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



 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2006

                              ----------                              


                        TUESDAY, MARCH 15, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:32 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Craig, Feinstein, Byrd, and 
Murray.

                     DEPARTMENT OF VETERANS AFFAIRS

                        Office of the Secretary

STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY
ACCOMPANIED BY:
        JONATHAN B. PERLIN, M.D., Ph.D., MSHA, FACP, ACTING UNDER 
            SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION
        HON. VICE ADMIRAL DANIEL L. COOPER (USN RET.), UNDER SECRETARY 
            FOR BENEFITS, VETERANS BENEFITS ADMINISTRATION
        RICHARD A. WANNEMACHER, ACTING UNDER SECRETARY FOR MEMORIAL 
            AFFAIRS, NATIONAL CEMETERY ADMINISTRATION
        HON. TIM McCLAIN, GENERAL COUNSEL
        RITA A. REED, DEPUTY ASSISTANT SECRETARY FOR BUDGET

           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. Our meeting will come to order. I will 
say that this is our first hearing for the Veterans Affairs 
Department for our new subcommittee. I am very pleased to be 
able to work with the Department of Veterans Affairs. Of 
course, I have known the Secretary for a long time and have 
worked with the previous Secretary for this important 
Department. We are delighted that we now have this 
jurisdiction.
    I want to first tell you that we have votes starting at 3 
o'clock, five votes. So I am going to dispense with my opening 
statement because I want to hear from you, and then I want to 
have time for questions. I think what we will do is get as far 
as we can until the vote starts, and then we will see where we 
are and perhaps have to take a small recess and come back. But 
I will dispense with my opening statement and put it in the 
record.
    Welcome to you.
    Let me call on my distinguished ranking member with whom I 
work very closely. It is a great relationship. I think it is 
safe to say we are both very happy to have the Veterans Affairs 
Department in this subcommittee. With that, Senator Feinstein.

                 STATEMENT OF SENATOR DIANNE FEINSTEIN

    Senator Feinstein. Thank you very much, Madam Chairman. I 
echo your comments. I am delighted to work with you. It has 
been many years, and I do not think we have had a problem yet. 
So that is the good news.
    Additionally, I would ask that you allow me to join you in 
welcoming the lady and gentlemen assembled before us. I 
particularly want to welcome Secretary Nicholson. We look 
forward to working with you in this appropriation effort.
    This is a new chapter for the Military Construction 
Committee because we will be taking on the Veterans Affairs 
matters, and I think between the chairman and me, we represent 
two of the three States with the largest population of veterans 
in America. So we have a very unique opportunity to work on 
these challenges and opportunities.
    That said, I do want to let you know where I am coming 
from. I am very disappointed in the President's fiscal year 
2006 budget request for the Department of Veterans Affairs. 
This budget assumes savings of over $1 billion by doubling 
prescription drug co-payments and imposing a $250 enrollment 
fee on middle income veterans, many of whom are struggling to 
make ends meet as it is on incomes as low as $26,000 a year. 
More than 200,000 veterans would be adversely affected by these 
proposals. I think they are unrealistic assumptions. Congress 
has rejected them in the past and I hope we will continue to 
reject them.
    We are a Nation at war. The military has discharged more 
than 244,000 veterans from Iraq and Afghanistan, and the VA has 
already treated nearly 49,000 of those returning troops. Yet, 
this budget turns a blind eye to the increasing demands on the 
VA health care system caused by the influx of new veterans, as 
well as the aging population of veterans from earlier wars. 
Instead of reaching out to veterans, this budget proposes to 
shut more veterans out of the health care system by charging 
enrollment fees, by hiking co-pays on prescription drug 
benefits, and by limiting long-term nursing home care.
    This is not how we should be treating America's veterans. I 
know that money is tight, but the administration should not try 
to balance the books by forcing veterans to shoulder a greater 
share of the burden of health care costs.
    I know these are tough times, Mr. Secretary, but they must 
be addressed. My goal as the ranking member of this 
subcommittee is to do everything in my power to see that we 
keep the promises we made to our veterans and, in so doing, 
make the highest and best use of taxpayer dollars.
    Now, Madam Chairman, I look forward to working with you on 
this aspect of the budget. I also very much look forward to our 
taking over the mantel of the VA/HUD Subcommittee which I think 
did an excellent job in terms of appropriating for veterans and 
veterans affairs. Thank you very much.
    Senator Hutchison. Thank you.
    Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Madam Chairman, thank you. It is a delight 
to join you on this committee.
    Mr. Secretary, it is an honor to be in front of you again. 
We have seen each other I believe on three occasions now. I 
serve on the Veterans Committee, Budget, and Appropriations. I 
appreciate and understand the difficult task that is before 
you.
    Madam Chair, I know that you are short on time because of 
the votes, and I will submit my statement for the record.
    But let me just say this. I share the concerns of Senator 
Feinstein. I do not believe that we have budgeted for the care 
of our soldiers who are returning from war, nor for the ones 
that are already in long waiting lines. You have heard me 
before. You know that I am deeply concerned of the thousands of 
members who are coming home who will be discharged but will not 
have access to health care, particularly our Guard and Reserve 
members. We know that you are talking about community outreach 
clinics, but they are already turning poor patients away in our 
States. So they cannot take up the burden of this.
    Increasing co-pays, enrollment fees, closing our long-term 
care facilities is the wrong thing to be doing at a time when 
we have so many men and women who are serving us overseas.
    So I will submit my statement for the record, but I feel 
very strongly about this and will continue in any way I can to 
help us increase the budget for our veterans because I believe 
it is a promise that we have not kept and we need to follow up 
on.
    Senator Hutchison. Senator Byrd.

                  STATEMENT OF SENATOR ROBERT C. BYRD

    Senator Byrd. Thank you, Madam Chairman, and I thank those 
Senators who have preceded me. I wish to associate myself with 
their remarks.
    Mr. Secretary, during this time of war, few matters could 
be more important than the care that our Nation gives to our 
veterans. West Virginians are extremely proud of our veterans. 
Those men and women who have chosen to serve our Nation are 
owed an enormous debt. It is a moral responsibility that the 
United States carries, as President Lincoln said, ``to care for 
him who shall have borne the battle and for his widow and his 
orphan.''
    But the funding priorities outlined by President Bush in 
his budget undermine our country's commitment to America's 
veterans. The President proposes to double the co-payment for 
prescription drugs, impose a new $250 annual user fee for 
certain veterans, and continue a policy of turning away 
hundreds of thousands of veterans from VA hospitals because 
they are classified as low priority. According to the 
Congressional Research Service, continuing this policy on low-
priority veterans will deny a staggering 522,000 veterans care 
from VA hospitals by the end of this year.
    The American people must be told how many veterans will 
suffer under the President's budget proposal. The more than 
190,000 veterans in West Virginia receiving health care from VA 
medical centers in the Mountain State are threatened by these 
significant hikes in fees and co-payments. The expected wave of 
combat veterans from the Iraq and the Afghanistan wars will add 
to the stress on our VA facilities.
    Yet, instead of strengthening the VA medical system, the 
Bush administration weakens it. The Nation's three largest 
veterans organizations, the American Legion, the Veterans of 
Foreign Wars, and the Disabled American Veterans, have called 
the President's proposals the most tight-fisted, miserly budget 
for veterans programs. And they are right.
    I note that the President's $81.9 billion emergency 
supplemental does not include a single dime for veterans health 
care. Tax cuts and corporate giveaways are helping the super-
rich to get further ahead, but the President's budget leaves 
veterans health care far behind. For this Senator, ``support 
the troops'' means taking care of veterans after they come 
home. Our brave fighting men and women deserve much more from 
the White House than sloganeering and health care on the cheap.
    Thank you, Mr. Secretary. Thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Byrd.
    Senator Craig, who is the distinguished chairman of the 
Veterans Affairs Committee and a member of our subcommittee.

                    STATEMENT OF SENATOR LARRY CRAIG

    Senator Craig. Well, thank you, Madam Chairman, and again, 
congratulations on chairing this newly structured committee and 
the authority within. Also, let me congratulate Senator 
Feinstein on her new position as ranking on this structure.
    To all of you from the Veterans Administration, Mr. 
Secretary, welcome before this most important committee. I have 
had the privilege, Madam Chairman, of being in each one of 
these lady's and gentleman's departments. I will go back better 
understanding the operations of the Veterans Administration. It 
is critically important for all of us to understand what it 
does and the role it plays as we work with this very difficult 
budget.
    Just this past week--I have held hearings now with all the 
veterans service organizations. The traditional joint hearings 
between the House and the Senate were obviously well attended 
and we heard from all of these marvelous organizations of their 
concern for veterans and the urgency of much of the service 
provided.
    I think it is also noteworthy that over the last 4 years, 
we have done more to improve veterans services than ever in the 
history of our country, tremendous commitments of resources, a 
9.4 percent average increase on an annualized basis. For that, 
we can all be proud.
    We are now debating a budget that is different than what 
the President proposed by a substantial amount. We have a 
budget before us that does not have any of the co-pays in it, 
does not have any of the new fees in it. In fact, it is a 
straight plus-up of nearly $1 billion without any 
reconciliation instructions in it, Madam Chairman. That is a 
significant improvement that serves the veterans of our country 
the way we would want them to be served.
    Does it serve every veteran who once bore the uniform of a 
service of this country? It does not. Nor can we be expected as 
a country to serve those who are not service-connected, who are 
the 7's and 8's, who may well have their own health care 
insurance, but now, because of the phenomenal work that the 
Veterans Administration has done to improve the quality of 
health care delivery within the system, we have created a 
system that is now sought after by all, in large part because 
if they can gain access through the front door, they gain free 
health care, even though they may be among the most wealthy in 
our country, but they have simply borne the uniform.
    That is a question that we have to ask ourselves in a 
fundamentally and fiscally responsible way, and that is the 
question that is now before us on the floor of the Senate. I do 
believe, Madam Chairman, we are going to be given a budget by 
the Budget Committee and instructions to this subcommittee that 
we can work with, that we can hand them to these administrators 
who sit before us in a way that does meet most, if not all, of 
the challenges, that addresses the concerns of Senator Murray, 
as I have, that we have a lot of new, incoming veterans with 
extraordinary needs because of the character of warfare today 
and because of the character of health on the front lines and 
medicine on the front lines of this war.
    So there are a lot of challenges out there that I trust, 
Madam Chairman, you and the ranking member can work with and 
work with those of us in the authorizing committees to make 
happen in defense of America's veterans. That is our charge. It 
is our responsibility.
    Thank you.
    Senator Hutchison. Thank you, Mr. Chairman.
    And now, Mr. Secretary, we would be pleased to hear from 
you.

             STATEMENT OF THE HONORABLE R. JAMES NICHOLSON

    Secretary Nicholson. Thank you, Madam Chairman and members 
of the committee. Good afternoon.
    Allow me, if you would, to start by introducing those 
experts that I have here and people who are far more 
experienced at the Veterans Affairs Department than I at this 
point. I would like to start on my far left with Tim McClain, 
who is the General Counsel. My immediate left is Dr. Jonathan 
Perlin, who is the Acting Under Secretary for Health. My far 
right is the Acting Under Secretary for Memorial Affairs, Dick 
Wannemacher. In the middle here on this side is Admiral Dan 
Cooper, who is the Under Secretary for Benefits, and my 
immediate right is Ms. Rita Reed, who is the Deputy Assistant 
Secretary for Budget.
    I would ask, Madam Chairman, if I could have my complete, 
comprehensive written statement be submitted for the record, 
but that I would be allowed to offer some highlights here of 
the President's proposal before we take your questions.
    Senator Hutchison. Without objection.
    Secretary Nicholson. Madam Chairman, President Bush is 
requesting a record $70.8 billion for the Department of 
Veterans Affairs in fiscal year 2006: $37.4 billion for 
entitlement programs and $33.4 billion for discretionary 
programs. This total represents a 2.2 percent increase over the 
fiscal year 2005 enacted level. The discretionary funding level 
would represent an increase of $880 million, or 2.7 percent, 
over the enacted level for 2005. The proposed mandatory 
spending level represents a $639 million, or 1.7 percent, 
increase over 2005. This budget represents a total increase of 
47 percent with a 44 percent increase in discretionary funding 
since the beginning of the Bush administration.
    The President's 2006 proposal will allow us to meet the 
health care and benefit needs of all newly separated veterans 
of the conflicts in Iraq and Afghanistan to maintain the high 
standards of health care quality, for which VA is now 
nationally recognized while treating 5.2 million patients. It 
will allow us to follow through on an historic realignment of 
our health care infrastructure through the CARES process, to 
reduce the backlog of disability compensation and pension 
claims, and to continue the largest expansion of the national 
cemetery system since the Civil War.
    In the area of health care, in recent years the 
Department's successes in delivering top-notch health care have 
been stunning. I can brag about this because I had nothing to 
do with it. But this is really a magnificent organization of 
dedicated, competent, compassionate people. The VA exceeds the 
performance of private sector and Medicare providers for key 
health care quality indicators for which comparable data are 
available. A recent RAND Corporation study also shows that 
patients in VA's health care system are significantly more 
likely to receive recommended care than our private sector 
patients.
    This is all the more impressive when you consider the 
explosive growth in VA health care usage. In 2006, the VA will 
treat about 1 million more patients than were treated in 2001. 
The President's budget will ensure there is no slippage in our 
high level of performance, even at these elevated patient 
levels. Ninety-four percent of the primary care appointments 
are scheduled within 30 days of the patient's desired date, and 
93 percent of the specialty care appointments are also 
scheduled within that time frame.
    The President's 2006 budget asks that you enact two 
important provisions affecting only priority 7 and 8 veterans: 
an annual enrollment fee of $250 and an increase in pharmacy 
co-payments from $7 to $15 for a 30-day supply of drugs.
    The proposed enrollment fee is similar to the fee paid by 
career military retirees enrolled in the TRICARE system and 
some would argue even more justified. As you know, most TRICARE 
enrollees have served on active duty for at least 20 years and 
are former enlisted personnel with modest retirement incomes. 
The proposed enrollment fee would apply to those veterans who 
may have served as few as 2 years and who have no service-
connected disability and who do have reasonable incomes.
    In addition, those veterans who are in priority group 8 
have incomes above the HUD geographic means test.
    I would like to turn to long-term care. This budget 
provides all long-term care needs for veterans who are 70 
percent or more service-connected. It also provides for 
patients requiring short-term care subsequent to a hospital 
stay and those needing hospice or respite care and those with 
special needs such as ventilator dependence or spinal cord 
injury.
    To ensure fairness and consistency, the VA proposes similar 
eligibility criteria across all institutional, long-term care 
venues, VA, contract community, and State nursing homes. The 
Department would continue to expand access to non-institutional 
long-term care with an emphasis on community-based and in-home 
care. In many cases this approach allows veterans to receive 
these services in the comfort and familiar settings of their 
homes surrounded by their families.
    In order to be more prepared to care for our veterans 
returning from Iraq and Afghanistan, the VA's 2006 medical care 
request includes $1.2 billion for the prosthetics program, 
which is $100 million over the fiscal year 2005 enacted level. 
This will support the increasing workload associated with the 
purchase and repair of prosthetics and sensory aids to improve 
veterans' quality of life.
    The budget will also provide $2.2 billion, or $100 million 
over the 2005 level, to standardize and further improve access 
to mental health services across the system, including PTSD.
    We are also proposing a number of program enhancements to 
cover out-of-pocket costs for emergency care for eligible 
veterans in non-VA facilities, to exempt former POW's from co-
payments for VA extended care and exempt veterans from co-
payments for hospice care delivered in hospitals or at home.
    We have projected increased health care management 
efficiencies of 2 percent in 2006 which will yield about $600 
million in savings.
    The $750 million requested for CARES in 2006 brings the 
total 3-year investment to $2.15 billion. At its core CARES 
means greater access to higher quality care for more veterans 
closer to where they live. Its impact is already being felt in 
Chicago where the proceeds from an enhanced use lease of VA's 
Lakeside Hospital property are being reinvested at VA's 
Westside facility. This will lead to a new modern bed tower for 
Chicago's veterans.
    Finally, the $786 million proposed in support of VA's 
medical and prosthetic research program would fund about 2,700 
high-priority research projects to expand knowledge in areas 
critical to veterans health care needs. The combination of VA 
appropriations and funding from other sources would bring our 
2006 research budget to nearly $1.7 billion.
    Veterans benefits. The President's request includes $37.4 
billion for the entitlement costs associated with all benefits. 
Our request includes $1.26 billion for the management of the 
Department's benefits program, which is 6.6 percent over the 
2005 level. Veterans Benefits will continue to address an 
increased volume of compensation claims from separating service 
members and older veterans who had not previously submitted 
claims and from current recipients.
    The VA has made significant improvements to the claims 
decision process, but clearly more must still be done. VA takes 
seriously its obligation that every veterans claim must be 
treated fairly and equitably, regardless of the locality. We 
will and must be consistent. To address the issue of 
consistency, the IG is performing an independent system-wide 
review.
    Also, Veterans Benefits leadership is looking at training, 
medical exams, and other aspects of the system to ensure we 
clearly are working toward a consistent, fair, and equitable 
case-decision process for all veterans.
    The President's request would also permit us to continue 
the Benefits Delivery at discharge program. This program 
enables active duty service members to file disability 
compensation claims with VA staff at military bases, complete 
physical exams, and have their claims evaluated before their 
military separations or soon thereafter.
    Burial benefits. The 2006 budget includes $290 million in 
discretionary funding for VA's burial program, including 
operating and maintenance expenses for the National Cemetery 
Administration, capital programs, the administration of 
mandatory burial benefits, and the State cemetery grants 
program. This total is nearly $17 million, or 6.4 percent, over 
the 2005 level.
    It includes $90 million for cemetery construction projects. 
We are requesting $41 million in major construction funding for 
land acquisition for six new national cemeteries and $32 
million for the State cemetery grants program. These resources 
would enable us to increase to 82 percent, the percentage of 
veterans having a veterans cemetery burial option within 75 
miles of their homes.
    Madam Chairman, I would be remiss if I did not note that 
last year's VA National Cemetery Administration earned the 
highest rating ever achieved by a public or private 
organization in the 2004 American Customer Satisfaction Index, 
a rating of 95 on a scale of 100.

