enduring Freedom 
veterans seeking care in the VA. We do not see any trends in the 
conflicts overseas that would suggest that this is an accurate 
assumption.
    Furthermore, the VA assumes that more than 200,000 veterans will 
leave the system as a result of enactment of their legislative 
proposals. This would automatically skew their projected growth rate 
downwards. However, recognizing the fact that these proposals have been 
soundly rejected in the past, these veterans have to be added back to 
the total, thereby driving the growth rate back up.
    Question 4. I know that each of your organizations is opposing the 
proposal to levy a $250 enrollment fee on Priority 7 and 8 veterans. I 
also know that opposition to higher income veterans contributing to the 
cost of their care was not always your policy. When--and why--did the 
views of each of your organizations change with respect to the idea 
that some veterans should contribute financially to the cost of their 
health care at VA?
    Answer. We originally acquiesced to copayments to be assessed 
against ``higher income'' veterans as part of budget reconciliation. 
When the Omnibus Budget Reconciliation Act was considered, the veterans 
service organizations were forced to make a choice between accepting 
these copayments or face broader cuts across the spectrum of veterans' 
programs. We accepted the copayments under the agreement that 
implementation of these policies were only temporary relief measures. 
We did not accept ongoing extension of these policies in subsequent 
years. In fact, once a budget surplus was achieved, the prescription 
copayments were actually increased to the previous level of $7.
    We also believe that the $250 enrollment fee is an altogether 
different proposition from prescription and health care copayments. 
This is unlike any proposal that we have ever considered, much less 
accepted. With this enrollment fee, veterans will not have access to 
care at all if they do not pay this fee up front. We oppose this 
strong-arm tactic to force veterans to choose between access to care or 
no care.
    Ouestion 5. Mr. Blake, I was struck by your characterization of the 
President's proposed enrollment fee. Is it really fair to say that $21 
per month would put a ``serious financial strain'' on veterans who make 
over $26,000 per year?
    Answer. Yes, it is. Veterans who live on the margin in Category 7 
or 8 making $26,000 per year or only a little more will be 
significantly impacted by this proposal. Many of these veterans live on 
fixed incomes and rely on the VA health care system to get the services 
they need. Furthermore, it is not as if they pay nothing for their care 
now. They are still required to pay for every prescription that they 
receive as well as every visit that they make to a VA medical facility. 
They are not getting a free ride, from the system. It is very easy for 
any one of us to claim that it is not much of a burden when we are not 
living under the same constraints.
    Likewise, although $250 may not seem like a great deal of money to 
veterans living in high cost-of-living areas as determined by means 
testing, veterans who live in areas that are covered by the minimum 
income threshold will experience a significant impact.
                               __________

Response to Written Questions Submitted by Hon. Daniel K. Akaka to the 
  Independent Budget (AMVETS, Paralyzed Veterans of America, Disabled 
  American Veterans and Veterans of Foreign Wars of the United States)

    Question 1. I would like to know your opinion on VA's proposed $250 
user fee and increase in the prescription drug copayment for Priority 7 
and 8 veterans, a plan the Administration has tried to implement for 
the past few years. In the American Legion's testimony in particular, I 
believe you described this as an attempt ``to balance the VA budget on 
the backs of America's veterans.'' What would the real impact be if 
Congress enacted these proposals?
    Answer. We are deeply concerned that once again the President's 
recommendation proposes the $250 enrollment fee for Priority 7 and 8 
veterans and an increase in prescription drug copayments from $8 to 
$15. These proposals will put a serious financial strain on many 
veterans, including certain PVA members with non-service connected 
spinal cord injuries. Veterans who live on the margin in Category 7 or 
8 making $26,000 per year or only a little more will be significantly 
impacted by this proposal. Many of these veterans live on fixed incomes 
and rely on the VA health care system to get the services they need. 
Furthermore, it is not as if they pay nothing for their care now. They 
are still required to pay for every prescription that they receive as 
well as every visit that they make to a VA medical facility. They are 
not getting a free ride from the system. It is very easy for any one of 
us to claim that it is not much of a burden when we are not living 
under the same constraints.