                           prepared statement

    So in closing, Madam Chairman, despite the many competing 
demands for Federal funding, the President continues to make 
veterans benefits and services a top priority of his 
administration. Our veterans deserve no less.
    We are now prepared to take your questions. Thank you.
    [The statement follows:]

                Prepared Statement of R. James Nicholson

    Madam Chairman and members of the Committee, good afternoon. I am 
happy to be here and I am deeply honored that the President has given 
me the opportunity to serve as Secretary of Veterans Affairs. My 
service in the United States Army was the defining experience of my 
life and instilled me with a strong sense of duty and esteem for my 
fellow veterans. I look forward to working with you and the thousands 
of dedicated employees who are carrying out the compelling mission of 
the Department of Veterans Affairs (VA) by ensuring the timely delivery 
of high-quality benefits and services to those veterans in need of same 
earned through their sacrifice and service in defense of freedom.
    In his February 2 State of the Union Address, the President 
underscored the need for America to restrain spending in order to 
sustain our economic prosperity. As part of this restraint, it is 
important that total discretionary and non-security spending be held to 
levels proposed in the 2006 budget. The budget savings and reforms in 
the budget are important components of achieving the President's goal 
of cutting the budget deficit in half by 2009. This budget gives VA 
what it needs to accomplish our priority mission and we urge the 
Congress to support it. The 2006 budget includes more than 150 
reductions, reforms, and terminations in non-defense discretionary 
programs. The Department wants to work with the Congress to achieve 
these savings.
    I am pleased to be here today to present the President's 2006 
budget proposal for VA. The request totals $70.8 billion--$37.4 billion 
for entitlement programs and $33.4 billion for discretionary programs. 
Our budget request for discretionary funds represents an increase of 
$880 million, or 2.7 percent, over the enacted level for 2005, and a 47 
percent increase since the beginning of the Bush Administration.
    With the resources requested for VA in the 2006 budget, we aim to 
build upon many of the Department's achievements that have dramatically 
improved benefits and services to veterans and their families since the 
President came to office. The most noteworthy accomplishments are that 
VA:
  --provides health care to about 1 million more patients
  --improved the quality of patient care that sets the national 
        standard of excellence for the health care industry
  --dramatically lowered the backlog of rating claims for disability 
        compensation and pension from a high of 432,000 to 321,000 (for 
        all claims the backlog peaked at over 600,000)
  --reduced the average length of time to process compensation and 
        pension claims from a high of 230 days to approximately 160 
        days
  --continued the largest expansion of the national cemetery system 
        since the Civil War to honor veterans with a final resting 
        place and lasting memorial that commemorates their service to 
        our country.
    With strong support from the President, VA has made excellent 
progress in sharpening its focus on more effectively meeting the needs 
of those veterans who count on us the most--veterans with service-
connected disabilities, those with lower incomes, and veterans with 
special health care needs. I fully support this strategy and am 
committed to ensuring that our health care resources continue to be 
concentrated on care for veterans most in need of the Department's 
services. As an integral part of this focused strategy, we will make it 
a top priority to provide ongoing benefits and services to the 
servicemen and women who served in Operation Enduring Freedom and 
Operation Iraqi Freedom. VA's goal is to ensure that every seriously 
injured or ill serviceman or woman returning from combat receives 
priority treatment and consideration. We will continue to work closely 
with the Department of Defense (DOD) to develop ways by which to move 
records more efficiently between the two agencies, share critical 
medical information electronically, protect the health of troops 
stationed in areas where environmental hazards pose threats, process 
benefit claims as one shared system, and in every way possible, ease 
their transition from active duty to civilian life.
                              medical care
    The President's 2006 request includes total budgetary resources of 
$30.7 billion (including $750 million for construction and $2.6 billion 
in collections) for the medical care program, an increase of 2.5 
percent over the enacted level for 2005, and more than 47 percent above 
the 2001 level. The $750 million in construction will be devoted to the 
Capital Asset Realignment for Enhanced Services (CARES) program, 
bringing the total Department investment to $2.15 billion over 3 years.
    Given the current fiscal environment, it is more important than 
ever that VA concentrate its resources, policies, and strategies on 
those veterans identified by Congress as high priority. The President's 
2006 budget request includes policies and strategies used successfully 
during the last few years to focus VA health care resources on veterans 
with service-connected disabilities, those with lower incomes, and 
veterans needing our specialized services. In particular, this budget 
assumes continued suspension of enrollment of new Priority 8 veterans, 
as this has proven to be the most effective vehicle through which to 
focus our health care resources on our highest priority patients.
    But maintaining the current enrollment policy will not in itself 
ensure us sufficient resources for the care of those who need us the 
most. The President's 2006 budget asks that you enact two important 
legislative proposals--an annual enrollment fee of $250 and an increase 
in pharmacy co-payments from $7 to $15 for a 30-day supply of drugs, 
both pertaining to only Priority 7 and 8 veterans. This fee and the 
increase in co-payments pertain only to veterans who have no 
compensable service-connected disabilities and do have the means to 
contribute modestly to the cost of their care. This budget asks these 
veterans to assume a small share of the cost so that we may adequately 
care for high-priority veterans.
    The proposed enrollment fee is very similar to the fee the law 
requires retired career service members to pay in order to participate 
in TRICARE, and is arguably even more justified. As you know, TRICARE 
enrollees generally must have served on active duty for at least 20 
years, and many of them are former enlisted personnel with modest 
retirement incomes. The proposed enrollment fee would apply to those 
veterans who may have served as few as 2 years and who have no service-
connected disability. In addition, some of these veterans (those in 
Priority Group 8) have incomes above the HUD geographic means test.
    I recognize that Congress has not supported either of these 
proposals during the past 2 years. However, these two legislative 
proposals are consistent with the priority health care structure 
Congress enacted several years ago, and will help us meet the needs of 
our highest priority veterans. In addition, past utilization of VA's 
health care services has demonstrated that veterans with higher incomes 
(Priority 7 and 8 veterans) rely less on VA for delivering their health 
care and usually have other health care options, including third party 
insurance coverage and Medicare. An annual enrollment fee of $250 and 
an increase in co-payments for pharmacy benefits from $7 to $15 would 
give higher income, non-disabled Priority 7 and 8 veterans the option 
of sharing a small portion of the cost of their care or utilizing other 
health care options. Our high-priority patients typically do not have 
other health care options, so we must act decisively to protect their 
interests by making sure that sufficient resources are available to 
handle their health care needs.
    With medical care resources of $30.7 billion, we project that we 
will treat more than 5.2 million patients. Those in Priorities 1 to 6 
will comprise 78 percent of the total number of veteran patients in 
2006. This will represent the third consecutive year during which our 
high-priority veterans will increase as a percentage of all veterans 
treated. In addition, about 9 of every 10 medical care dollars in 2006 
will be devoted to meeting the health care needs of those veterans who 
count on us the most.
    Even with an increasing patient workload among our highest priority 
veterans, we will continue our steadfast commitment to providing high-
quality and accessible health care that sets the national standard of 
excellence for the health care industry. Our two primary measures of 
health care quality--clinical practice guidelines index and prevention 
index--focus on the degree to which VA follows nationally recognized 
guidelines and standards of care that the medical literature has proven 
to be directly linked with improved health outcomes for patients and 
more efficient care. Our performance on the clinical practice 
guidelines index, which focuses on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to hold steady at the current high performance 
level of 77 percent. As an indicator aimed at primary prevention and 
early detection recommendations dealing with immunizations and 
screenings, the prevention index is projected to remain at its existing 
high rate of performance of 88 percent. VA continues to exceed the 
performance of private sector and Medicare providers for all 15 key 
health care quality indicators for which comparable data are available. 
These indicators include cancer screening for early detection, and 
immunization for influenza and pneumonia. In addition, they cover 
disease management measures such as compliance with accepted clinical 
guidelines in managing diabetes, heart disease, hypertensive disease, 
and mental health.
    The Department has greatly improved access to our health care 
services during the last few years by opening additional outpatient 
clinics, applying information technology strategies to streamline 
administrative, business, and care delivery processes, and implementing 
pay policies and human resource management practices to facilitate 
hiring and retain sufficient health care workers to meet capacity 
demands across the full continuum of care. These initiatives have 
helped VA raise the percent of primary care appointments scheduled 
within 30 days of the patient's desired date to 94 percent and the 
percent of specialty care appointments scheduled within 30 days of the 
patient's desired date to 93 percent. By continuing these types of 
strategies, improving clinical efficiencies, and effectively utilizing 
the resources requested in our 2006 budget, VA will maintain these high 
performance levels.
    The Department's record of success in health care delivery is 
substantiated by the results of the 2004 American Customer Satisfaction 
Index (ACSI). Conducted by the National Quality Research Center at the 
University of Michigan Business School, the most recent ACSI survey 
found that customer satisfaction with VA's health care system was 
markedly above the satisfaction level for Federal Government services 
as a whole. Results released in December 2004 revealed that inpatients 
at VA medical centers recorded a satisfaction level of 84 out of a 
possible 100 points, while outpatients at VA clinics registered a 
satisfaction score of 83. Both of these are well above the government 
average of 72.
    While VA is excelling compared to its private sector counterparts, 
we are committed to doing even better in the future. The results of a 
recent study conducted by the RAND Corporation revealed that patients 
in VA's health care system were more likely to receive recommended care 
than private-sector patients. Quality of care was better for VA 
patients on all measures except acute care, for which care was similar 
for both patient groups. RAND researchers examined the medical records 
of nearly 600 VA patients and about 1,000 non-VA patients with similar 
health problems. They compared the treatment received by both groups to 
well-established standards for medical care for 26 conditions. They 
found that 67 percent of VA patients received care that met the latest 
standards of the health care profession compared with 51 percent of 
non-VA patients. For preventive care, such as vaccination, cancer 
screening, and early disease detection and treatment, 64 percent of VA 
patients received the appropriate care compared to only 44 percent in 
the private sector. The RAND researchers attributed the difference in 
patient care to technological innovations, such as VA's computerized 
patient records, and to performance measurement policies holding top 
managers accountable for standards in preventive care and the treatment 
of long-term conditions.
    As another means by which to ensure sufficient resources are 
available to address the health care needs of those veterans who count 
on us the most, VA is proposing to revise the eligibility criteria for 
long-term care services to focus on the following groups of veterans:
  --those injured or disabled while on active duty, including veterans 
        who served in Operation Enduring Freedom and Operation Iraqi 
        Freedom
  --those catastrophically disabled
  --patients requiring short-term care subsequent to a hospital stay
  --those needing hospice or respite care.
    These eligibility criteria would be applied to VA-sponsored long-
term care services, including VA, community, and State nursing homes. 
This long-term care strategy will save approximately $496 million that 
will be redirected toward meeting the health care needs of veterans 
with service-connected disabilities, those with lower incomes, and 
veterans with special health care needs.
    In 2006 the Department will continue to expand access to non-
institutional long-term care services to all enrolled veterans with an 
emphasis on community-based and in-home care. In many cases this 
approach allows VA to provide these services to veterans where they 
live and to care for them in the comfort and familiar setting of their 
home surrounded by their family. During 2006 VA will increase the 
number of patients receiving non-institutional long-term care, as 
measured by the average daily census, to about 35,500. This total is 
over 50 percent above the number of patients receiving this type of 
care in 2001. Funding for non-institutional long-term care in 2006 will 
be about 67 percent higher than the resource level devoted to this type 
of health care service in 2001.
    VA's 2006 medical care request includes $1.2 billion ($100 million 
over the 2005 enacted level) to support the increasing workload 
associated with the purchase and repair of prosthetics and sensory aids 
to improve veterans' quality of life. VA is already providing 
prosthetics and sensory aids to many military personnel who served in 
Operation Enduring Freedom and Operation Iraqi Freedom and the 
Department will continue to provide them as needed.
    The President's 2006 budget includes $2.2 billion ($100 million 
over the 2005 level) to continue our effort to improve access to mental 
health services across the country. These funds will help ensure VA 
provides standardized and equitable access throughout the Nation to a 
full continuum of care for veterans with mental health disorders. The 
Department will place particular emphasis on providing care to those 
suffering from post-traumatic stress disorder as a result of their 
service in Operation Enduring Freedom and Operation Iraqi Freedom.
    We have included a management efficiency rate of 2 percent which 
will yield about $600 million in 2006. We continue to monitor and 
emphasize the need for performance that results in minimizing unit 
costs where possible, and eliminating inefficiency in the provision of 
quality health care. To that end, we have included within this savings 
target, $150 million that will be achieved through implementation of 
improved contracting practices with medical schools and other VA 
affiliates for scarce medical specialties. This is a long-standing 
issue for which the Department is aggressively implementing management 
changes to ensure fair pricing for the services provided by our 
affiliates.
    As a result of continual improvements in our medical collections 
processes and the policy changes presented in this budget request, we 
expect to collect about $2.6 billion in 2006 that will substantially 
supplement the resources available from appropriated sources. This 
figure is $635 million (or 32.5 percent) above the 2005 estimate, with 
two-thirds of the increase due to the two important legislative 
proposals (the $250 enrollment fee and the increase in pharmacy co-
payments), and is more than 48 percent higher than the 2004 collections 
total. VA has an expanded revenue improvement strategy that focuses on 
modeling industry best performance by establishing industry-based 
performance and operational metrics, developing technological 
enhancements, and integrating industry-proven business approaches, 
including the establishment of centralized revenue operation centers. 
There are two electronic data initiatives underway that will add 
efficiencies to the billing and collections processes. The electronic 
and insurance identification and verification project is providing VA 
medical centers with an automated mechanism to obtain veterans' 
insurance information from health plans that participate in this 
electronic data exchange. We are pursuing enhancements which will 
provide additional insurance information stored by other government 
agencies. Our second initiative will result in electronic outpatient 
pharmacy claims processing to provide real-time claims adjudication.

        CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

    The President's budget request includes $750 million in 2006 to 
continue the CARES program that renovates and modernizes VA's health 
care infrastructure and provides greater access to higher quality care 
for more veterans, closer to where they live. About $50 million of this 
total relates to the sale of assets and enhanced use proceeds of the 
Lakeside hospital in Chicago. The budget request provides a 3-year 
(2004-2006) investment total of $2.15 billion committed to this 
historic transformation of our health care system. These resources will 
be used to address our prioritized list of major capital investments. 
The proposed projects for 2006 will advance the CARES program by 
providing construction funding for five projects for which design work 
has already started, as well as two additional projects to be initiated 
in 2006. All of these capital projects support the recommendations 
included in the CARES Decision report. About half of the CARES funding 
requested for 2006 will be devoted to three major construction 
projects:
  --Las Vegas, Nevada, New Medical Facility--$199 million to complete 
        phase two construction, providing up to 90 inpatient beds, a 
        120-bed nursing home care unit, ambulatory care center, and 
        administrative and support functions, all of which will expand 
        capacity and increase the scope of health care services 
        available; VA is working with DOD to ensure mutual needs are 
        met
  --Cleveland, Ohio, Cleveland-Brecksville Consolidation--$87.3 million 
        to complete phase two construction; this project will 
        consolidate and co-locate all clinical and administrative 
        functions of a two-division medical center at the Wade Park VA 
        Medical Center, leading to annual cost savings of more than $23 
        million and enhancing the quality of care
  --Pittsburgh, Pennsylvania, Consolidation of Campuses--$82.5 million 
        to complete phase two construction; this project will 
        consolidate a three-division health care delivery system into 
        two divisions which will improve patient care by providing a 
        state-of-the-art health care environment and reducing operating 
        expenses.
    Our capital investment planning process and methodology involve a 
Department-wide approach for the use of capital funds and ensure all 
major investments are based upon sound economic principles and are 
fully linked to strategic planning, budget, and performance measures 
and targets. All CARES projects have been reviewed using a consistent 
set of evaluation criteria that address service delivery enhancements, 
safeguarding assets, support of special emphasis programs and services, 
capital portfolio goals, alignment with the President's Management 
Agenda, and financial priorities.

                    MEDICAL AND PROSTHETIC RESEARCH

    The President's 2006 budget includes $786 million to support VA's 
medical and prosthetic research program. This resource level will fund 
nearly 2,700 high-priority research projects to expand knowledge in 
areas critical to veterans' health care needs, most notably research in 
the areas of aging, acute and traumatic injury, the effects of military 
and environmental exposures, mental illness, substance abuse, cancer, 
and heart disease.
    The requested level of funding for the medical and prosthetic 
research program will position the Department to build upon its long 
track record of success in conducting research projects that lead to 
clinically useful interventions that improve veterans' health and 
quality of life. Examples of some of the recent contributions made by 
VA research to the advancement of medicine are:
  --development of an artificial nerve system that enables a patient 
        with upper-limb paralysis to grasp objects
  --creation of a new collaborative model for treating depression in 
        older adults, the application of which potentially saves lives, 
        reduces patients' level of pain, and improves their overall 
        functioning
  --the finding that proper intake of cereal fiber and vitamin D are 
        among the best ways to prevent serious colon polyps that may 
        lead to colorectal cancer
  --development of an oral drug that halts the deadly action of the 
        smallpox virus.
    In addition to VA appropriations, VA researchers compete and 
receive funds from other Federal and non-Federal sources. Funding from 
external sources is expected to continue to increase in 2006. Through a 
combination of VA resources and funds from outside sources, the total 
research budget in 2006 will be nearly $1.7 billion.

                           VETERANS' BENEFITS

    The Department's 2006 budget request includes $37.4 billion for the 
entitlement costs mainly associated with all benefits administered by 
the Veterans Benefits Administration (VBA). This total includes an 
additional $812 million for disability compensation payments to 
veterans and their survivors for disabilities or diseases incurred or 
aggravated while on active duty. Recipients of these compensation 
benefits are projected to increase to 3 million in 2006 (2.7 million 
veterans and 0.3 million survivors, or 400,000 more than when the 
President came to office).
    The President's budget request includes $1.26 billion for the 
management of the following benefits programs--disability compensation; 
pension; education; vocational rehabilitation and employment; housing; 
and life insurance. This is $77 million, or 6.6 percent, over the 2005 
level. As a result of the enactment of the Consolidated Appropriations 
Act, 2005 (Public Law 108-447), an additional $125 million will be made 
available to VBA (through a transfer of funds from medical care) for 
disability benefits claims processing. Of this total, $75 million will 
be used during 2005 and the remaining $50 million will be used in 2006. 
The overwhelming majority of these funds will be used to address the 
increased volume of compensation claims from both separating service 
members and older veterans who had not previously submitted claims.
    As a Presidential initiative, improving the timeliness and accuracy 
of claims processing remains the Department's top priority associated 
with our benefits programs. Last year the timeliness of our 
compensation and pension claims processing improved by 9 percent (from 
182 days in 2003 to 166 days in 2004). While we were successful in 
reducing the time it takes to process claims for compensation and 
pension benefits, we were not able to improve timeliness as much as we 
had projected at the beginning of the year. Entering 2004, VA was well 
positioned to meet our performance goals pertaining to the timeliness 
of processing claims. However, a September 2003 decision by the Federal 
Circuit Court in the case of the Paralyzed Veterans of America et. al. 
v. the Secretary of Veterans Affairs required VA to keep veterans' 
claims open for 1 year before making a decision to deny a claim. As a 
result, decisions on over 62,000 claims were deferred, many for as much 
as 90 days. While the President signed correcting legislation in 
December 2003, the impact of the court decision in the early portion of 
2004 was substantial, as the number of pending claims had grown 
dramatically. VA made significant progress during the last half of the 
year, but we were not able to fully overcome the negative effects from 
this court decision on our claims processing timeliness.
    We have had to revise our claims processing timeliness goals for 
the next 2 years due, in part, to the lingering effect of the Federal 
Circuit Court decision. Also having an impact on the timeliness of 
processing is the increasing volume of disability claims and the 
complexity of the claims. In addition, VA will continue to face the 
retirement of staff members highly experienced in processing claims. 
While we have established a sound succession plan, the new employees we 
are hiring will require both extensive training and substantial claims 
processing experience in order for them to reach the productivity level 
of those leaving the Department.
    During 2005 we expect to reduce the average number of days to 
process compensation and pension claims to 145 days, an improvement of 
12.7 percent from the 2004 performance level. With the resources 
requested in the 2006 budget, we will be able to maintain this improved 
timeliness in support of this Presidential initiative. In addition, we 
will reduce the number of pending claims for compensation and pension 
benefits to 283,000 by the end of 2006, a reduction of 12 percent from 
the total at the close of 2004.
    We will increase our efforts to ensure the consistency of our 
disability evaluations from one regional office to another. VA has made 
significant improvements in both the accuracy and consistency of its 
benefit entitlement decisions due to increased quality assurance 
efforts and more focused training of claims adjudicators. However, more 
must be done to ensure the Department meets its commitment to treating 
every veteran's claim fairly and equitably regardless of locality. A 
system-wide review of the rating program for disability compensation is 
underway. In addition to this independent review, the Veterans' 
Disability Benefits Commission has been established to carry out a 
study of the statutory benefits that are provided to compensate and 
assist veterans and their survivors for disabilities and deaths 
attributable to military service. This commission is expected to 
examine and make recommendations concerning the appropriateness of 
these statutory benefits, the appropriateness of the level of the 
benefits, and the appropriate standard or standards for determining 
whether a disability or death of a veteran should be compensated. VA's 
efforts to improve the consistency of disability evaluations are 
supported in the 2006 budget by a request for $1.2 million for skills 
certification testing and $2.6 million for continued development of 
computer-based training tools. These initiatives will complement other 
ongoing efforts supported by our budget that address the issue of 
consistency and accuracy. Among these are:
  --revision of all of the regulations that govern the compensation and 
        pension programs in plain language to ensure that the rules can 
        be applied consistently and fairly
  --in-depth data analysis of benefit decisions to identify potential 
        areas of inconsistency, increasingly possible with our new 
        information technology applications and tools
  --centralized processing of appeals remanded by the Board of 
        Veterans' Appeals, and ongoing quality reviews of appealed 
        claims decisions.
    An important and successful component of VA's vision for providing 
a seamless transition for service members separating from active duty 
is the Benefits Delivery at Discharge (BDD) program. The BDD program 
enables active duty service members to file disability compensation 
claims with VA staff at military bases, complete physical exams, and 
have their claims evaluated before, or closely following, their 
military separation dates. Transitioning service members benefit 
greatly from the BDD program, which has been a vital part of the 
Department's strategy for improving timeliness and accuracy of 
disability compensation claims processing.
    We believe the BDD program provides opportunities to not only 
benefit transitioning service members through timely and accurate 
claims processing, but also to bring new processing improvements and 
efficiencies to the system through consolidation of claims evaluation 
activities. An initiative is currently underway to consolidate 
disability compensation rating and authorization actions on all BDD 
claims to two sites nationwide. VA staff will continue work with 
transitioning service members at military bases to establish claims and 
arrange for timely medical exams, thereby retaining these successful 
aspects of the BDD program.
    In support of the education program, the 2006 budget proposes $7.8 
million for continued development and implementation of the Education 
Expert System. The requested funds will be used to first transition 
education processing to VBA's corporate environment, followed by the 
development and deployment of a processing system that receives 
application and enrollment information electronically and processes 
that information in the new corporate environment without human 
intervention. While it will be a number of years before this system is 
fully deployed, it will ultimately lead to substantial improvements in 
education claims processing timeliness.
    In April 2004 the Department's Vocational Rehabilitation and 
Employment Task Force released its report containing more than 100 
recommendations on how to improve service to disabled veterans. The 
focus of the report was on development and implementation of a new, 
integrated service delivery system based on an employment-driven 
process. In response to the task force's recommendations, VA is 
including $4.4 million in the 2006 resource request to be used for 
establishing a job resource lab in each regional office. These labs 
will include all of the necessary equipment, supplies, and resource 
materials to aid VA staff and veterans in conducting comprehensive 
analyses of local and national job outlooks, developing job search 
plans, preparing for interviews, developing resumes, and conducting 
thorough job searches. These self-service job resource labs will assist 
veterans in acquiring suitable employment through the use of a 
comprehensive on-line employment preparation and job-seeking tool.
    In order to make the delivery of VA benefits and services more 
convenient for veterans and more efficient for the Department, we are 
requesting $4.4 million for the collocation and relocation of some 
regional offices. This effort may involve collocations using enhanced-
use authority, which entails an agreement with a private developer to 
construct a facility on Department-owned grounds and then leasing all 
or part of it back to VA. At the end of these long-term lease 
agreements, the land and all improvements revert to VA ownership.

                                 BURIAL

    The President's 2006 budget includes $290 million in discretionary 
funding for VA's burial program, which includes operating and 
maintenance expenses for the National Cemetery Administration, capital 
programs, the administration of mandatory burial benefits, and the 
State Cemetery Grants program. This total is nearly $17 million, or 6.4 
percent, over the 2005 enacted level.
    The 2006 request includes $167 million in administrative funding 
for VA's burial program, an increase of $7.3 million (or 4.6 percent) 
from the 2005 enacted level. Within this total, $156 million is for the 
operations and maintenance of VA's national cemeteries and $11 million 
is for the administrative processing of claims for burial benefits. The 
additional funding will be used to meet the growing workload at 
existing cemeteries, primarily by increasing staffing and contract 
maintenance. The growth in workload is a direct result of the aging of 
the veteran population. The annual number of veteran deaths continues 
to rise and VA projects an increase in interments of about 4 percent a 
year for the next several years.
    Our budget request for the burial program includes $90 million for 
construction projects. Of this total, $65 million is for major projects 
and $25 million is for minor projects. Consistent with the provisions 
of the National Cemetery Expansion Act of 2003, we are requesting $41 
million in major construction funding for land acquisition for six new 
national cemeteries in the areas of Bakersfield, California; 
Birmingham, Alabama; Columbia-Greenville, South Carolina; Jacksonville, 
Florida; Sarasota, Florida; and southeastern Pennsylvania. The 2006 
request also includes funding to develop an annex for the expansion of 
Fort Rosecrans National Cemetery in Miramar, California. In addition, 
this budget provides $32 million for the State Cemetery Grants program.
    Our resource investments in the burial program produce positive 
results in service delivery to veterans and their families. We will 
expand access by increasing the percent of veterans served by a burial 
option within 75 miles of their residence to 82.2 percent in 2006, 
which is 6.9 percentage points above the 2004 figure. While our 2004 
performance was extremely high in several key areas, we will continue 
to improve our performance in 2006. We have established the following 
performance goals for 2006:
  --increase to 96 percent (from 94 percent in 2004) those who rate the 
        quality of service provided by the national cemeteries as 
        excellent
  --increase to 99 percent (from 98 percent in 2004) those who rate 
        national cemetery appearance as excellent
  --increase to 89 percent (from 87 percent in 2004) the proportion of 
        graves in national cemeteries marked within 60 days of 
        interment.
    These performance improvements will further enhance the outstanding 
reputation of VA's National Cemetery Administration which, in 2004, 
earned the highest rating ever achieved by a public or private 
organization in the American Customer Satisfaction Index (ACSI). These 
results demonstrated that the Department's national cemeteries produced 
a customer satisfaction rating of 95 out of a possible 100 points. This 
is two points higher than the last survey conducted in 2001 when VA's 
national cemeteries also ranked number one among Federal agencies in 
customer satisfaction.

                        MANAGEMENT IMPROVEMENTS

    VA continues to aggressively pursue a variety of initiatives aimed 
at ensuring we apply sound business principles to all of the 
Department's operations. Two of our most successful management 
improvement efforts during the last year focus on the strategic 
management of human capital and capital asset management.
    As an integral component of our succession planning activities, we 
released a state-of-the-art ``VA Recruitment'' CD-ROM in September 2004 
promoting the Department as an employer of choice. We distributed this 
to colleges and universities, military transition centers, veterans 
organizations, and VA vocational rehabilitation centers, offices, and 
medical centers. This initiative creates a corporate recruitment 
marketing approach that will give VA a competitive edge in attracting 
highly-qualified career applicants. The CD-ROM uses graphics and video 
streaming to present a wide spectrum of career opportunities and 
describes VA's goals and services, occupations, and the benefits of 
working for the Department. We will continue to focus on creative 
marketing initiatives and outreach to prospective applicants.
    VA has also launched a Capital Asset Management System (CAMS) which 
is an integrated, Department-wide system that enables us to establish, 
analyze, monitor, and manage our portfolio of diverse capital assets 
through their entire lifecycle from formulation through disposal. CAMS 
provides a strategic view of existing, in-process, and proposed asset 
investments across all VA program offices and capital asset types. All 
offices now use this shared system to collect and monitor real property 
and capital asset information. In addition, VA has been approached by 
numerous agencies, including the Departments of Defense, Homeland 
Security, Commerce, and Interior to explore the replication of CAMS in 
their organizations.
    VA's progress in this area places it in the forefront of other 
Federal agencies in terms of its ability to meet the real property 
performance measures and guidelines that were recently finalized by the 
newly created Federal Real Property Council.
    We are currently in the process of fully evaluating all of the 
information gathered during the operational tests of the Core Financial 
and Logistics System (CoreFLS) conducted last year. This year we will 
complete a comprehensive analysis of the product and any existing 
configuration gaps, examine lessons learned from the pilot tests, and 
reevaluate our business processes. This will provide us with the 
information needed to refine the system as well as develop improved 
change management, training, and implementation procedures that are 
critical to successful deployment. In anticipation of an enhanced 
financial management system moving forward to full deployment at VA 
facilities nationwide, the Department's 2006 budget includes $70.1 
million for this project.
    In support of one of the primary electronic government initiatives 
for improving internal efficiencies and effectiveness, the Department's 
2006 budget provides $8 million to continue the migration of VA's 
payroll services to the Defense Finance and Accounting Service (DFAS). 
This initiative will consolidate 26 Federal payroll systems down to 2 
Federal payroll provider partnerships. VA is working with DFAS on all 
required tasks to ensure successful migration.

                                CLOSING

    In summary, Madam Chairman, our 2006 budget request of $70.8 
billion will provide the resources necessary for VA to:
  --provide timely, high-quality health care to more than 5.2 million 
        patients; 78 percent of all veteran patients will be veterans 
        with service-connected disabilities, those with lower incomes, 
        or veterans with special health care needs
  --maintain the 2005 performance level of 145 days, on average, to 
        process compensation and pension claims
  --increase access to our burial program by ensuring that more than 82 
        percent of veterans will be served by a burial option within 75 
        miles of their residence.
    I look forward to working with the members of this committee to 
continue the Department's tradition of providing timely, high-quality 
benefits and services to those who have helped defend and preserve 
freedom around the world.
    That concludes my formal remarks. My staff and I will be pleased to 
answer any questions.

    Senator Hutchison. Thank you very much, Mr. Secretary.
    I would like to have a 5-minute round. Each of us can have 
one round and then we will definitely have a second and maybe a 
third.
    First of all, Mr. Secretary, I certainly agree with the 
Veterans Administration's principle that we should focus on 
care for priority 1 through 6 veterans. I think everyone would 
agree that that should be our highest priority. Do you agree 
that we must have full funding for those priority 1 through 6 
veterans, whatever else happens?
    Secretary Nicholson. Yes, Madam Chairman. This budget 
reflects that. We have a mandate to take care of those veterans 
who need us the most, and that is those veterans who have been 
injured as a result of their service or become ill, including 
mental illness as a result of that service, those that are down 
and out, the poor, indigent, and those in need of unique, 
special care, and that is those categories.
    Senator Hutchison. This is my question. If the policy 
provisions regarding 7's and 8's with the added enrollment fees 
and co-payments were not enacted, would there still be full 
funding in this budget for priorities 1 through 6?
    Secretary Nicholson. Yes, Madam Chairman, there would. We 
would still be able to take care of those priorities.
    Senator Hutchison. Thank you.

                        THIRD PARTY COLLECTIONS

    Along that line, I understand that you have the authority 
to collect payments from private health insurance for the cost 
of treating veterans' non-service-connected disabilities. So 
when we are looking at the priority 7's and 8's, which have 
become really the growth area for the medical care for 
veterans, according to the GAO your present collection rate is 
only 41 percent and your fiscal year 2006 budget submission 
sets a target of only 41 percent. I wondered why this 
collection target seems low and if you are looking at trying to 
improve that collection rate and perhaps a different way to get 
more income from the 7's and 8's to make sure that we are doing 
the best we can with what we have.
    Secretary Nicholson. Let me respond in part, Madam 
Chairman, and then I am going to ask Dr. Perlin to comment. It 
is 6 weeks today that I have been Secretary, so there are just 
one or two things that I do not know yet.
    Senator Hutchison. We understand totally and we are not 
expecting perfection until next year.
    Secretary Nicholson. It is a very important question. You 
will note that in this budget proposal it shows collections 
being up by 15 percent over last year. I will say that I think 
the VA has shown a commendable transformation in its culture, 
going from virtually no collections, a no-collection culture 
habit mandate, to in a very short time, collecting a 
significant amount of money. But it is still a work in process. 
It is very important.
    I will ask Dr. Perlin if he would comment further.
    Senator Hutchison. Dr. Perlin.
    Dr. Perlin. Thank you, Madam Chairman. The Secretary is 
absolutely right in terms of our Veterans Health Administration 
learning how to collect, and the progress has been substantial. 
In fact, in 2001, our collections were on the order of $700 
million. Today they will approach in the 2006 budget on the 
order of $2.1 billion. That budget builds in an 11 percent 
increase, or collections of $211 million additional.
    I think the 41 percent is important because we need to keep 
moving up, but I would note that it is unadjusted for Medicare. 
As you know, we cannot collect for Medicare, but the figure 
actually reflects the funds that we are not able to collect. So 
actually it is artificially deflated. We do benchmark against 
private sector, and we have been using gross days revenue 
outstanding, and I am pleased to say that we are closing in on 
setting aggressive targets. But your point is well taken. We 
will continue to push the aggressive collections.
    [The information follows:]

    The Department of Veterans Affairs (VA) is not allowed (by law) to 
bill and collect from Medicare. The unadjusted billing to collection 
ratio of 41 percent reflects the large number of over-65, Medicare-
eligible population that VA serves which cannot be billed or collected. 
VA maintains an adjusted billing to collection ratio which accounts for 
the Medicare-eligible population and this ratio has been in the 75 
percent range for fiscal year 2004 and fiscal year 2005 and provides a 
more realistic measure of performance.
    To improve the collections to billings Medicare-adjusted ratio, VA 
is taking the following actions:
  --Metric Calculation.--Collections to billings calculation attempts 
        to quantify net billings by projecting net amounts due from 
        third parties and secondary payors. The current calculation 
        utilizes national data and does not fully reflect VISN 
        differences in population compositions (veterans older and 
        younger than 65) and Health Maintenance Organization (HMO) 
        penetration that impacts this performance metric.
    --Action.--The Veterans Health Administration (VHA) is working to 
            enhance the metric calculation for fiscal year 2006 to 
            incorporate population variations and HMO penetration 
            differences that could impact overall results. Also, full 
            implementation of the e-MRA (Medicare-equivalent remittance 
            advice) system throughout VHA will improve the specificity 
            of predicting these net realizable amounts.
  --Denial-Management Tracking System.--The private sector approaches 
        aggressively the identification, tracking, and resolution of 
        third-party denials. VHA is presently establishing several 
        best-practice denial-management initiatives at the Veterans 
        Integrated Service Network (VISN) level.
    --Action.--VHA is working to compile the best practices from the 
            VISN pilots and roll out a comprehensive national denial-
            management strategy in the upcoming months.
  --Formalized Managed-Care Contracts.--The private sector has the 
        ability to project net billings with great specificity due to 
        established contract rates with managed-care payors, which can 
        easily be loaded into their systems to track deviations due to 
        over- and under-payments.
    --Action.--VHA has established a National Payor Compliance Office 
            (NPCO) to assist VISNs in addressing negotiations 
            strategically with managed-care payors. As this process 
            matures, VHA will be able to track expected reimbursements 
            better, similar to the private sector.
  --Enhanced Development of Revenue-Cycle Productivity Tools.--The 
        private sector has invested considerable time and effort to 
        ensure that the necessary staff and resources are dedicated to 
        the revenue cycle. VHA actively monitors monthly performance of 
        its facilities though use of a web-based system (POWER) that 
        reports performance using a stop-light color-coded approach. 
        This system is considered a best practice when compared to 
        private-industry standards. The VISNs have also adopted 
        monitoring tools to measure productivity and to ensure that 
        appropriate resources are dedicated to the revenue-cycle 
        collection process.
    --Action.--VHA is taking a leadership role to extend nationally the 
            best practices identified at the VISN level to improve 
            overall effectiveness in the collection process.

    Senator Hutchison. I guess that would be my point. Would 
you continue to look for ways where there is an outside 
insurer, a private insurer, that we would make as many of those 
collections as absolutely possible to offset costs?
    My time is up, and I would like to give my colleagues a 
chance to have a first round of questions before this vote 
starts. Senator Feinstein.
    Senator Feinstein. Thanks very much, Madam Chairman. I 
appreciate that.

               GRANTS FOR STATE EXTENDED CARE FACILITIES

    Mr. Nicholson, the President's fiscal year 2006 budget 
request for the VA suspends grants for the State extended care 
facilities. Could you explain to us why it is necessary to 
impose a 1-year moratorium on grants for construction of long-
term extended care facilities when there is such a need for VA 
homes throughout this Nation? How would this affect the current 
priorities list for funding under this program? Do you 
anticipate altering this list in fiscal year 2007?
    California, my State, with three homes and 2.3 million 
veterans is one of two States classified under great need in 
regard to home funding. The State plans to request $125 million 
in fiscal year 2007 under this grant program to fund its 
largest project to date which is the greater Los Angeles, 
Ventura County home which includes three separate facilities. 
How would the 1-year moratorium impact funding for this 
project?
    So there are essentially three questions in one. If you 
want me to go one by one, I will.
    Secretary Nicholson. Thank you, Senator. It is an important 
area. Let me address the suspension of the grants. In this 
budget, I think it would reflect a reduction of just over $100 
million for this coming fiscal year 2006. I am going to ask Dr. 
Perlin if he would address the specifics as to California.
    Dr. Perlin. Thank you, Senator. Let me start with the piece 
of the question you asked about the 2005 commitments. The 
commitments are proceeding as was planned. I would have to get 
back to you with the specific information on California.
    Senator Feinstein. And how will this affect 2007?
    Dr. Perlin. I think I would be unable to speculate in terms 
of the future.
    Senator Feinstein. All right. So what you are telling me 
then is you do not know about California. You do not know about 
the future, and it is a 1-year moratorium essentially.
    Could you tell me what the rationale for a 1-year 
moratorium is when the needs are so great?
    [The information follows:]

    The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of 
extended care facilities. This will permit VA to complete an 
assessment of its nationwide institutional long-term care 
infrastructure and ensure that future construction aligns with 
the areas of greatest projected need. Grants that have already 
been awarded will not be affected by the 1-year moratorium.
    VA has already committed to all planned fiscal year 2005 
projects on the current Priority List. The States are currently 
completing the requirements for fiscal year 2005 grant awards. 
VA has committed the maximum fiscal year 2005 appropriations 
and the remaining fiscal year 2004 carryover funds to these 
projects.
    The Priority List is revised annually, as of August 15th. 
All new and existing pending projects are ranked and included 
in the annual list. Once approved by the Secretary, the list is 
used to identify ranked projects and commit funding for 
projects for that fiscal year award or to finalize 
conditionally approved projects. For fiscal year 2007, VA would 
follow the same procedures and commit funds available at that 
time to the projects in rank order. VA cannot predict at this 
time how the California project will be ranked in fiscal year 
2007 or whether there will be sufficient appropriations to fund 
it.

    Secretary Nicholson. Well, I can address the issue in 
brief, Senator. If you take a look at the VA as a whole, it has 
gone through a major transformation from being a hospital-
centered medical care provider to a clinical-centered provider 
and more outreach and moving out more to where the veterans 
are.
    The same philosophy is operating in extended care. We are 
finding that it is very often both more efficient and effective 
to treat institutional care people or what used to be 
institutionalized people in a non-institutionalized setting 
using the new tools that are available of telemedicine, 
telehealth, social workers, people being allowed to remain in 
their homes or closer to their homes.
    Senator Feinstein. I think I see where you are going, and 
correct me if I am wrong. Is this then an effort to begin to 
phase out long-term care for veterans and sort of go to an 
outpatient treatment process?
    Secretary Nicholson. Well, I think there are certainly some 
people that will need long-term care. There are some people who 
are not candidates for the new capabilities that we have for 
extended non-institutionalized care. So no, I do not think it 
is a path toward the end of them, but it is a trend and one 
that is finding a lot of satisfaction among the people being 
treated that remain at home. They have a social worker come 
there and provide them with care and bathing. With the 
electronics that we have now, we can take blood pressure, get 
their blood sugar, and all that on-line daily with a medical 
mentor talking to them in their home. If they need care, we can 
then move them.
    Senator Feinstein. Let me just, if I might, say a word on 
behalf of the 2.2 million veterans in my State. California is a 
very high cost-of-living State. The extended care facilities 
are very expensive for the most part, particularly if an 
individual does not have Medicaid or Medicare. I guess what I 
hope is that this is just not an effort to absolve us of the 
Federal responsibility to take care of veterans in later years 
who cannot take care of themselves and push it onto the State 
because I think the veterans are not then going to be well 
cared for. So I will leave you with that.
    Senator Craig.
    Senator Craig. Well, thank you very much. I think we are 
going to run out of time rapidly here, Senator Feinstein, as it 
relates to a vote that is now underway.
    Mr. Secretary, from my initial visit with you and our 
initial hearing on your budget, we have proposed a variety of 
changes, somewhat different from what you proposed, which we 
think will offer a little more flexibility in funding and still 
meet all of the needs that you have projected are out there and 
the savings that you have projected are out there.