    Likewise, although $250 may not seem like a great deal of money to 
veterans living in high cost-of-living areas as determined by means 
testing, veterans who live in areas that are covered by the minimum 
income threshold will experience a significant impact.
    We also believe that the $250 enrollment fee is an altogether 
different proposition from prescription and health care copayments. 
This is unlike any proposal that we have ever considered, much less 
accepted. With this enrollment fee, veterans will not have access to 
care at all if they do not pay this fee up front. We oppose this 
strong-arm tactic to force veterans to choose between access to care or 
no care.
    The VA estimates that these proposals will force nearly 200,000 
veterans to leave the system and more than 1,000,000 veterans will 
choose not to enroll. Congress has soundly rejected these proposals for 
the past 3 years and we urge you to do so once again.
    Question 2. The President is clear on who should be eligible for VA 
health care: those with service-connected health needs. I would like to 
ask you all a three-part question related to this topic. Do you think 
the system as we know it today, can survive if eligibility is severely 
narrowed? Can we continue to train nearly half of all physicians in the 
U.S.; maintain specialty programs unparalleled in the community; and 
teach the rest of the health care system about quality management if 
eligibility is limited to service-connected health needs? And last, 
don't we want veterans who have other forms of insurance to come into 
the system to help finance it?
    Answer. We do not believe that the current VA health care system 
can be sustained if eligibility is curbed and the patient population is 
reduced. The VA health care system is the number one health care system 
in America because of the broad range of patients that it has seen over 
the years. Eligibility reform allowed the VA to see patients with all 
types of disabilities and illnesses. It developed many treatments and 
techniques, as well as high-tech equipment, through clinical trials 
with the many veteran patients it has seen.
    Likewise, the VA is able to train a large number of physicians only 
because of the vast number of patients that come to the system. 
Limiting access only serves to limit the opportunity for physicians to 
interact with patients. The relationship that VA medical facilities 
have developed with local medical schools and colleges and universities 
is essential to the training of professional medical staff. In fact, VA 
is currently partnered with more than 100 medical schools and more than 
1,000 colleges and universities. Each year, about 83,000 health 
professionals are trained in VA medical centers. More than half of the 
physicians practicing in the United States had some of their 
professional education in the VA health care system.
    Question 3. This year's Medical and Prosthetics Research budget 
request actually amounts to a cut of about $13 million in appropriated 
dollars--which in turn translates to the loss of 286 employees and 96 
projects. By VA's own account, this will result in the reduction of 
projects in areas such as aging, cancer, heart disease research, and 
traumatic injury. This is yet another year of proposed cuts to VA's 
Research Program by the President. What are your thoughts on the 
Administration's vision for the future of VA research? What impact do 
these continuing assaults on the program have on physician satisfaction 
and recruitment?
    Answer. We are concerned that continued efforts to cut funding for 
the Medical and Prosthetic Research accounts send the wrong message 
about the future of these programs. Research is a vital part of 
veterans' health care, and an essential mission for our national health 
care system. VA research has been grossly underfunded in comparison to 
the growth rate of other Federal research initiatives. The 
Administration's request only serves to further dilute the quality of 
VA research projects.
    One of the primary factors that allow the VA to recruit high-
quality physicians is the availability of research opportunities. 
Clinical research opportunities in the VA health care system are second 
to none.
    We also believe that additional funding needs to be provided for 
rehabilitation research. The development of new and better techniques 
allows catastrophically disabled veterans to become more active and 
independent in society. Furthermore, advanced rehabilitation can only 
lead to a happier and healthier life for these men and women.
    Question 4. As you may know, VA assisted me in attending college 
after I left military service. I am thankful for my education and the 
opportunities in life that have been afforded me because of that 
education. I am concerned that some in military service many not 
receive benefits that mirror their service commitment. Can you please 
explain the main nuances of the Total Force MGIB restructuring?
    Answer. The Total Force Montgomery GI Bill recognizes that our 
Nation's Armed Forces today--active duty, National Guard and Reserve--
train, deploy, and fight together as one team. But educational benefits 
for the Guard and Reserve members on the team have not kept pace in 
proportion to the service they carry out today in defense of our great 
Nation.