                 PER DIEM PAYMENT POLICY TO STATE HOMES

    There are many that concern me and I think concern all of 
us, but the State home program, by most accounts, has been a 
very successful partnership between the Federal and State 
governments for the care of aging veterans, and yet VA proposed 
to modify this past per diem payment policy, a change in policy 
the VA says would reduce the number of State beds by more than 
50 percent. We have, obviously, disagreed on that and are 
proposing not to do so.
    Why does VA want the States to reduce the number of State 
home beds? I guess that would be the first question. Even if VA 
does not want to provide institutional care for the non-
service-connected, why does it want to discourage States from 
attempting to meet that need?
    Secretary Nicholson. Well, one of the things operating 
here, Senator Craig, is a goal of getting in uniform 
conformance with the law from the VA's perspective, which is 
that those people eligible for long-term institutional care are 
those that are 70 percent disabled or more. The goal, as I have 
stated to Senator Feinstein, of--you know, realizing the 
benefits of the care more in the community where the people 
are.
    I am not sure that the VA is desirous of the States getting 
out of the long-term institutional care.
    Senator Craig. I guess then the question, does VA believe 
that it has the legal authority to simply stop paying per diem 
payments to the States for the care of veterans VA does not 
define as a priority?
    Secretary Nicholson. No, I do not think so. I think there 
would be a legislative piece needed. I could also say that this 
budget does not contemplate that a veteran that is in a 
facility who really needs to be there would be moved from that 
bed.
    Senator Craig [presiding]. Well, I am going to run out of 
time, and I need to go vote. So I am going to put the committee 
at recess until the chairman returns. So with that, the 
committee will stand in recess.
    Thank you all very much for being here today.
    Senator Hutchison [presiding]. I am going to call the 
committee back to order. We will try to finish the questions.

              TRANSITIONAL PHARMACY BENEFIT PILOT PROGRAM

    Let me ask you about the transitional pharmacy benefit 
pilot program. Last year the Department implemented the 
transitional pharmacy benefit pilot program to allow veterans 
on the waiting list to have their privately written 
prescriptions filled at the VA without seeing a VA physician. I 
think this makes great sense, and tying up VA doctors just to 
write a prescription when someone can get one outside probably 
is not the best use of their time.
    I understand the pilot did achieve its goal of improving 
access to VA prescription drugs, but there were implementation 
errors reported by the Inspector General. I am concerned that 
maybe the errors did not give an accurate assessment of whether 
this type of program should be continued. So I wanted to ask 
you what is the status of that pilot program and is it 
something that you are going to implement as a policy?
    Secretary Nicholson. Madam Chairman, this budget does not 
contemplate that. There was that pilot program and it 
encompassed 48,000 people. What was most notable I think about 
that was that approximately half of those prescriptions that 
were presented for filling by the VA pharmacies were requesting 
pharmaceuticals that did not meet the formulary inventory of 
the VA. So it caused difficulties for people on both sides of 
that transaction, as well as the need then for VA functionaries 
who were very dutiful to call the prescriber, if they could 
find them, to see if they could prescribe a comparable for the 
patient that was in our formulary holding.
    I will ask Dr. Perlin, who was there and has been through 
that test, if he would like to elaborate.
    Dr. Perlin. Madam Chairman, thank you for your interest in 
this area. I know it has been positive that the substitution of 
the ability to fill pharmaceuticals might relieve some of the 
waiting when, in fact, a patient wants just a prescription.
    By way of disclosure, I would need to indicate that we have 
learned from the transition pharmacy benefit a few facts. As 
Secretary Nicholson said, almost half of the prescriptions were 
off of our formulary. Even with negotiation, it was still a 
much, much higher rate of non-formulary, which meant that we 
did not achieve some of the efficiencies in terms of cost of 
the prescription that we would in our normal course of 
practice. So it is something that I think deserves further 
consideration, and I would want to consult with the Secretary 
in terms of his future thoughts on the topic.
    Senator Hutchison. Well, I understand the point that was 
being made that perhaps it ends up not being a good tradeoff. 
You save the doctor's time, but you make it harder for the 
pharmacies and maybe more expensive. So I would like for you to 
look at it again just to see if it is worth continuing a pilot 
or if you determine that the good does not outweigh the bad. It 
just seemed like a good concept.
    Secretary Nicholson. So noted, Madam Chairman. It is 
something that we have discussed quite a bit actually in the 
few weeks that I have been there because on its face it does 
seem to have a lot of appeal, especially some of those 
prescribers have been Medicare paid doctors so the public is 
already paying for that service.

                      MEDICAL PROSTHETIC RESEARCH

    Senator Hutchison. Let me ask you a question on the 
research budget. The budget request proposes a $9.3 million cut 
to the medical and prosthetic research account. But I wanted to 
ask you if you feel that that is going to be enough.
    Further, Secretary Principi had made a commitment of $15 
million a year for the Gulf War Syndrome research for a 4-year 
period for a total of $60 million. That is something that is 
very important to me because I think our veterans got very 
short-changed when they came home with these symptoms, that in 
a previous administration, were sort of swept aside as, well, 
it was post-traumatic stress syndrome type thing, and it turns 
out that there is a causal connection between brain damage and 
exposure to chemicals. We, through the Veterans Administration 
under Secretary Principi, were on the road to making that a 
larger study, with the long-term goal of, of course, getting 
antidotes for that or trying to determine if someone is 
predisposed because of a brain deficiency--an enzyme 
deficiency, that is--to not send someone to an area where there 
might be chemical weapons.
    My question is does this cut in the budget give you enough 
funding for your Department to do all of the things that are a 
priority and is Gulf War Syndrome research still going to get 
the full $60 million commitment, in $15 million increments, 
that Secretary Principi had said he would do?
    Secretary Nicholson. Madam Chairman, this budget is 
$1,653,000,000 for research in total. We are asking for an 
appropriation of $786 million. That is sufficient to underwrite 
something like 2,700 different research projects.
    As to your question, is there sufficient funding in here 
approved for the current year Gulf War illness research of $15 
million, the answer is yes.
    We have had some discussion about the $60 million, the 4-
year program, and counsel to me is that it is not a hard 
commitment. That has been discussed. What I will say to you is 
that the $15 million is absolutely in here, and the subsequent 
years, as I get more familiar with it, I will take a very 
serious look at this. But we will probably be back to you in 
discussion with this.
    I think the answer to your question overall is that there 
is enough in this to do the research that we think should be 
done.
    There is a $100 million in this budget for prosthetics, and 
there is an increase of $100 million for PTSD research and 
application.
    Senator Hutchison. Could you clarify? You are saying that 
the $60 million over the 4 years is not a commitment. So are 
you saying that $15 million is in for this year but you are not 
making a commitment for future years?
    Secretary Nicholson. Well, I am going to first ask the 
general counsel if he would address that from his perspective, 
and then I will respond.
    Mr. McClain. Madam Chairman, we do have $15 million in 
additional research funding for the Gulf War illnesses. That is 
for this particular year in unspecified projects but they will 
go toward Gulf War research. As far as future years, we really 
cannot speculate as to what might come out in future years for 
research dollars, but certainly we have been committed over 
several years now to putting additional resources toward Gulf 
War research.
    Senator Hutchison. Mr. Secretary, do you consider that the 
Gulf War Syndrome is a legitimate area for research?
    Secretary Nicholson. Yes, I do. I know something about 
that. I have been briefed by a team of doctors on that, and I 
think that is a very legitimate area to try to understand. So 
that is not an issue for me, but we have to do it legally.
    I would like to ask Dr. Perlin, if I could, Madam Chairman, 
if he would comment a bit on the current status of the 
research.
    Dr. Perlin. Madam Chairman, this is an absolutely critical 
area. Right now we have 146 separate projects on environmental 
exposures at a cost of about $35 million in the 2006 budget 
proposed.
    In the area of Gulf War illnesses, VA has funded 111 
projects since 1991 and currently there are 48 ongoing. VA's 
commitment to date has been $73 million. The Federal commitment 
has been in excess of $300 million. Of that $15 million, I can 
tell you that right now $5 million have been executed late this 
spring. There is a request for applications to make sure that 
we have the best research in that area.
    I think one of the most promising endeavors this year, 
something that we worked hard with the Research Advisory 
Committee on Gulf War Illnesses to develop is a new center for 
the study of promising treatments for Gulf War illness. While 
we may not have full insight into the mechanisms of what causes 
these unexplained symptoms, we passionately feel the obligation 
to care for these veterans to treat their symptoms. This new 
center promises to help us align our best tools to understand 
what treatments may be promising.
    Senator Hutchison. So you are not in any way saying it is 
not a priority. You will be saying that it is a priority. Is 
that what you are saying?
    Secretary Nicholson. Yes, exactly.

                        DALLAS VA MEDICAL CENTER

    Senator Hutchison. I wanted to talk about a couple of local 
issues. First of all, in November of 2004, your own Department 
ranked the Dallas Veterans Affairs Medical Center the worst VA 
hospital in the country. Of course, that was a revelation to 
many people in the Dallas area. I know improvements have been 
made. I know that the head of that hospital is no longer there. 
But I just wanted to ask you, Mr. Secretary, if you are 
satisfied that the changes being made there are bringing that 
VA hospital up to your standards.
    Secretary Nicholson. Yes. That has been problematic. I 
noted that as soon as I began getting briefed for this job. As 
you noted, some of the key management personnel have been 
replaced. There have been several reviews made of that 
internal. An accrediting association has looked at that. They 
found some deficiencies and have given recommendations to us to 
institute. I am satisfied that those corrective measures are 
underway. We have some good new people in place, but it is 
something that is very important and we are keeping an eye on.
    Senator Hutchison. That is what I was going to follow up 
and ask. Is there a mechanism by which, when you have a 
hospital that gets this low a rating, you would go in and check 
more carefully and more frequently to assure that the changes 
are being implemented?
    Secretary Nicholson. I am going to ask Dr. Perlin to answer 
that.
    Dr. Perlin. Thank you, Mr. Secretary.
    Madam Chairman, absolutely. We are following up with 
objective evidence of improvement. We have the performance 
measurement system throughout the VHA. As our Inspector General 
noted, the performance was not where the citizens of Texas and 
Dallas deserved. That is changing already objectively on the 
basis of data. We can demonstrate that there is significant 
improvement.
    In addition to a new director, Betty Brown, there is also a 
new associate director, Dan Heers, a new chief of staff, a new 
chief nursing executive. And my own calls to individuals down 
there tell me that the progress has been light-speed.
    I would note to you that I plan to make a visit to Dallas 
in April to assure myself that what I am seeing on paper is 
actually represented as the best improvements.
    I think it is important to note that while there have been 
some individuals who have been problematic, that part of my job 
is to encourage the 90 percent of the staff that really go 
above and beyond to give their best for the veterans. So I want 
to make sure that the message is complete, that we sanction and 
improve and hold accountable where we need to, but that we also 
encourage and support those individuals who really do give our 
veterans their best.

                    WACO AND BIG SPRING, TEXAS SITES

    Senator Hutchison. Thank you. I would be very interested, 
after your visit, in hearing what your findings are.
    There are two veterans sites that are in the 18 in the 
CARES plan that are cited as needing more study. One is in 
Waco. I have discussed this with you, Mr. Secretary.
    The Waco facility is a campus. It is a beautiful campus. It 
is under-utilized, that is for sure. The care that it gives is 
excellent. The mental health care, from everything that we 
could tell, did a very solid, good job. But the plan now is for 
there to be a master plan for the Waco facility that is 
supposed to be put together with the city leaders in Waco and 
the consultants from the VA. I just wanted to ask you if we can 
expect that you would continue the commitment to look for a 
master plan for that site so that it can be efficiently used.
    One of the things that I did not quite understand in the 
CARES Commission report is that they closed two smaller clinics 
and recommended that there be a VA clinic built in Waco. It 
just seemed to me that with the facility there being under-
utilized that perhaps having the clinic move to the long-term 
care facility that there might be an added benefit there and be 
the right thing for the veterans in the area as well as for the 
efficient operation that you would be seeking.
    So do you have any status report on that, or can you just 
at least say that we will have the master plan moving forward 
and that the Department will work with the community leaders 
for that plan?
    Secretary Nicholson. Absolutely I can say that, Madam 
Chairman. In fact, I am planning to go to Waco myself hopefully 
in April. I want to go down there and get on the ground and see 
the facilities, not to preempt the process but so that I know 
and have a feeling myself for the physical assets that are 
there. I know that the continued process out of the CARES 
process is underway, and I think that will run its course and 
have great community involvement. We are very committed and 
interested in that.
    Senator Hutchison. Well, I certainly am pleased that you 
are going there. I hope I can join you. So I would like to call 
your office and see if we can do that together.
    Secretary Nicholson. We will try to coordinate.
    Senator Hutchison. There is a second facility at Big 
Spring. It is a hospital that I visited a few months ago. It is 
in a central location which is 40 miles from Midland, 60 miles 
from Odessa, 87 miles from San Angelo, and 110 miles from 
Abilene. The next closest VA hospital is 200 miles from any of 
those locations.
    I had asked Secretary Principi to consider a public/private 
partnership between the Big Spring VA and Scenic Mountain 
Medical Center to increase the services to the veterans in that 
area. It is the area that all of those communities support the 
VA hospital because it is the most centrally located. As you 
know, we have two Air Force bases, one in Abilene and one in 
San Angelo, that feed into that veterans hospital, plus Midland 
and Odessa feeding in. And if you put it in any of the other 
places, it would be much farther from other population centers.
    So I would ask that you also visit that one--it might be a 
good day to go to both of those at the same time--and look at 
the possibilities of, again, making your service more efficient 
but keeping it at the Big Spring facility where you already 
have a major investment.
    Secretary Nicholson. I will try to do that, Madam Chairman. 
I am committed to Waco. I will see if we can make it work at 
Big Spring. I would like to. I can tell you, as you probably 
know, I think the first open forum of that advisory board for 
Big Spring is scheduled to meet, I think, April 7 for the first 
time with our consultant, Price Waterhouse.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Hutchison. Well, I know this is all pretty 
overwhelming and you have only been there a short time. But I 
would look forward to working with you to assure that the 
community has its input and that we can do the best for the 
veterans in the area. I think you will be pleased when you see 
both of those facilities.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

          Questions Submitted by Senator Kay Bailey Hutchison

                       MAJOR CHALLENGES AND GOALS

    Questions. I recognize you have been in office only a few weeks, 
but I would like to hear your preliminary observations about the 
Department.
    Specifically, what do you see as the Department's main challenges?
    As VA Secretary, what are the main goals you would like to achieve 
before the end of your tenure?
    Answers.
Challenges
    VA is a very large, multi-business organization requiring diverse 
management service delivery skills. More than 220,000 dedicated VA 
employees operate its 157 hospitals, 134 nursing homes, 860 outpatient 
clinics, 57 regional benefit offices, and 120 national cemeteries and 
receive pre-discharge claims for disability benefits at 139 military 
sites. They strive to provide world- class service to America's 
deserving veterans who seek (1) health care; (2) the benefits they have 
earned to restore their capability and ensure a smooth transition from 
active military service to civilian life; and (3) honor and fitting 
memorials in death.
    Our single greatest challenge is making sure our veterans receive 
the highest return on the taxpayers' dollar. To do that, VA needs to 
make sure it operates with only the best business practices in place. 
This alone, will make it easier for our veterans to access the quality 
care and services we provide. We must continually improve our business 
practices, maximize sharing opportunities with DOD and others and focus 
our services on those most in need. I look forward to tackling the 
challenges of ensuring best practices in all areas of VA endeavor and 
building on today's successes for even greater achievements in the 
future.
Goals
  --I want to ensure that timely access to medical care continues to 
        improve for those who depend on VA the most, and I want to 
        ensure that significant improvements in both accuracy and 
        consistency of benefit entitlement decisions are a primary 
        focus across regional offices.
  --I want to achieve the right balance of informed, centralized policy 
        decision-making with appropriate, responsible decentralized 
        implementation at levels closest to the provision of day-to-day 
        services to our veterans.
  --I want to lead VA to the forefront of integrating accountability 
        systems based on results. VA provides essential, life-saving 
        and life-enhancing services for America's veterans, and I want 
        the Department to be able to articulate, based on solid 
        metrics, the incredible results that are achieved on an on-
        going basis for veterans, their dependents and survivors.
  --I want to continue to build on the objective measures currently 
        being used to assess maximum resource-allocation efficiency so 
        that every dollar is invested wisely toward the outcome of 
        improving veterans' lives.
  --I want to sharpen this organization's focuses on improved 
        information and knowledge management and human-capital 
        development.
    Madam Chairman, there is so much more I could address, but first 
and foremost, I want to ensure that all 220,000 employees of this 
Department strive every day to improve the lot of those heroic, 
selfless Americans we are privileged to serve--our Nation's veterans.
              veterans returning from iraq and afghanistan
    Question. There are concerns about VA's ability and capacity to 
treat all returning service members from Operations Enduring Freedom 
and Iraqi Freedom (OEF/OIF). Further, there have been media reports of 
some returning veterans who are falling through the cracks and 
experiencing such things as delayed benefits and medical care and 
homelessness.
    For the record, do you have enough resources to meet the needs of 
all returning veterans from Iraq and Afghanistan for this current 
fiscal year 2005?
    Answer.
    Dr. Perlin. Yes, VA has the necessary resources in fiscal year 2005 
to continue meeting the needs of all returning veterans from Iraq and 
Afghanistan.
    Admiral Cooper. VA has the resources, capacity, and systems in 
place to provide priority care and claims processing for all seriously 
injured veterans of Iraq and Afghanistan. We have the resources 
available to continue our highly successful Benefits Delivery at 
Discharge (BDD) program, through which service members are able to file 
disability compensation claims prior to their separation from service. 
Their claims are then processed expeditiously immediately upon the 
service members' separation from service. Last year claims filed 
through the BDD program were processed in an average of 55 days, 
compared to the national average for all disability determinations of 
165 days. We have the resources to conduct briefings for separating 
members of the active components and specialized outreach to 
demobilized reserve component forces. In fiscal year 2004 we conducted 
benefit briefings for more than 88,000 members of the Guard and 
Reserve. VA will continue to meet its responsibilities to America's 
current returning war veterans while working to lower inventories, 
reduce claims processing times, and deal with high claims activity by 
veterans from earlier service periods.
    Question. Does the budget request for fiscal year 2006 provide 
adequate funding to meet the needs of all returning OEF and OIF 
veterans?
    Answer.
    Dr. Perlin. Yes, VA requested the necessary resources in fiscal 
year 2006 to continue meeting the needs of all veterans who have 
suffered injuries or diseases as a result of the conflicts in Iraq and 
Afghanistan.
    Admiral Cooper. The funding request for 2006 is adequate and will 
enable us to continue the efforts described in the previous response.
    Question. Has the VA exhausted all means to reach service members 
who may separate from active duty? Has the VA used public service 
announcements?
    Answer. While there is always more that could be done to reach 
veterans and their families, VA has extensive outreach programs for 
returning service personnel, including Reserve/National Guard members.
    News Releases.--Last year, VA produced a 30-second public service 
video entitled ``Our Turn to Serve'' which was distributed to domestic 
viewing markets near or at major military transition and separation 
bases. It was placed as a streaming video file on the VA Internet Web 
site and marketed electronically to other domestic TV station 
programmers in markets with large military populations. It is now about 
to run on AFRTS outlets serving military based overseas. A new VA 
outreach video program, ``The American Veteran,'' is airing on the 
Pentagon Channel, which reaches military audiences at Department of 
Defense (DOD) installations, communities, and sites in this country and 
around the world. It is a half-hour video magazine featuring stories 
and information of interest to military personnel and veterans that 
focuses on their benefits and how they can access and use them. This is 
a continuing series of monthly programs that will be marketed 
domestically to cable systems, PBS stations, and community access 
cable.
    Transition Assistance Program (TAP) and Other Military Services 
Briefings.--From October 2002 through January 2005, VBA military 
services coordinators conducted transition briefings and related 
personal interviews in the United States as reflected in the chart 
below. These briefings include pre- and post-deployment briefings for 
Reserve and National Guard members.

                                                OVERALL BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................           5,368         197,082          97,352
2004............................................................           7,210         261,391         115,576
2005 \1\........................................................           2,263          79,105          34,106
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    In addition to military services briefings in the U.S., VBA 
representatives conduct briefings overseas under arrangement with DOD. 
VBA provides two tours each year with 6 to 7 VBA representatives 
providing this service for each tour. Each is home-based at a major 
military site and provides services at the site and surrounding areas. 
The countries serviced are England, Germany, Japan, and Italy. Korea is 
serviced by staff from the Benefits Delivery at Discharge office in 
Yong San. A representative from the St. Petersburg Regional Office 
provides that service for Guantanamo Bay. We were recently requested by 
DOD to add Bahrain to our overseas schedule beginning with the May 2005 
tour. The following chart reflects statistics regarding overseas 
briefings:

                                               OVERSEAS BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................             472          12,943          12,947
2004............................................................             624          15,183           6,544
2005 \1\........................................................              36           1,278             464
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard 
members is part of the overall VBA outreach program. In peacetime, this 
outreach is generally accomplished on an ``on call'' or ``as 
requested'' basis. With the activation and deployment of large numbers 
of Reserve/Guard members following the September 11, 2001, attack on 
America, and the onset of OEF/OIF, VBA outreach to this group has been 
greatly expanded. National and local contacts have been made with 
Reserve/Guard officials to schedule pre- and post-mobilization 
briefings for their members. Returning Reserve/Guard members can also 
elect to attend the formal three-day TAP workshops. The following data 
on Reserve/Guard briefings is a subset of the Overall Briefings data 
provided in the first chart:

                         RESERVE/GUARD BRIEFINGS
------------------------------------------------------------------------
               Fiscal year                   Briefings     No. attendees
------------------------------------------------------------------------
2003....................................             821          46,675
2004....................................           1,399          88,366
2005 \1\................................             531          32,448
------------------------------------------------------------------------
\1\Through January 2005.

    Briefings Aboard Ships.--VA provided TAP briefings aboard the USS 
Constellation, the USS Enterprise, and the USS George Washington on 
their return from the Persian Gulf to the United States. VBA will 
continue to support requests from the Department of the Navy for TAP 
workshops aboard ships.
Seamless Transition--Military Treatment Facilities (MTFs)
    In 2003, VA began placing Veterans Service Representatives at key 
military treatment facilities (MTFs) where severely wounded service 
members from OEF/OIF are frequently sent. Representatives of the VBA 
Benefits Delivery at Discharge office in Germany work closely with the 
staff at the Landstuhl Army Medical Center to assist returning injured 
service members who are patients at that facility and family members 
temporarily residing at the Fischer House.
    Since March 2003, a VBA OEF/OIF coordinator is assigned for each 
MTF. Full time staff is assigned to the Walter Reed Army Medical Center 
in Washington, D.C., and the Bethesda Naval Medical Center in Maryland. 
Similar teams work with patients and family members at three other MTFs 
serving as key medical centers for seriously wounded returning troops: 
Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service 
is conducted at all other major military treatment facilities. As of 
January 2005, over 4,500 hospitalized returning service members were 
assisted through this program at Walter Reed, Bethesda, Eisenhower, 
Brooke, and Madigan. Since March 2003, each claim from a seriously 
disabled OEF/OIF veteran has been case managed for seamless and 
expeditious processing.
    Web Page.--As part of the Seamless Transition effort, VBA created a 
new web page for OEF/OIF, directly accessible from the VA homepage. 
Information specific to Reserve/Guard members who were activated is 
included, as well as links to other Federal benefits of interest to 
returning service members. The web page has been accessed over 340,000 
times since its activation in December 2003.
    Benefits Delivery at Discharge (BDD).--VA's BDD program operates in 
concert with the military services outreach program. Under BDD, service 
members can apply for disability compensation within 180 days before 
discharge. The required physical examinations are conducted and service 
medical records are reviewed prior to discharge. The goal is to 
adjudicate claims within 30 days following discharge. Upon receipt of 
the claimant's DD Form 214 (Report of Release from Active Military 
Service), benefits are immediately authorized so that the recently 
separated veteran can receive his/her first disability check the month 
following the month of discharge or shortly thereafter. Currently, 141 
military installations worldwide participate in this program, including 
two sites in Germany and three in Korea. Approximately 26,000 BDD 
claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004; 
and 12,000 in fiscal year 2005 to date.

Recently-Separated Veterans
    Veterans Assistance at Discharge System (VADS).--All separating and 
retiring service members (including Reserve/Guard members) receive a 
``Welcome Home Package'' that includes a letter from the Secretary, a 
copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
0501, Veterans Benefits Timetable, through VADS. Similar information is 
again mailed with a 6-month follow-up letter.
    Secretary's Outreach Letter to Returning Service Members.--Outreach 
letters from the Secretary of Veterans Affairs have been sent to 
approximately 240,000 returning service members who have separated/
retired from active duty. Enclosed with the letters are copies of VA 
Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of 
VA Benefits for National Guard and Reserve Personnel.

                       PRIORITY 7 AND 8 VETERANS
 
   Question. Clearly, we must ensure full funding for Priority 1 
through 6 veterans, but I am also concerned about our Priority 7 and 8 
veterans.
    Given the escalating costs of private health care insurance and 
cuts to other publicly funded programs, what is going to happen to the 
tens of thousands of uninsured Priority 7 and 8 veterans? Has the VA 
performed any analysis to project the outcomes of these veterans? Does 
the VA have a good understanding of who these veterans are, 
demographically, and what resources they may have in the event VA 
medical care is not available to them?
    Answer. VA has health insurance coverage data on veterans from the 
fiscal year 2001 Survey of Veterans. VA also obtains health insurance 
coverage data for VA health care enrollees from the annual VHA Enrollee 
Survey. VA has also considered the impact of its proposed policies on 
uninsured veterans. For example, the cost-sharing policies (annual 
enrollment fee and increased pharmacy co-payments) in the fiscal year 
2006 President's budget will enable uninsured Priority 7 and 8 enrolled 
veterans to continue to have access to the VA health care system for a 
very modest amount of cost sharing. We expect that Priority 7 and 8 
enrollees who are uninsured will pay the enrollment fee, while many 
Priority 7 and 8 enrollees who have other health care coverage are not 
expected to enroll because of their alternative sources of care.

                        MANAGEMENT EFFICIENCIES

    Question. This year's request estimates savings of some $1.8 
billion in management efficiencies--an increase of some $590 million 
over the fiscal year 2005 level. I support efforts by the Department to 
improve its management practices, and clearly the Inspector General's 
office has identified a number of areas where savings could be 
achieved. But we haven't seen a lot of detail or reliable data to back 
up these savings projections.
    For example, the budget projects saving $150 million through 
improved contracting practices with medical schools and other VA 
affiliates for scarce medical specialties. Can you explain exactly how 
you will achieve this $150 million in savings?
    Answer. VA anticipates that $150 million in savings will result 
from improved contracting practices. A new directive is about to be 
issued that encourages competitive contracting for services and 
provides contracting officers specific guidance on appropriate costs to 
include in a sole-source contract, when that vehicle is appropriate. In 
addition, there will be increased Office of Inspector General audits of 
sole source contracts with VA's affiliates, which will result in 
further savings from originally negotiated rates.
    Question. Can you provide the committee with details on how the 
Department will achieve its overall management savings goal of $1.8 
billion for fiscal year 2006?
    Answer. The $1.8 billion in management efficiencies is composed of 
recurring and anticipated new efficiencies in standardization of 
pharmaceuticals and supplies; inventory management; productivity; and 
administrative/clinical consolidations and VA/DOD sharing.

                              HOMELESSNESS

    Question. By some accounts, homeless veterans number around 
200,000; even some veterans returning from Iraq and Afghanistan are 
experiencing homelessness.
    Can you explain why there continues to be such a large number of 
homeless veterans in this country?
    Answer. While homeless veterans tend to be older and better 
educated than their non-veteran counterparts, they face the same 
vulnerabilities that increase their risk of homelessness. These 
liabilities include mental illness and substance use disorders, lack of 
adequate social supports, disadvantages associated with past histories 
of incarceration, and poor employment prospects.
    VA estimates that there may be 200,000 homeless veterans living on 
the streets or in shelters on any given day. Data from the National 
Survey of Homeless Service Providers and Clients conducted in 1996 
indicates that the proportion of veterans among homeless men declined 
to 23 percent from an estimate of 34 percent identified in a similar 
study conducted in the mid 1980s. We believe that VA, working together 
with community-based and faith-based organizations, has put in place a 
wide range of services to address the needs of homeless veterans and 
this system of services is helping veterans move out of homelessness to 
independence and self sufficiency.
    Question. Why are some of our OEF and OIF veterans experiencing 
homelessness?
    Answer. From August through December of 2004, VA has reached out to 
128 homeless OEF and OIF veterans, about 1 percent of all homeless 
veterans contacted through outreach during those months. Review of 
intake assessment information about these veterans suggests that, for 
the most part, these homeless veterans have problems similar to those 
of homeless veterans from other eras and periods of service. However, 
homeless OEF/OIF veterans are younger and appear to have fewer problems 
with substance abuse and they seem to have more short-term situational 
problems such as changes in family status (e.g. separation or divorce). 
These veterans are less likely to be chronically homeless, which gives 
us hope that they can return more easily to self sufficiency.

                             VISN STRUCTURE

    Question. The President's Task Force (PTF) found that the VA's 
veterans integrated systems network (VISN) structure ``resulted in the 
growth of disparate business procedures and practices.'' Further, the 
PTF's report stated that the ``VISN structure alters the ability to 
provide consistent, uniform national program guidance in the clinical 
arena, the loss of which affects opportunities for improved quality, 
access, and cost effectiveness.'' Due to these findings, the PTF 
recommended ``the structure and processes of VHA should be reviewed.''
    Do you agree with the PTF's findings? If so, what are your thoughts 
on altering the VISN structure? If not, what alternatives do you offer?
    Answer. There is always a tension between centralization and 
decentralization, such as we find in the current VA network structure. 
A system that is too centralized is grossly ineffective and 
inefficient. On the other hand, a system that is too decentralized 
loses the integration and cohesiveness that defines it as a ``system.'' 
Achieving the proper balance to avoid both too much centralization and 
too much decentralization requires continual monitoring and refinement 
where necessary. So to that extent, we agree that the structure and 
processes of the VISN structure require continual review. But continual 
review does not necessarily entail significant alterations. Nor is it 
clear that the VISN structure has impaired VA's ability to provide 
consistent, uniform national clinical guidance.
    VA operates a large, integrated health care system that functions 
both efficiently and effectively. Improvements in quality, access, 
veteran satisfaction, and efficiency are measurable and have been 
widely recognized. Health care policy is established centrally in 
Washington and is expected to be executed uniformly throughout all 21 
VISNs. I expect the VISNs to address the unique challenges of their 
respective environments, and we will hold management at all levels 
accountable for implementing national policy consistently. I am a firm 
believer in the benefits of performance measurement, and I will hold 
all VISN directors accountable for the same set of performance measures 
and goals. The individual means to achieve the goals set may vary 
somewhat from VISN to VISN, depending on their individual 
circumstances, but the requirement for implementation of overall 
national health care policies is immutable.

                        STATE HOME CONSTRUCTION

    Question. The budget request proposes a 1-year moratorium on 
providing grants for construction of State nursing homes until the VA 
has completed a review of its long-term care needs.
    Since State veterans' nursing homes account for more than half of 
VA's nursing home workload, to what extent will the moratorium impact 
veterans access to long term-care?
    Answer. The proposed 1-year moratorium on grants for construction 
of State nursing homes will have a minimal effect on veterans' access 
to long-term care. Nationally, State Veterans Homes operate at 
approximately 85 percent capacity; consequently the existing capacity 
can accommodate additional veterans. Moreover, construction projects 
that are already underway are anticipated to add more than 1,600 
additional State Home beds nationally over the next 3-4 years.
    Question. Are there State nursing home projects with established 
and documented need that will be delayed because of the funding 
moratorium?
    Answer. There are nursing home projects for which the States have 
committed matching funds that will be delayed by the moratorium for 1 
year. Because the Priority List is revised annually, VA cannot predict 
how many or which specific projects will be delayed. All new and 
existing pending projects are ranked as of August 15 and included in 
the annual list.

                          VA-DOD COLLABORATION

    Question. For several years, there have been numerous efforts to 
promote health care collaboration between the Department of Defense and 
the VA. The fiscal year 2003 National Defense Authorization Act 
directed DOD and VA to establish a joint program to identify and 
provide incentives to implement, fund, and evaluate creative health 
care coordination and sharing initiatives between the two departments.
    Can you give us a status and any initial findings on this new 
program?
    Answer. Section 721 of Public Law 107-314, the fiscal year 2003 
National Defense Authorization Act, requires that DOD and VA establish 
a joint incentives program through the creation of a DOD-VA Health Care 
Sharing Incentive Fund. The intent of the program is to identify, fund, 
and evaluate creative local, regional, and national sharing 
initiatives.
    A DOD-VA Memorandum of Agreement (MOA), signed on July 8, 2004, 
assigned VA as administrator of the fund under the direction of the VA-
DOD Health Executive Council (HEC). The HEC appointed the Financial 
Management Work Group to issue the calls for proposals, recommend the 
proposals to be funded, and monitor the projects selected. There is a 
minimum contribution of $15 million by each Department ($30 million 
total per year) each year for 4 years (fiscal year 2004-fiscal year 
2007).
    In fiscal year 2004, 12 proposals were approved. Those proposals 
require $37.5 million in funding over 2 years. Approved proposals 
involve a wide range of services including various tele-health 
projects, women's health services, a joint cardiac catheterization lab, 
a joint dialysis unit, and a joint clinic.
    In fiscal year 2005, 56 proposals have been submitted, and they 
will compete for $22.5 million in funding for the first year. VA and 
DOD are currently reviewing the projects submitted for the fiscal year 
2005 awards cycle.
    There has been a high level of interest by VA and DOD in submitting 
projects for funding. There have been many lessons learned in 
administering the program, such as allowing sufficient time to permit 
review up the chains of commands within both VA and DOD; the need for 
information technology projects to be consistent with the national 
level solutions being developed; and the need for projects to clearly 
identify a benefit to both Departments. The projects selected for 
funding in fiscal year 2004 have not been operational long enough to 
provide an individual project assessment of the results.
                                 ______
                                 