    The ``main nuances'' of the Total Force MGIB include:
    1. A clearer alignment of education benefit levels or rates 
according to service rendered. Since 9/11, National Guard and Reserve 
GI Bill benefits have dropped sharply compared to active duty rates. 
When the MGIB was fielded in 1985, reserve benefits paid 47 cents to 
the dollar of active duty benefits--and, that ratio kept pace until 
1999. Then, the rates began to plummet year by year even as tens of 
thousands of reservists were being sent into harm's way. The reason for 
this is that when Congress acted to raise active duty GI Bill benefits 
under Title 38 jurisdiction, no action was taken to adjust the reserve 
rates (Title 10) in proportion to the active duty program. This 
disconnect happened because the MGIB is a divided house in statute. The 
Total Force MGIB proposal seeks to integrate all MGIB programs under 
Title 38 to ensure that future benefit adjustments can be made in 
proportion to the service performed. Any funding to support 
transferring these programs to Title 38 should come from the Department 
of Defense.
    2. Establishment of a transition or readjustment authority for 
reserve MGIB benefits earned on Federal active duty in support of a 
contingency operation. When the greatest generation returned home from 
World War II it took advantage of educational benefits and training 
under the historic GI Bill. When mobilized members of the National 
Guard and Reserve return home today from their deployments they also 
have earned educational benefits from a grateful Nation under Chapter 
1607 of Title 10 (the second reserve MGIB program enacted by Congress 
in the fiscal year 2005 defense authorization act). But any benefits 
not used during their service contract are forfeited at separation. For 
example, a young woman who enlisted in the Hawaii National Guard after 
high school in 2001 incurs a 6-year service agreement. Let's assume 
this Guard member was mobilized in June 2005 and will return home from 
Iraq in September 2006, a fifteen month hitch. She plans to complete 
her service in June 2007 (six years) and use the $22,334 MGIB benefits 
(60 percent of the active duty benefit in accordance with Chapter 1607 
of Title 10) she earned during her mobilization to attend the 
University of Hawaii. Unfortunately, under current law, she forfeits 
all of her mobilization MGIB benefits if she leaves the Guard. The 
Total Force MGIB proposal would eliminate this unfair feature by 
establishment of a readjustment/transition feature to benefits earned 
during a Federal mobilization.
    3. Combining the reserve and active duty MGIB programs under ``one 
tent'' in the U.S. Code--Title 38; that is, the reserve MGIB programs 
under DOD's jurisdiction would be joined with the active duty MGIB 
program managed by the Department of Veterans Affairs under the 
Veterans Benefits code. The problems identified above are the direct 
result of programs that are not properly synchronized to accomplish the 
purposes Congress set out for the MGIB: support for military 
recruitment and reenlistment, readjustment on completion of service, 
and increased competitiveness for the Nation's economy. When the MGIB 
was first enacted during the cold war, national security planners and 
Congress never envisioned that reservists would be used in every 
operational mission as they are today. Today the reserves serve as both 
a strategic and operational force, and they will do so for the 
foreseeable future. By integrating the MGIB programs under a single 
structure, benefits can be better aligned to carry out the MGIB's 
mission of supporting our military force while enabling all our 
veterans the opportunity to reintegrate in society when their honorable 
service is completed.
    Question 5. The Independent Budget suggests that the VA Schedule 
for Ratings Disabilities does not provide a compensable evaluation for 
hearing loss. The Independent Budget asserts that a general principle 
of disability compensation is that ratings are not offset by artificial 
restoration because of use of prosthetics. Can you point to other areas 
in the VA Rating Schedule where ratings are not offset by this 
artificial restoration?
    Answer. Probably the most compelling area of the Schedule that 
illustrates why compensation should not be offset by the functionality 
restored by prosthesis is the portion dealing with amputations. For 
example, a veteran receiving full compensation for amputation of a 
lower extremity may still be able to ambulate with the aid of a 
prosthetic limb. It is difficult to imagine that any person with the 
slightest sense of compassion would suggest that such a heavy sacrifice 
does not warrant compensation just because advances in medical 
technology allow the veteran to walk.
    Question 6. The Independent Budget calls for VA to establish 
recruiting programs that will enable VHA to remain competitive for 
hiring nurses by using private-sector marketing strategies. Can you 
give some examples of what they could do to become more competitive?