               Questions Submitted by Senator Larry Craig

                                SERVICES

    Question. The 116th Calvary Brigade Combat Team of the Idaho Army 
National Guard are now stationed overseas in Iraq and fighting in 
Operation Iraqi Freedom. Like all National Guardsmen, when they return 
from active duty they will resume their duties of working under the 
command of the Governor of Idaho.
    What will their eligibility be for VA services, including health 
care and benefits, when they separate from active duty service?
    Answer. Army National Guard personnel activated by Federal 
declaration and who served on active duty in a theater of combat 
operations which includes Operation Iraqi Freedom are eligible for 
hospital care, medical services, and nursing home care. Public Law 105-
368 amended title 38, United States Code, to authorize VA to provide 
combat veterans with care for conditions potentially related to their 
combat service for a 2 year period following discharge. Care is cost-
free for conditions that cannot be disassociated from combat service. 
Care for other conditions is subject to applicable copayments. Veterans 
who enroll with VA under this authority retain enrollment eligibility, 
regardless of any enrollment restriction that may be in effect after 
this 2-year post discharge period. Combat veterans who choose not to 
enroll with VA during the 2-year period would be able to enroll in the 
future only if they are otherwise eligible to enroll.
    In addition to health care benefits, they are also eligible for a 
full array of benefits offered through the Veterans Benefits 
Administration (VBA) to include:
  --Disability Benefits
  --Education and Training Benefits
  --Vocational Rehabilitation and Employment
  --Home Loans
  --Life Insurance
  --Burial Benefits
  --Dependents' and Survivors' Benefits
    Question. Does the Department have any programs in place that will 
continue to follow these Guardsmen after their completion of their 
combat mission and they return home to a civilian life?
    Answer. Under 38 U.S.C.  1710(e)(1)(D) and  1710(e)(3)(C), OIF/
OEF veterans may enroll in the VA health care system and, for a 2-year 
period following the date of their separation from active duty, receive 
VA health care without co-payment requirements for conditions that are 
or may be related to their combat service. After the end of the 2-year 
period, they may continue their enrollment but may be subject to any 
applicable co-payment requirements. For OIF/OEF veterans who do not 
enroll with VA during the 2-year post-discharge period, eligibility for 
enrollment and subsequent health care is, of course, subject to such 
factors as a service connected disability rating, VA pension status, 
catastrophic disability determination, or financial circumstances.
    OIF and OEF veterans have sought VA health care for a wide-variety 
of physical and psychological problems. The most common health problems 
have been musculoskeletal ailments (principally joint and back 
disorders); diseases of the digestive system (with teeth and gum 
problems predominating); and mental disorders (predominantly adjustment 
reactions). The medical issues we have seen to date are those we would 
expect to see in young, active, military populations, and no particular 
health problem stands out among these veterans at present. We will 
continue to monitor the health status of recent OIF and OEF veterans to 
ensure that VA aligns its health care programs to meet their needs.
    Following is a brief description of VA initiatives that have been 
developed in response to the service needs of veterans from Operations 
Iraqi Freedom (OIF) and Enduring Freedom (OEF). Many of these are brand 
new programs that were developed to meet these needs. All of them 
represent ``lessons learned'' from VA's experiences responding to the 
health care and other benefits needs of veterans returning from the 
1991 Gulf War and from the Vietnam War before that.
    Immediate Health Care Needs for Combat Veterans.--In response to 
immediate health concerns for OIF and OEF veterans, on March 26 and 27, 
2003, VA developed a program called ``Caring for the War Wounded,'' 
which was broadcast over the VA Knowledge Network satellite broadcast 
system. This program provided timely and relevant information about the 
anticipated health care needs of veterans of the current conflict in 
Iraq, included VA experts on treatments for traumatic injuries; 
chemical warfare agent health effects; infectious diseases; 
radiological health effects; and post-deployment readjustment health 
concerns, and was converted into a new Veterans Health Initiative (VHI) 
health care provider independent study guide, called ``Caring for the 
War Wounded,'' which is available online at vaww.va.gov/VHI/and on the 
Internet at http://www.appc1.va.gov/vhi/.
    New Clinical Guidelines for Combat Veteran Health Care.--In 
collaboration with DOD, VA developed two Clinical Practice Guidelines 
on combat veteran health issues, including one general guideline to 
post-deployment health, and a second dealing with unexplained pain and 
fatigue. The new clinical guidelines give our health care providers the 
best medical evidence for diagnoses and treatment. VA highly recommends 
these for the evaluation and care of all returning combat veterans, 
including veterans from OIF and OEF. The value of the guidelines in 
providing care to returning veterans is described in a video ``The Epic 
of Gilgamesh: Clinical Practice Guidelines for Post-Deployment Health 
Evaluation and Management,'' at www.va.gov/Gilgamesh.
    New Specialized Combat Veteran Health Care Program.--In 2001, VA 
established two new War Related Illness and Injury Study Centers 
(WRIISCs) at the Washington, DC, and East Orange, NJ, VAMCs. Today, the 
WRIISCs are providing specialized health care for combat veterans from 
all deployments who experience difficult to diagnose but disabling 
illnesses. Concerns about unexplained illness are seen after all 
deployments including OIF/OEF, but VA is building on our understand of 
these illnesses. More information is available online at www.va.gov/
environagents under the heading ``WRIISC Referral Eligibility 
Information.''
    Expanded Education on Combat Health Care for VA Providers.--In 
addition to the programs already described, VA has developed several 
Veterans Health Initiative (VHI) Independent Study Guides relevant to 
veterans returning from Iraq and Afghanistan:
  --``A Guide to Gulf War Veterans Health'' was originally on health 
        care for combat veterans from the 1991 Gulf War. The product, 
        written for clinicians, veterans and their families, remains 
        very relevant for OIF and OEF combat veterans because many of 
        the hazardous exposures are the same.
  --``Endemic Infectious Diseases of Southwest Asia'' provides 
        information for health care providers about the infectious 
        disease risks in Southwest Asia, particularly in Afghanistan 
        and Iraq. The emphasis is on diseases not typically seen in 
        North America.
  --``Health Effects from Chemical, Biological and Radiological 
        Weapons'' was developed to improve recognition of health issues 
        related to chemical, biological and radiological weapons and 
        agents.
  --``Military Sexual Trauma'' was developed to improve recognitions 
        and treatment of health problems related to military sexual 
        trauma, including sexual assault and harassment.
  --``Post-Traumatic Stress Disorder: Implications for Primary Care'' 
        is an introduction to PTSD diagnosis, treatment, referrals, 
        support and education, as well as awareness and understanding 
        of veterans who suffer from this illness.
  --``Traumatic Amputation and Prosthetics'' includes information about 
        patients who experience traumatic amputation during military 
        service, their rehabilitation, primary and long-term care, 
        prosthetic, clinical and administrative issues.
  --``Traumatic Brain Injury'' presents an overview of TBI issues that 
        primary care practitioners may encounter when providing care to 
        veterans and active duty military personnel.
    All are available in print, CD ROM, and on the web at www.va.gov/
VHI.
    Outreach to Combat Veterans.--VA has many new products to offer 
combat veterans and their families.
  --The Secretary of Veterans Affairs sends a letter to every newly 
        separated OIF and OEF veteran, based on records for these 
        veterans provided to VA by DOD. The letter thanks the veteran 
        for their service, welcomes them home, and provides basic 
        information about health care and other benefits provided by 
        VA.
  --In collaboration with DOD, VA published and distributed one million 
        copies of a new short brochure called ``A Summary of VA 
        Benefits for National Guard and Reservists Personnel.'' The new 
        brochure does a tremendous job of summarizing health care and 
        other benefits available to this special population of combat 
        veterans upon their return to civilian life (also available 
        online at www.va.gov/EnvironAgents).
  --``Health Care and Assistance for U.S. Veterans of Operation Iraqi 
        Freedom'' is a new brochure on basic health issues for that 
        deployment (also at www.va.gov/EnvironAgents).
  --``OIF and OEF Review'' is a new newsletter mailed to all separated 
        OIF and OEF veterans and their families, on VA health care and 
        assistance programs for these newest veterans (online at 
        www.va.gov/EnvironAgents).
  --``VA Health Care and Benefits Information for Veterans'' is a new 
        wallet care that succinctly summarizes all VA health and other 
        benefits for veterans, along with contact information, in a 
        single, wallet-sized card for easy reference (also at 
        www.va.gov/EnvironAgents).
    Special Depleted Uranium (DU) Program.--OIF veterans concerned 
about possible exposure to depleted uranium can be evaluated using a 
special DU exposure protocol that VA began after the 1991 Gulf War. 
This program offers free DU urine screening tests by referral from VA 
primary care physicians to veterans who have concerns about their 
possible exposure to this agent.
    Combat Veteran Health Status Surveillance.--Today, we can monitor 
the overall health status of combat veterans very efficiently by using 
VA's electronic inpatient and outpatient medical records. This 
surveillance summarizes every single visit by a combat veteran 
including all medical diagnoses. VA has developed a new Clinical 
Reminder (part of VA's computerized reminder system) to assist VA 
primary care clinicians in providing timely and appropriate care to new 
combat veterans.
    Question. What resources are being devoted this year to put into 
effect the co-location of the Boise VA Medical Center and Regional 
Office? What are projected for next year?
    Answer. In fiscal year 2005, staff resources in VBA will accomplish 
the following:
  --Secure a letter from the GSA initiating the transfer of the 2.13 
        acre parcel to VA and get VA Secretary's signature accepting 
        transfer and control of the property.
  --Complete a concept paper for the business case for a project to 
        construct a new office building for the Boise Regional Office 
        on the subject property.
  --Complete an Exhibit 300 business case application for a project to 
        construct a new office building for the Boise Regional Office 
        on the subject property.
  --Select an Architect/Engineer (A/E) firm to prepare a preliminary 
        design and a Request for Proposals (RFP) for a Design-Build 
        contract for the construction of the new office building. Funds 
        from the Minor Construction program will be allocated to this 
        contract.
  --Begin the preliminary design for the new office building.
    In fiscal year 2006, staff resources in VBA will accomplish the 
following:
  --Complete the preliminary design and the RFP for the Design-Build 
        contract.
  --Work with the VHA contracting officer to prepare the solicitation 
        for the Design-Build contract.
  --Advertise the project in the FedBizOps for a contract award in 
        early fiscal year 2007.
  --Identify the necessary minor construction funds in the fiscal year 
        2007 budget for the construction contract.

                           PRESCRIPTION DRUGS

    Question. Last year, Congress enacted the Medicare Modernization 
Act which, for the first time, provides Medicare beneficiaries with 
prescription drug coverage.
    Has VA conducted any assessments of the impact this legislation 
will have on the number of veterans who rely on VA health care to 
provide prescription drug coverage? If so, what has this assessment 
shown?
    Answer. Milliman, Inc., the private-sector actuarial firm that 
develops projections of veteran demand for VA health care, has advised 
VA that the impact of the new Medicare drug benefit on VA enrollment, 
utilization, and expenditures is expected to be minimal. The biggest 
impact is expected to come from reductions in employer-based 
prescription drug coverage. However, the impact may not become 
significant until as late as 2016 since the most recent cutbacks have 
been for future retirees only; those eligible for retirement (over age 
55) have been grandfathered into employer's current plan. Based on 
recent estimates of retirees who could lose benefits, enrollment in VA 
health care could increase by an estimated 35,000 within the 10-15 year 
period following the start of the Medicare prescription drug benefit. 
VA currently treats about 5.2 million veterans per year.
    Question. Does VA believe that there is a way VA can work in 
concert with Medicare on the provisions of prescription medications for 
Medicare-eligible veterans? If so, has VA leadership approached the 
leadership of the Centers for Medicare and Medicaid Services to discuss 
and proposals?
    Answer. VA believes that VA and the Department of Health and Human 
Services' Centers for Medicare and Medicaid Services (CMS) can work 
together so that beneficiaries who chose to use both VA and CMS 
prescription benefits do so in a safe and cost-effective manner.
    To that end, VA Pharmacy Benefits Management staff and staff from 
the Centers for Medicare and Medicaid Services (CMS) have had 
preliminary discussions about potential VA /CMS patient safety and 
electronic prescribing initiatives.
    VA will continue to provide prescription medications to enrolled 
veteran patients who are also eligible for Medicare. VA will continue 
to provide this prescription coverage to Medicare eligible veterans who 
chose VA as their health care provider, even after Medicare Part D is 
fully implemented.

                     STATE HOME PER DIEM PROPOSALS

    Question. The State Home program, by most accounts, has been a 
successful partnership between the Federal and State governments for 
the care of aging veterans. Yet VA proposes to modify its past per diem 
payment policies--a change in policy that VA says will reduce the 
number of State home beds by more than 50 percent.
    Why does VA want the States to reduce the number of State home 
beds? Even if VA does not want to provide institutional care to the 
non-service-connected, why does it want to discourage States from 
meeting that need?
    Answer. VA is not proposing that the States reduce the number of 
State Home beds. State Veterans Homes are owned, operated, and financed 
by the States. VA provides limited financial assistance to the States 
in the form of per diem payments for nursing home, hospital, 
domiciliary, and adult day healthcare. Only the nursing home per diem 
is affected by the fiscal year 2006 budget proposal. The cost of care 
in State Veterans Homes varies from State to State, as does the amount 
of assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. State Homes will continue 
operations to the extent that individual States discharge their fiscal 
responsibility for the operation and management of the Homes. VA does 
not have information on the plans of individual States to respond to 
the change in VA policy.
    The average daily census in State Veterans Homes on whose behalf VA 
pays a per diem payment would decrease from 17,328 to 7,217 from fiscal 
year 2004 to fiscal year 2006. Over the same period, however, VA is 
projecting a substantial increase in both workload and funding for the 
non-institutional programs it supports. The average daily census in 
these home and community-based care (HCBC) programs is projected to 
rise from 25,523 in fiscal year 2004 to 35,540 in fiscal year 2006 (a 
39 percent increase). Funding is projected to increase from $287.3 
million in fiscal year 2004 to over $400 million in fiscal year 2006 
(also a 39 percent increase). The projected increases in HCBC programs 
will serve to offset some of the reductions in nursing home care. VA 
believes the proposals on long-term care in this budget provide an 
appropriate balance between congressionally mandated nursing home 
services and the national trend toward increased use of non-
institutional home and community-based services in preference to 
nursing home care. HCBC is preferred by most patients and their 
families and is more cost effective than inpatient care.
    Question. Does VA assume bed closures will occur when payments for 
non-priority veterans (those without a service-connection) cease? Does 
VA believe that it has the legal authority to simply stop paying per 
diem payments to States for the care of veterans VA doesn't define as a 
priority?
    Answer. VA is seeking legislative authority to align VA per diem 
payments to State veterans homes with VA's revised long-term care 
eligibility policy. Enactment of this proposal would ensure fairness 
and consistency in how VA treats veterans needing long-term care across 
all venues, including VA nursing homes, community nursing homes, and 
State nursing homes. We are unable to comment on how the individual 
States would respond to this change in policy.
    Question. It seems to me that VA encouraged the States to build 
long-term care capacity by offering them construction subsidies. Would 
a change in the ``rules of the game'' after these State homes have been 
built not break the bargain that the Federal Government has struck with 
the States?
    Answer. The VA State Home Construction Grant Program assists States 
in construction and renovation costs for nursing homes, domiciliary 
facilities and adult day healthcare. The program does not require the 
state to participate in the State Veteran Home Per Diem Grant Program, 
or guarantee the ongoing subsidy of per diem payments. The law is 
separate for each of the programs.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

             STATE EXTENDED CARE FACILITIES GRANTS PROGRAM

    Question. Today I asked about the decision to impose a 1-year 
moratorium on funding for the State Extended Care Facilities Grants 
program. Specifically, I asked for the rationale behind the decision 
and if he could explain its impact on States, such as California, which 
critically need additional veterans homes. I also inquired about 
whether the moratorium was really a plan to ultimately phase out 
funding for State veterans homes.
    Can you explain to this committee why it is necessary to impose a 
1-year moratorium on grants for construction of long-term extended care 
facilities when there is such a need for VA homes throughout this 
Nation?
    Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of extended 
care facilities. This will permit VA to complete an assessment of its 
nationwide institutional long-term care infrastructure and ensure that 
future construction aligns with the areas of greatest projected need. 
Grants that have already been awarded will not be affected by the 1-
year moratorium.
    Question. How would this moratorium affect the current priorities 
list for funding under this program?
    Answer. VA has already committed to all planned fiscal year 2005 
projects on the current Priority List. The States are currently 
completing the requirements for fiscal year 2005 grant awards. VA has 
committed the maximum fiscal year 2005 appropriations and the remaining 
fiscal year 2004 carryover funds to these projects.
    Question. Do you anticipate altering this priorities list for 
fiscal year 2007?
    Answer. The Priority List is revised annually, as of August 15th. 
All new and existing pending projects are ranked and included in the 
annual list. Once approved by the Secretary, the list is used to 
identify ranked projects and commit funding for projects for that 
fiscal year award or to finalize conditionally approved projects. For 
fiscal year 2007, VA would follow the same procedures and commit funds 
available at that time to the projects in rank order.
    Question. Can you provide this committee a better sense of your 
plans going forward and how it would affect funding for future State 
veterans home projects?
    Answer. VA will complete its assessment for our nationwide long-
term care infrastructure and assess the construction grants program 
priority during the fiscal year 2007 budget deliberations.
    Question. Is the Administration considering a plan to phase out 
grant funding for State veterans homes?
    Answer. The Administration will reevaluate the funding for the 
State Extended Care Facilities Grant program during the fiscal year 
2007 budget deliberations.
    Question. I also know that the State of California plans to request 
$125 million in fiscal year 2007 under this grant program to fund its 
largest project to date, the Greater Los Angeles-Ventura County Home, 
which includes 3 separate facilities. How would the 1-year moratorium 
impact funding for this project?
    Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of extended 
care facilities. This will permit VA to complete an assessment of its 
nationwide institutional long-term care infrastructure and ensure that 
future construction aligns with the areas of greatest projected need. 
Grants that have already been awarded will not be affected by the 1-
year moratorium.
    VA has already committed to all planned fiscal year 2005 projects 
on the current Priority List. The states are currently completing the 
requirements for fiscal year 2005 grant awards. VA has committed the 
maximum fiscal year 2005 appropriations and the remaining fiscal year 
2004 carryover funds to these projects.
    The Priority List is revised annually, as of August 15th. All new 
and existing pending projects are ranked and included in the annual 
list. Once approved by the Secretary, the list is used to identify 
ranked projects and commit funding for projects for that fiscal year 
award or to finalize conditionally approved projects. For fiscal year 
2007, VA would follow the same procedures and commit funds available at 
that time to the projects in rank order. VA cannot predict at this time 
how the California project will be ranked in fiscal year 2007 or 
whether there will be sufficient appropriations to fund it.

                         MEDICAL CARE PROGRAMS

    Question. The Administration's overall request for Medical Care 
Programs is $30.8 billion. However, if you discount the collections 
that you anticipate through the Medical Care Collections Fund, as well 
as the new fees that would be imposed on thousands of veterans, you are 
left with a base appropriation request for Medical Care Programs of 
$28.2 billion. Which is only 0.4 percent increase over last year's 
enacted level. This falls well below the standard compounded medical 
inflation rate of 3.9 percent.
    Do you believe that this is sufficient funding given the number of 
veterans returning home from the Middle East?
    Answer. Yes, VA requested the necessary resources in fiscal year 
2006 to continue meeting the needs of all veterans who have suffered 
injuries or diseases as a result of the conflicts in Iraq and 
Afghanistan.

                    MEDICAL AND PROSTHETIC RESEARCH

    Question. I am happy to see the fiscal year 2006 budget calling for 
$1.2 billion for prosthetics and sensory aids, a $100 million increase 
over fiscal year 2005, however, I am concerned about the cut to Medical 
and Prosthetic Research (from $402 million in fiscal year 2005 to $393 
million in fiscal year 2006). As you know, 11,000 men and women of our 
Armed Forces have suffered injuries in Iraq and Afghanistan and to many 
of them functional and efficient prosthetics will make all the 
difference in the world. The VA has made tremendous progress in 
developing new, state-of-the-art prosthetics, but we should not stop 
there. We should continue to fund a robust prosthetic research program. 
None of us ever wants to have to explain to one of our soldiers who has 
lost a leg, that more could have been done.
    Can you please explain why the fiscal year 2006 budget reduces 
money in this area?
    Answer. The VA research program is funded by three funding 
sources--direct appropriation, private grant funding, and Federal grant 
funding. The overall estimated funding is expected to rise in fiscal 
year 2006 by $49 million or 3.1 percent to $1.7 billion. The total 
research program level of effort and number of projects for veterans 
will be at a similar level to that of fiscal year 2005. VA, like other 
Departments across Government, must be a responsible partner in 
assisting to achieve many important, competing priorities. Reducing the 
deficit for the current and long-term strength of this country is very 
important. Therefore, tough choices had to be made in maximizing 
resource impact in a slower growth environment. Medical care for those 
who need VA the most and timely, consistent benefits delivery are also 
crucial services for veterans. A balanced approach in wisely investing 
resources was a guiding principle in the development of this budget. 
Research that enhances veterans' lives continues to be an important 
priority of the VA.
    In terms of prosthetics research, VA is expanding its support of 
multidisciplinary research approaches and examination of enabling 
technologies that aim to ease the physical and psychological pain of 
veterans. The VA Office of Research and Development (ORD) is 
collaborating with clinical services to evaluate the delivery of care 
and help identify optimal utilization of all patient services including 
durable medical equipment for veterans. VA is also dedicated to the 
generation of the rigorous data required to formulate policy and 
establish clinical care guidelines.
    In addition to evaluating existing practices, VA is expanding upon 
its longstanding support for advances in surgical approaches to primary 
amputation to include operative revision and limb lengthening 
procedures that can potentially aid in fitting prostheses and enhance 
function beyond what is now possible. VA is also aggressively examining 
other techniques such as osseointegration, a procedure that replaces 
missing limbs with titanium rods inserted directly into residual bone.
    Examples of ongoing projects include:
  --partnerships with the Department of Defense and Walter Reed Army 
        Medical Center to investigate immediate concerns of returning 
        Operation Enduring Freedom (OEF) and Operation Iraqi Freedom 
        (OIF) veterans;
  --trials of current prosthetic designs and improvements for future 
        designs;
  --use of telerehabilitation to prevent complications resulting from 
        amputation;
  --bio-hybrid limb projects using regenerated tissue, lengthened bone, 
        internal and external titanium implants, and sensors that allow 
        amputees to use brain signals and residual limb musculature to 
        move their prostheses;
  --new uses for sensory and implanted control devices and biological 
        sensors for the detection of health and function including 
        microelectro-mechanical or nanotechnologies;
  --evaluation and updates of rehabilitation strategies; and
  --examination of how best to implement research results and develop 
        best practices across VHA.

                        MEFLOQUINE (LARIAM) USE

    Question. As you may be aware, I have been concerned about the 
Department of Defense's (DOD) use of the anti-malarial drug mefloquine 
(Lariam) and its impact on our service members. In June 2004, I wrote 
your predecessor Secretary Principi with my concerns about the use of 
this drug, especially after hearing that several service members had 
been diagnosed with permanent brainstem and vestibular damage from 
mefloquine toxicity. Shortly thereafter, the Veterans Health 
Administration issued an Information Letter outlining the potential for 
serious complications associated with mefloquine.
    The VA's health care system is likely to be the first line of 
treatment for service members who have returned from active duty. And 
the VA will bear much of the cost and burden of treatment and 
rehabilitation for service members with mefloquine toxicity.
    Knowing that mefloquine was issued to active duty military in the 
wars in Afghanistan and Iraq, will you take steps to actively monitor 
the impact this drug has on these veterans' health conditions?
    Answer. VA is actively monitoring the DOD studies of possible 
adverse effects of mefloquine and is following the medical literature 
and reported studies. At DOD's invitation, VA participated in a special 
meeting of DOD's Armed Forces Epidemiology Board that DOD charged with 
helping to plan studies on long-term health effects among OIF and OEF 
veterans from mefloquine. VA regularly participates in DOD briefings on 
the status of DOD's studies on this health issue. In addition, VA 
developed an Under Secretary for Health Information Letter that 
reviewed medical and scientific literature on known health effects from 
taking mefloquine (IL 10-2004-007), ``Possible Long-Term Health Effects 
From The Malarial Prophylaxis Mefloquine (Lariam),'' June 23, 2004). 
This information letter alerts VA health care providers to the range of 
possible long-term health effects from taking mefloquine. It is 
important to note that mefloquine is an FDA approved drug that is 
widely used in the civilian community and not just in the military.
    Question. In the past, I have suggested that it is necessary for 
the Department of Defense (DOD) to immediately implement a program that 
will allow soldiers to report side effects and be evaluated, diagnosed 
and treated without fear of reprisal and that reporting such side 
effects not negatively affect their military service or careers. Would 
you be willing to implement such a program at the Department of 
Veterans' Affairs and will you work with DOD on such a program?
    Answer. Mefloquine side effects begin while a person is actually 
taking the drug--in this case, while they were still on active duty. 
Side effects appearing while a service member was still on active duty 
may be recorded by DOD health care providers. Few if any veterans are 
still taking malaria prophylaxis after leaving active military duty and 
then enrolling for VA health care. VA's Information Letter on 
mefloquine side effects (IL 10-2004-007) is intended to alert VA health 
care providers to any side effects that may persist in veterans after 
they have separated from military service. Any relevant findings then 
may be entered into the veteran's health record. Moreover, no health 
problem identified by the VA would result in reprisals or harm to a 
veterans' career because of the strict confidentiality and 
professionalism within the VA health care system.
    Question. As you may know, DOD is undertaking an investigation of 
the impact of mefloquine use by service members. What has the VA's role 
been in this investigation and has the Department participated in DOD's 
investigation?
    Answer. VA has been briefed on this study and actively supports 
DOD's efforts. VA is actively monitoring the DOD studies of possible 
adverse effects of mefloquine and is following the medical literature 
and reported studies. At DOD's invitation, VA participated in a special 
meeting of DOD's Armed Forces Epidemiology Board that DOD charged with 
helping to plan studies on long-term health effects among OIF and OEF 
veterans from mefloquine. VA regularly participates in briefings on the 
status of various DOD studies on this topic.

                            ENROLLMENT FEES

    Question. The budget submission assumes a $250 enrollment fee on 
Priority 7 and 8 veterans.
    How many veterans will have to pay the $250 enrollment fee? How 
many veterans will leave VA if they have to pay this premium? AND How 
does the VA plan to collect this fee from veterans?
    Answer. In 2006, 1.26 million Priority 7 and 8 veterans are 
expected to pay the $250 annual enrollment fee. This policy is expected 
to reduce enrollment for Priority 7 and 8 veterans by 1.1 million and 
reduce the number of Priority 7 and 8 unique patients by 213,000.
    VA will notify all Priority 7 and 8 enrolled veterans of the 
requirement to pay the enrollment fee by letter with appropriate 
payment guidance. Veterans will be provided a specified period of time 
to pay the entire fee or to agree to a quarterly payment schedule with 
payment of the first quarterly payment by a specified date. Payments 
will be processed through a central ``lockbox'' utility separate from, 
but similar to, existing processes used for receipt of veteran co-
payments.

                        PHARMACY CO-PAY INCREASE

    Question. The budget includes an assumption that the pharmacy co-
payments for certain veterans will increase from $7 to $15.
    How did VA choose $15 as the amount for the prescription drug co-
payment?
    Answer. This and the other proposed policies in VA's 2006 
President's budget were designed to ensure that VA is able to fulfill 
its core mission--providing timely access to high-quality health care 
to veterans with serviced connected disabilities, low incomes, and 
those with special needs. The $15 pharmacy co-payment proposal and 
other cost-sharing proposals would only affect higher income, better-
insured veterans in the lowest priorities and have been strategically 
priced to refocus the VA system on those veterans who need us most. The 
$15 drug co-pay would more closely align VA with other private and 
public health care plans.

                            RETURNING TROOPS

    Question. There are new challenges arising to ensure that returning 
troops are receiving their entitled benefits and services as veterans. 
The new challenges include reaching every veteran.
    What steps is the VA taking to reach out to all of our returning 
troops from Iraq and Afghanistan?
    Answer. Returning troops are provided information about VA benefits 
and services and assistance in applying for these benefits through the 
following VA outreach programs.
    Transition Assistance Program (TAP) and Other Military Services 
Briefings.--From October 2002 through January 2005, VBA military 
services coordinators conducted transition briefings and related 
personal interviews in the United States as reflected in the chart 
below. These briefings include pre- and post-deployment briefings for 
Reserve and National Guard members.

                                                OVERALL BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................           5,368         197,082          97,352
2004............................................................           7,210         261,391         115,576
2005 \1\........................................................           2,263          79,105          34,106
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    In addition to military services briefings in the United States, 
VBA representatives conduct briefings overseas under arrangement with 
the Department of Defense (DOD). VBA provides two tours each year with 
6 to 7 VBA representatives providing this service for each tour. Each 
is home-based at a major military site and provides services at the 
site and surrounding areas. The countries serviced are England, 
Germany, Japan, and Italy. Korea is serviced by staff from the Benefits 
Delivery at Discharge office in Yong San. A representative from the St. 
Petersburg Regional Office provides that service for Guantanamo Bay. We 
were recently requested by DOD to add Bahrain to our overseas schedule 
beginning with the May 2005 tour. The following chart reflects 
statistics regarding overseas briefings:

                                               OVERSEAS BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................             472          12,943          12,947
2004............................................................             624          15,183           6,544
2005 \1\........................................................              36           1,278             464
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard 
members is part of the overall VBA outreach program. In peacetime, this 
outreach is generally accomplished on an ``on call'' or ``as 
requested'' basis. With the activation and deployment of large numbers 
of Reserve/Guard members following the September 11, 2001, attack on 
America, and the onset of Operations Enduring Freedom and Iraqi Freedom 
(OEF/OIF), VBA outreach to this group has been greatly expanded. 
National and local contacts have been made with Reserve/Guard officials 
to schedule pre- and post-mobilization briefings for their members. 
Returning Reserve/Guard members can also elect to attend the formal 3-
day TAP workshops. The following data on Reserve/Guard briefings is a 
subset of the overall briefings data provided in the first chart:

                         RESERVE/GUARD BRIEFINGS
------------------------------------------------------------------------
               Fiscal year                   Briefings     No. attendees
------------------------------------------------------------------------
2003....................................             821          46,675
2004....................................           1,399          88,366
2005 \1\................................             531          32,448
------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings Aboard Ships.--VA provided TAP briefings aboard the USS 
Constellation, the USS Enterprise, and the USS George Washington on 
their return from the Persian Gulf to the United States. VBA will 
continue to support requests from the Department of the Navy for TAP 
workshops aboard ships.
Seamless Transition--Military Treatment Facilities (MTFs)
    In 2003, VA began placing Veterans Service Representatives at key 
military treatment facilities (MTFs) where severely wounded service 
members from OEF/OIF are frequently sent. Representatives of the VBA 
Benefits Delivery at Discharge office in Germany work closely with the 
staff at the Landstuhl Army Medical Center to assist returning injured 
service members who are patients at that facility and family members 
temporarily residing at the Fisher House.
    Since March 2003, a VBA OEF/OIF coordinator is assigned for each 
MTF. Full time staff is assigned to the Walter Reed Army Medical Center 
in Washington, D.C., and the Bethesda Naval Medical Center in Maryland. 
Similar teams work with patients and family members at three other MTFs 
serving as key medical centers for seriously wounded returning troops: 
Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service 
is conducted at all other major military treatment facilities. As of 
January 2005, over 4,500 hospitalized returning service members were 
assisted through this program at Walter Reed, Bethesda, Eisenhower, 
Brooke, and Madigan. Since March 2003, each claim from a seriously 
disabled OEF/OIF veteran has been case managed for seamless and 
expeditious processing.
    Web Page.--As part of the Seamless Transition effort, VBA created a 
new web page for OEF/OIF, directly accessible from the VA homepage. 
Information specific to Reserve/Guard members who were activated is 
included, as well as links to other Federal benefits of interest to 
returning service members. The web page has been accessed over 340,000 
times since its activation in December 2003.
    Benefits Delivery at Discharge (BDD).--VA's BDD program operates in 
concert with the military services outreach program. Under BDD, service 
members can apply for disability compensation within 180 days before 
discharge. The required physical examinations are conducted and service 
medical records are reviewed prior to discharge. The goal is to 
adjudicate claims within 30 days following discharge. Upon receipt of 
the claimant's DD Form 214 (Report of Release from Active Military 
Service), benefits are immediately authorized so that the recently 
separated veteran can receive his/her first disability check the month 
following the month of discharge or shortly thereafter. Currently, 141 
military installations worldwide participate in this program, including 
two sites in Germany and three in Korea. Approximately 26,000 BDD 
claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004; 
and 12,000 in fiscal year 2005 to date.
Recently-Separated Veterans
    Veterans Assistance at Discharge System (VADS).--All separating and 
retiring service members (including Reserve/Guard members) receive a 
``Welcome Home Package'' that includes a letter from the Secretary, a 
copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
0501, Veterans Benefits Timetable, through VADS. Similar information is 
again mailed with a 6-month follow-up letter.
    Secretary's Outreach Letter to Returning Service Members.--Outreach 
letters from the Secretary of Veterans Affairs have been sent to 
approximately 240,000 returning service members who have separated/
retired from active duty. Enclosed with the letters are copies of VA 
Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of 
VA Benefits for National Guard and Reserve Personnel.
    Question. It is imperative for the Department of Defense and the 
Veterans Administration to work closely to ensure that troops returning 
from Iraq and Afghanistan receive the benefits and assistance to which 
they are entitled.
    How do the VA and Department of Defense coordinate information on 
returning troops? Is the VA getting timely and accurate information 
from the Department of Defense on returning troops? In what manner is 
information on returning troops transmitted to the VA from DOD?
    Answer. VA's Office of the General Counsel continues to negotiate 
with DOD to obtain the complete range of returning service member data 
VA needs for identification, tracking, and statistical/reporting 
purposes. A formal Memorandum of Agreement (MOA) between VA and DOD is 
still pending.
    However, a preliminary agreement has been reached that will allow 
VA to receive a flow of basic data from DOD on a regular basis, thus 
facilitating a seamless transition of seriously disabled service 
members into the VA system. As part of this agreement, VA will begin 
receiving data on those disabled service members who are entering the 
Physical Evaluation Board process.
    Question. What is VA doing to reach out to reservists and national 
guardsmen that were activated and deployed who are now returning home 
and are entitled to benefits?
    Answer. See the response above to the question concerning outreach 
to all of our returning troops from Iraq and Afghanistan. Outreach to 
reservists and National Guard members is addressed in that response.

                           COLORECTAL CANCER

    Question. Colorectal cancer is the second leading cause of cancer 
deaths in the United States, yet survival rates are greater than 90 
percent among those whose cancer is detected early.
    Roughly, what percentage of patients who receive their health care 
at a Veterans Administration facility undergoes routine screening for 
colon cancer?
    Answer. Screening for colorectal cancer in the VA has increased 
significantly. In fiscal year 2004, 74 percent of the established 
veterans (those who received care from VA in the past 12 months) 
requiring colorectal screening received it. The percentage of veterans 
requiring colorectal screening has been increasing. In fiscal year 
1996, the percentage was 34 percent; in fiscal year 2001, 60 percent; 
in fiscal year 2002, 64 percent; and in fiscal year 2003, 67 percent.
    Question. Many patients resist colon cancer screening tests due to 
the anticipated discomfort and inconvenience. On the other hand, those 
who choose to be screened by colonoscopy--the most accurate of the 
current modalities--must often wait months for access to a surgical 
suite and trained gastroenterologist. On average, how long must 
veterans wait for a screening colonoscopy at veterans' hospitals and 
clinics?
    Answer. Diagnostic colonoscopies (for patients with symptoms or 
positive findings) are scheduled as soon as possible with an average 
wait time of 32 days. Screening colonoscopies (for asymptomatic 
patients) are scheduled for the next available appointment. VA does not 
measure specifically for screening colonoscopies, but we are providing 
the following waiting time information for diagnostic colonoscopies and 
GI clinics (which includes upper endoscopies and colonoscopies).
    VHA has completed 20,186 diagnostic colonoscopies for the first 4 
months of fiscal year 2005 with an average wait time from the patient's 
desired appointment date (from the date appointment created if a new 
patient) of 32 days. Half the appointments were completed within 17 
days (median wait time was 17 days).
    VHA completed 55,933 appointments for the GI Endoscopy Clinic for 
the first 4 months of fiscal year 2005. The average wait time from the 
patient's desired appointment date (or the date the appointment created 
if a new patient) was 31 days. Half were completed within 7 days 
(median wait time was 7 days).
    Question. In the fiscal year 2004 Omnibus Appropriation, Congress 
urged the VA to pursue aggressively new technologies available for 
diagnosing colorectal cancer that are less invasive, less expensive and 
provide equal or better evaluations than older methods. What has the 
Administration done in response?
    Answer. VA is committed to improving the colorectal screening 
methods and overall percentage of screened veterans. In general, VA 
follows the evidence-based review of the U.S. Preventive Services Task 
Force (USPSTF) in screening for colon cancer, which is found online at 
http://www.ahrq.gov/clinic/uspstf/uspscolo.htm. As noted in their 
conclusion, ``It is unclear whether the increased accuracy of 
colonoscopy compared with alternative screening methods (for example, 
the identification of lesions that FOBT [fecal occult blood test] and 
flexible sigmoidoscopy would not detect) offsets the procedure's 
additional complications, inconvenience, and costs.'' However, the Task 
Force also found insufficient evidence that newer screening 
technologies (for example, computed tomographic colography) are 
effective in improving health outcomes. VA is still looking for 
evidence to show benefit of the newer technologies and works closely 
with USPSTF.
    VA offers screening for colon cancer using all recognized effective 
modalities. If a patient experiences symptoms or has positive findings 
on a screening by any other modality than colonoscopy, then a 
diagnostic colonoscopy is scheduled.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                          MEDICAL HEALTH CARE

    Question. Recently, I introduced the Assured Funding for Veterans 
Health Care Act (S. 331). This bill would ensure adequate veterans 
health care funding is available by making VA medical care mandatory 
spending. This legislation has been endorsed by all of the leading 
veterans organizations.
    Do you support this legislation, and if not, why?
    Answer. An analysis of your proposed legislation would need to be 
made in light of the President's fiscal year 2006 budget submission and 
overall guidance on the budget.
    That said, however, VA has not supported similar legislation 
introduced in previous Congresses. While mandatory funding may appear 
to be an interesting approach to provide resources to America's 
veterans, VA has some serious concerns about its applicability to a 
very complex, highly dynamic and sophisticated health care delivery 
system such as the VA. A mandatory funding approach could inhibit VA's 
ability to appropriately react to rapid advances in medical science and 
technology and the development of new drugs and equipment have 
dramatically changed treatment modalities and the manner in which 
health care is delivered over the last decade. It could also fail to 
keep up with the demographic or health status changes among veterans 
and possibly create a false impression that VA would have full funding 
to enroll all veterans. Therefore, a mandatory funding system based 
upon static or untimely fixed indices may not be the best way to ensure 
that adequate resources are available to maintain the high quality of 
care that VA has become renowned for to care for our Nation's veterans.
    Former VA Secretary Principi testified that the VA needs at least a 
13 percent-14 percent increase in medical funding each year just to 
maintain current health care services for veterans. The Bush 
Administration's fiscal year 2006 budget request for VA medical care 
does not include such an increase in funding.
    Question. If the Administration's proposed VA health care funding 
levels were enacted would there be a decrease in any veterans health 
care services or was Secretary Principi incorrect in his analysis?
    Answer. The Veterans Health Administration has received record 
budget increases over the last 4 years. With this budget proposal, the 
President, working in partnership with Congress, will have increased 
health care funding for veterans by more than 47 percent since fiscal 
year 2001.
    In fiscal year 2006, VA plans to operate within the level of the 
President's Budget request of $30.7 billion (including $750 million for 
construction and $2.6 billion for collections) for the medical care 
program, an increase of 2.5 percent over the enacted level of fiscal 
year 2005. With this funding level, VA will be able to treat more than 
5.2 million patients and VA will focus its health care resources on 
veterans with service-connected disabled conditions, those with lower 
incomes, and veterans needing our specialized services. In 2006, nearly 
80 percent of veteran patients are expected to be high priority--those 
veterans who count on VA the most.
    The President's Task Force to Improve Health Care Delivery for Our 
Nation's Veterans--a 15-member panel that was assembled to study the 
health care needs of our Nation's veterans--released their 
recommendations in a report on May 28, 2003. The report stated clearly 
that the most pressing problem facing the VA health system is that 
funding is not keeping pace with the need for care. While the panel 
encouraged greater cooperation between the VA and the Department of 
Defense's health care system, they recognized this would not address 
the fundamental problem. Instead, the panel recommended two solutions 
to the VA's funding problems: create an independent board which will 
set the level of VA health care spending each year, or establish a 
formula and provide a mandatory amount of funding for VA medical care.
    Question. Do you plan to endorse or act on either of these 
recommendations from the President's Task Force to Improve Health Care 
Delivery for Our Nation's Veterans?
    Answer. Thank you for your question regarding the endorsement of 
mandatory health care funding for the Department of Veterans Affairs. 
We are most appreciative of your interest and concern to ensure that 
sufficient resources are available to provide high-quality health care 
to our Nation's veterans.
    The discretionary legislative process currently in place has 
provided for substantial increases for the Department of Veterans 
Affairs health care budget over the past several years, nearly a 47 
percent increase since 2001.
    While mandatory funding may appear to be an interesting approach to 
provide resources to America's veterans, VA has some serious concerns 
about its applicability to a very complex, highly dynamic and 
sophisticated health care delivery system such as the VA. A mandatory 
funding approach could inhibit VA's ability to appropriately react to 
rapid advances in medical science and technology and the development of 
new drugs and equipment have dramatically changed treatment modalities 
and the manner in which health care is delivered over the last decade. 
It could also fail to keep up with the demographic or health status 
changes among veterans and possibly create a false impression that VA 
would have full funding to enroll all veterans. Therefore, a mandatory 
funding system based upon static or untimely fixed indices may not be 
the best way to ensure that adequate resources are available to 
maintain the high quality of care that VA has become renowned for to 
care for our Nation's veterans.
    Since 2001 VA has been utilizing a professional actuarial model as 
a basis for the formulation of the budget. These actuarial forecasts 
also have been integrated into the VHA's capital and strategic planning 
processes. This demand model has contributed significantly to the 
achievement of VA's strategic goals and performance measures to provide 
enrolled veterans with access to timely, quality care. This has allowed 
decision makers to ensure that resources are available to meet the 
expected demand or develop policies to address any gap between the 
expected demand and available resources. This professional, 
businesslike approach to forecasting is similar to that employed by 
many large private-sector organizations such as major insurance 
corporations throughout our country. The model utilized is highly 
sophisticated and is capable of predicting patient utilization, 
reliance, morbidity, etc. We continue to revise and update the model in 
order to assure that future projections will be as accurate as 
possible.
    VA therefore strongly believes that the utilization of a highly 
professional, scientific, actuarial model is a much more professional, 
effective, and businesslike approach for budget formulation and 
forecasting than those like mandatory funding.
                                 ______
                                 