    Answer. The serious shortage of nurses in the United States is 
affecting all sectors of the health arena, both public and private. The 
private sector has adapted well in the competition for attracting 
nursing staff from a finite number of nurses in the profession by 
utilizing a wide variety of incentives to attract and retain staff. An 
excellent incentive that private health care systems use that the VA 
could benefit from are extending education benefits to nursing staff. 
This could be done through an employee scholarship program or similar 
incentive program.
    Recruitment and retention bonuses have also proven to be effective, 
resulting in an improvement in the quality of care for veterans as well 
as the overall morale of the nursing staff. Unfortunately, these are 
localized efforts by the individual VA medical facilities. We believe 
that the Veterans Health Administration (VHA) should authorize 
substantial recruitment incentives and bonuses across the entire 
system.
    We also believe that the VA should encourage all of its medical 
facilities to achieve the Magnet status. Magnet designations 
distinguish health care organizations that have a proven level of 
excellence in nursing care. Hospitals that achieve the Magnet status 
have excellent patient outcomes and higher rates of nurse retention and 
job satisfaction. The American Nurses Association previously testified 
to the importance of Magnet designations in recruiting and retaining a 
high quality nursing staff.
    Question 7. Public Law 108-445, the ``Department of Veterans 
Affairs Personnel Enhancement Act of 2004,'' was intended to reform the 
pay and performance system used by VA for hiring and retaining its 
physician and dentists. Can you give us a sense of how well you feel VA 
has implemented this legislation and if it can and will assist VA in 
attracting and retaining the best and brightest physicians?
    Answer. It is clear that Public Law 108-445 provides for a 
physician and dentist pay system that adjusts to market conditions 
without the need for intervening legislation while retaining some of 
the attractive elements of the civil service-like system that currently 
exists. Subsequently, two goals were identified to achieve the 
aforementioned ``[T]o provide VA with a system that is appropriately 
flexible . . . for the recruitment and retention of doctors and 
dentists to care for veterans,'' and ``physicians and dentists would be 
assured that their salaries will not be reduced during their service 
with VA.'' In addition, recognizing that physicians and dentists are at 
the ``front-lines'' of medicine, such that they know what is needed to 
provide care for veterans, the law requires that practicing physicians 
have a significant role in making recommendations to the Secretary or 
his or her designee as to the appropriate levels of salaries paid to 
members of their professions.
    While we recognize the need for pay system enhancements to better 
recruit and retain VA health care providers, we note that the end 
product is to provide timely access to quality medical care for our 
Nation's disabled veterans. In light of recent history wherein VA 
health care has not been properly funded to meet the demand, we share 
the growing concern amongst the frontline of VA regarding the ability 
to provide the funds necessary to maximize the use of the new three 
tier pay system for physicians and dentists.
    According to the Department of Labor, ``Physicians and surgeons 
held about 567,000 jobs in 2004; approximately 1 out of 7 was self-
employed and not incorporated. About 60 percent of salaried physicians 
and surgeons were in office of physicians, and 16 percent were employed 
by private hospitals. Others practiced in Federal, State, and local 
governments, including hospitals, colleges, universities, and 
professional schools; private colleges, universities, and professional 
schools; and outpatient care centers.'' We are concerned that the 
Medical Group Management Association (MGMA) survey data was not 
utilized in the recommended physician and dentist pay group and rate 
changes for the new pay system. Understanding that the MGMA represents 
a very different employment setting than VHA and that it is based 
solely on private practice income, VA's recruitment and retention 
initiative is not insulated against private practice and is subject to 
market forces captured in large part by the MGMA survey.
    Another cause for concern is obvious disregard of the Committee's 
explicit instruction for stakeholder input from VHA frontline personnel 
and transparency of the process in the making of the new pay system; 
particularly with the various committees and the compensation pay panel 
charged with making recommendations to the Secretary as to the 
appropriate levels of salaries. We also note that a number of 
professional associations and employee representatives were excluded 
from these deliberations. Therefore, we are greatly concerned about the 
impact this new pay system will have on frontline employees having been 
left out of the process, and the subsequent effect on prospective VA 
health care providers.
  

                                  
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