            Questions Submitted by Senator Mary L. Landrieu

    Question. In May 2001, President George W. Bush signed Executive 
Order 13214 creating the President's Task Force to Improve Health Care 
Delivery for Our Nation's Veterans. The PTF Task Force. This task force 
was charged to identify ways to improve health care delivery to VA and 
Department of Defense beneficiaries. One important recommendation of 
this task force was recently addressed in a letter sent to the VA 
Secretary and to Defense Secretary Rumsfeld. This recommendation 
directed the VA to develop electronic medical records that are 
interoperable and bi-directional, allowing for a two-way electronic 
exchange of health information and occupational and environment 
exposure data. These electronic medical records should also include an 
easily transferable electronic DD214 forwarded from the DOD to the VA. 
This would allow the VA to expedite the claims process and give the 
service member faster access to health care and benefits.
    What progress has been made towards accomplishing this task which 
is necessary in order to ensure that servicemen and women have a 
seamless transition from military to civilian life?
    Answer. The Defense Personnel Records Image Retrieval System 
(DPRIS) is currently operational between the Department of Veterans 
Affairs, Veterans Benefits Administration (over 3,000 users) and the 
Official Military Personnel File systems of the Army, Navy, and Marine 
Corps. DPRIS connects to the VA Personnel Information Exchange System 
(PIES) and allows VA users to electronically request and receive 
official military personnel documentation. The interface with the Air 
Force will be completed in June 2005, and the VA will be able to 
retrieve imaged copies of military personnel records from the Air Force 
by September 2005. All of these systems contain the DD214 and many 
additional military personnel documents that VA uses. The most commonly 
requested form is the DD214, and although the performance parameter for 
DPRIS is to return the requested documents to VA within 48 hours, it is 
currently operating in near real time. In addition to the interagency 
collaboration on DPRIS, DOD and VA are also collaborating on VA access 
to military personnel information that will be stored as data in the 
Defense Integrated Military Human Resources System (DIMHRS). VA 
requirements for military information have been an integral and on-
going part of the requirements collection for DIMHRS, and the two 
departments are now moving into the technical integration phase which 
will determine the most efficient and expeditious way for VA to access 
information in DIMHRS when it comes on line in 2006. The electronic 
exchange of DD214 information will be fully implemented with DIMHRS.
    Question. According to a New England Journal of Medicine study 
published on July 1, 2004, dealing with Mental Health Problems and 
Barriers to Care with respect to Service Members Returning From Combat 
Duty in Iraq and Afghanistan, 82 percent of veterans acknowledged a 
need for mental health treatment, however only 24 percent reported ever 
receiving any mental health treatment within 1 year after returning 
from combat. Among the concerns veterans reported after returning from 
combat, were depression, anxiety, post traumatic stress disorder and 
almost one third reported the misuse of alcohol. With thousands of 
service members returning from Iraq and Afghanistan this year, these 
numbers will increase significantly. As you know, often times symptoms 
of post traumatic stress do not manifest themselves for months or even 
years after returning from combat.
    Given the importance of mental health issues and the impact that 
these concerns will have on not only the service member's entire 
quality of life, as well as the quality of life of his or her family 
and community, what programs has the VA in place at present to deal 
with these matters and what plans do you have to deal with the 
increased numbers who will require this type of health care?
    Answer. Meeting the needs of our returning veterans and their 
families is among VA's highest priorities. VA has indeed anticipated 
and prepared for the increased numbers of those requiring mental health 
services. VA's approach toward the returning troops and their families 
emphasizes health promotion and preventive care principles. This 
approach is designed to identify and resolve problems in readjustment 
to civilian life, before they progress to problems requiring more 
intensive clinical interaction. For those that require clinical 
interaction, VA provides state-of-the-art psychotherapy and 
psychopharmacology treatments.
    Based on VA's experience and research we do not expect that a great 
majority of Operation Enduring Freedom and Operation Iraqi Freedom 
(OEF/OIF) veterans will suffer long-term consequences of their war zone 
experience. However, many likely will have some short-term reactions to 
the horrors of war. Of those who do develop mental/emotional problems, 
PTSD will not be the only problem to be addressed. VA provides 
comprehensive care for veterans with mental disorders through a 
continuum of services designed to meet patients' changing needs.
    Major depression and substance abuse are two problems that can be 
anticipated, and these disorders carry with them significant risk for 
dangerous behaviors such as suicide and family violence. VA provides 
care through 144 specialized PTSD programs throughout the country along 
with 206 (soon to be 207) Readjustment Counseling Centers (RCS), often 
called Vet Centers. In addition, Outpatient Clinical PTSD Teams, 
Specialized Inpatient PTSD Programs, and Residential Treatment Programs 
are located across the Nation. There are PTSD programs in all States. 
VA's ongoing PTSD program evaluation indicates improvements in PTSD 
symptoms and functioning in patients treated by VA for PTSD. In fiscal 
year 2004, VA spent more than $3 billion on the provision of treatment 
services (medical and psychiatric) to veterans with a mental illness.
    The tasks for these teams are those of outreach, health promotion, 
consultation, and liaison. The working title for these programs is: 
Returning Veterans Outreach, Education and Care programs and there will 
be at least one program in every Veterans Integrated Service Network. 
VA's National Center for PTSD is creating an educational program 
entitled ``PTSD 101'' specifically for clinicians who will be hired 
into the new PTSD programs. There will be basic and advanced care 
modules. Linked to the concepts of the PTSD Clinical Practice Guideline 
and the Iraq Clinician War Guide, it will ensure the provision of the 
latest evidence-based care to veterans with PTSD and associated mental 
disorders.
    Analysis of DOD data as of December 2004 shows that 244,054 troops 
had returned from Iraq, with 20 percent (48,733) receiving care in a VA 
medical center. Of those returned troops, 12,422 had a mental health 
diagnosis: 4,783 were previously diagnosed with PTSD, and 3,500 were 
diagnosed with a depressive disorder. An additional 2,082 veterans were 
diagnosed with PTSD at Vet Centers.
    Readjustment Counseling Service takes the lead in providing 
outreach and counseling services through the 206 (soon to be 207) 
community-based centers throughout the United States. Fifty additional 
Global War on Terrorism counselors have been added to these centers to 
meet this need. In addition the Secretary has assigned authority to RCS 
to deliver bereavement counseling to those in need.
    To position VA for future needs, we have allocated $100 million in 
fiscal year 2005 to implement initiatives contained in the Department's 
Mental Health Strategic Plan. The President's fiscal year 2006 budget 
submission proposes an additional $100 million for mental health 
initiatives in fiscal year 2006. These initiatives will benefit all 
veterans receiving mental health care from VA and include OEF/OIF 
outreach programs designed to provide preventive health services that 
should, in many instances, identify problems and address them before 
they require more extensive clinical intervention. These enhancements 
will also address increased clinical needs of returning veterans and 
existing veterans who come to VA for PTSD care.
    Question. A core mission of the Department of Veterans Affairs is 
the provision of benefits to relieve the economic effects of disability 
upon veterans and their families. For those benefits to effectively 
fulfill their intended purpose the VA must process and adjudicate 
claims in a timely and accurate fashion. Rather than making headway and 
overcoming the chronic claims backlog and consequent protracted delays 
in claims disposition, the VA has lost ground to the problem, with the 
backlog of pending claims growing substantially larger. Historically, 
many underlying causes acted in concert to bring on this intractable 
problem. These dynamics acting in concert have been thoroughly detailed 
in several studies into the problem. While the problem has been 
exacerbated by lack of appropriate and decisive action, most of the 
causes can be directly or indirectly associated with inadequate 
resources.
    What steps does the Veterans Administration plan to take by virtue 
of this recommended budget in order to improve the quality, 
proficiency, and efficiency within the Veterans Administration with 
respect to claims processing and adjudication?
    Answer. The focus of the 2006 budget is to continue progress, in 
support of the President's initiative, to improve the timeliness and 
accuracy of claims processing. Recipients of compensation and pension 
benefits are projected to increase from 2.62 million in 2001 to 3.02 
million in 2006, a 15.3 percent increase. The projected increase is due 
to a number of factors, including the current record levels of DOD 
active duty end strength resulting from the large number of activated 
reserve units.
  --We continue to receive increasing numbers of claims. Between 2000 
        and 2004, the number of disability claims received annually 
        rose from 674,000 to 771,000, or more than 14 percent. This 
        budget conservatively estimates a 3 percent increase for 2005 
        and another 3 percent for 2006 in claims receipts. This 
        increase is due to both the high active duty levels mentioned 
        above, as well as an increase in the number of reopened claims 
        due to various changes, including the addition of 
        cardiovascular disease and residuals of stroke to the 
        presumptive list for former Prisoners of War.
  --To address projected workload increases, this budget continues to 
        ensure a sufficient workforce in our compensation and pension 
        programs to meet our targets. The FTE in the compensation and 
        pension programs will increase by 128 in 2006.
    This budget also continues VBA's goal to improve organizational 
designs and information technology investments to process claims as 
efficiently and accurately as possible. For example:
  --In 2005 VBA will begin the consolidation of the disability 
        determination aspects of the Benefits Delivery at Discharge 
        Program into two rating activities located in Salt Lake City 
        and Winston-Salem.
  --In 2006 VBA will complete implementation of the Cooperative 
        Separation Process/Examination initiative at the local level. 
        This is a joint VA and DOD initiative that streamlines the 
        military discharge process for separating servicemembers with 
        disabilities.
  --Funds are provided to continue reorganizing our field financial 
        functions to reduce overhead and realign critical resources to 
        our business processes directly serving veterans.
  --$4.4 million is provided to begin implementation of the Vocational 
        Rehabilitation & Employment Task Force recommendations to 
        establish self-service job resource labs at each regional 
        office to aid VR&E staff and veterans in comprehensive analyses 
        of employment opportunities.
  --Over $15 million has been allocated to support our highest priority 
        IT initiative--VETSNET--and continue efforts in C&P, Education, 
        and VR&E to move off the existing Benefits Delivery Network to 
        the new corporate environment. VETSNET, when fully deployed, 
        will greatly expand the information available to decision 
        makers, reduce the number of times data must be entered both 
        increasing efficiency and insuring that the same data is 
        available throughout the Department.
    In addition, the 2006 budget submission will enable VA to continue 
its efforts in skill certification. Skill certification is a core 
initiative of the Department to insure that claims processors in 
regional offices have tested and validated competencies in the 
essential aspects of their positions. We believe that skill 
certification directly addresses quality and proficiency.
    VA will also continue its Benefit Delivery at Discharge (BDD) 
program. That program greatly simplifies the claims process and 
significantly reduces the amount of time required to process a claim.
    Question. There are 119 State Veterans Homes in 48 States and 
Puerto Rico. For more than 100 years the Federal Government has 
provided support for our State Veteran's Homes in partnership with 
State governments. The Federal Department of Veteran's Affairs budget 
for fiscal year 2006 would change the eligibility for Federal support 
excluding for the first time whole priority groups of deserving 
veterans. As a result, up to 80 percent of veterans in many States may 
no longer qualify for partial Federal support through per diem 
payments. Budget assumptions reduce the VA Per Diem grant by $293 
million. The budget would also place a moratorium on Federal 
construction grants for renovations and new construction of State 
Veterans Homes. After decades of partnership with the States--during 
which State taxpayers across the country have contributed millions of 
dollars to build and maintain the State Veterans Homes--the President's 
budget reneges on this commitment to our State homes, State taxpayers, 
and worst of all, our honored veterans. The impact of the proposal 
would be devastating for the residents of the State Veterans Homes. Of 
veterans currently residing in the Homes, approximately 20 percent 
would continue to receive the Federal per diem payments.
    What suggestions does the VA have for veterans who cannot afford to 
pick up these additional payments as a result of the per diem change 
and what plan do you have for Louisiana Veterans Homes which will be 
unable to meet their operating costs as a result of this massive blow?
    Answer. State Veterans Homes are owned, operated, and financed by 
the States. VA provides limited financial assistance to the States in 
the form of per diem grants for nursing home, hospital, domiciliary, 
and adult day healthcare. Only the nursing home per diem is affected by 
the fiscal year 2006 budget proposal. The cost of care in State 
Veterans Homes varies from State to State, as does the amount of 
assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. State Homes will continue 
operations to the extent that individual States discharge their fiscal 
responsibility for the operation and management of the Homes. VA does 
not have information on the plans of individual States to respond to 
the change in VA policy.
                                 ______
                                 

             Questions Submitted by Senator Robert C. Byrd

    Question. According to the Congressional Research Service, the 2003 
decision by the Administration to suspend health care enrollments for 
the lowest priority veterans called Category 8 veterans will affect 
522,000 veterans by the end of the current fiscal year.
    Secretary Nicholson, how many Category 8 veterans in West Virginia 
are no longer eligible to enroll in the VA health care as a result of 
the 2003 decision?
    Answer. As of the end of fiscal year 2004, VA estimates there were 
78,688 veterans in West Virginia who were Priority 8 of which 24,649 
were enrolled. VA projects there were 54,039 Priority 8 veterans in 
West Virginia who were not eligible to enroll with VA for health care.
    Question. If this policy continues, as your budget proposes, how 
many Category 8 veterans in West Virginia will be affected in fiscal 
year 2006 and beyond? How many veterans will be affected nationally?
    Answer. VA projects there are 9,818 Priority 8 enrollees residing 
in West Virginia who will pay the enrollment fee in fiscal year 2006 
and another 8,789 who will choose not to pay. At the national level, 
642,772 Priority 8 enrollees would pay the enrollment fee and 579,929 
would not. These new collections will allow VA to continue to refocus 
resources on veterans that fall under VA's core medical care mission 
(those with service-related disabilities, lower incomes, and special 
health needs). The fees are more closely aligned with other public and 
private health plans.

            PROPOSED BECKLEY VA MEDICAL CENTER NURSING HOME

    Question. Mr. Secretary, I made your predecessors acutely aware of 
my very strong support for the construction of the proposed Beckley VA 
Medical Center Nursing Home, and I want to take this opportunity to 
familiarize you of my interest in this project, as well. The nursing 
home was authorized by the Veterans Programs Enhancement Act of 2000, 
with the sponsorship of Senator John D. Rockefeller, IV. The project 
was originally authorized at $9.5 million. However, after further 
consultation with VA Headquarters officials, the estimates were 
reformulated, with a new total cost of approximately $18 million for a 
120-bed, 71,300 gross-square foot facility.
    I have been supportive of this project since its inception. To aid 
in its development, I added $1 million to the fiscal year 2001 VA-HUD 
Appropriations bill for the design of such a nursing home on thirteen 
acres of available space owned by the Beckley VA Medical Center, a site 
for which I secured $100,000 several years ago in anticipation of 
increased demand for nursing home care in Southern West Virginia. 
Further, I have included language in the Senate reports accompanying 
the fiscal year 2002, 2003, 2004, and 2005 VA-HUD Appropriations bills 
to encourage that funds for the project be included in subsequent 
Administration budgets.
    I understand that the project has undergone the Capital Asset 
Realignment for Enhanced Services (CARES) review process and that it 
has been included in the February 2005 VA Five-Year Capital Plan, 2005-
2010, which lists the VA's highest priority major medical facility 
construction requirements over the next 5 years. While I am pleased 
that the proposed nursing home is on this list, I am disappointed that 
it is ranked #46 (out of 48 projects).
    Mr. Secretary, is the VA adhering to its capital investment 
methodology by funding construction projects in priority order? Have 
there been any exceptions made? What are they?
    Answer. The Department has adhered to the capital investment 
methodology when funding CARES projects. VA has only allowed projects 
to be funded out of order in extremely limited situations, based upon 
funding allocations, as described below.
    The only exception being:
  --To Allow for Maximizing of the Utilization of Major Construction 
        Funds.--In fiscal year 2005 #29 San Diego, CA, $48.3 million 
        was funded prior to #28 Dallas, TX. Clinical expansion at San 
        Diego was funded since it was less expensive and within VA's 
        funding allowance. This occurred again in fiscal year 2006 when 
        the design for #6 project in Fayetteville, AR, was funded prior 
        to other higher ranking projects because of the availability of 
        funding.
    Question. At the current level of funding and the current rank of 
the Beckley VAMC Nursing Home, when do you anticipate that funds will 
be included in the President's Budget for this project? What can be 
done to move Beckley up the list?
    Answer. When Beckley will be included in the President's budget 
cannot be determined at this time as new projects are added (and some 
may drop out) to the review process each year. For example, for fiscal 
year 2006 two additional projects were reviewed as compared to the 
previous year. Existing projects which have not received CARES funding 
and new projects are rescored each year. Split funded projects that 
have received previous CARES funds (because of their higher score) 
retain their ranking.
    Based on the current capital decision criteria, it will be 
difficult for a project like Beckley to compete with other medical 
projects that clearly provide more access to care, or have a life-
safety component (such as seismic) and/or provide for special 
disability services (spinal cord injury). How well a project addresses 
these criteria leads to an improved score.
    Question. Will the VA's highest major construction priorities be 
reevaulated in the future, providing an opportunity for the proposed 
Beckley Nursing Home to move up on the list?
    Answer. The Department rescores and ranks major projects every 
year. In the next few months, VA will again review and rank major 
construction projects. The highest ranking will be included in the 
congressional budget submission for fiscal year 2007.
    Question. Since the proposed Beckley Nursing Home has already been 
designed with funds that I added in fiscal year 2001 and the land is 
already owned by the VA, why can't this project be moved up on the list 
since it is ready to go to construction?
    Answer. The ranked list of projects are developed based on how well 
each project specifically addresses each of the main criteria and sub-
criterion used for ranking CARES projects. It would not be equitable 
for the Department to move a project up this list simply based on the 
fact that it is designed. Our capital investment planning process and 
methodology involve a Department-wide approach for the use of capital 
funds and ensure all major investments are based upon sound economic 
principles and are fully linked to strategic planning, budget, and 
performance measures and targets. All CARES projects have been reviewed 
using a consistent set of evaluation criteria that address service 
delivery enhancements, safeguarding assets, support of special emphasis 
programs and services, capital portfolio goals, alignment with the 
President's Management Agenda, and financial priorities.
    Question. What level of funding for the VA's major construction 
program will be required annually and for what period of time to 
complete all of the projects listed in the VA's Five-Year Capital Plan, 
2005-2010?
    Answer. VA will need to reexamine its needs each year and determine 
the appropriate breakout between major and minor construction. The 
Department is unable to determine for what period of time it would take 
to complete all the projects listed in our Five-Year Capital Plan 
because the plan is a dynamic document which is updated each year based 
on competing new projects and priorities. In addition, VA is still 
developing cost estimates for the 70 outyear projects that are listed 
in the plan. Most of these conceptual projects require further 
refinement and development. To date, VA has committed $2.15 billion to 
implementing CARES plans, and additional funding will be requested in 
the outyears as specific capital plans are designed.
    Question. How many design awards has the Department made to date 
and for which projects? How many land purchases and for which projects? 
How many construction awards have been made and for which projects?
    Answer. There have been 16 design awards and 2 construction awards. 
There were no land purchases.
    Design Awards:
  --Atlanta, GA--Modernize Patient Wards--6/04
  --Chicago Westside, IL--Modernize Inpatient Space--11/02
  --Columbus, OH--Outpatient Clinic--8/04
  --Des Moines, IA--Extended Care Building--7/04
  --Durham, NC--Renovate Patient Wards--9/04
  --Las Vegas, NV--New Medical Facility--2/05
  --North Chicago, IL--Surgical Suite/Emergency--11/03
  --Pensacola, FL--Outpatient Clinic--1/04
  --Pittsburgh, PA--Medical Center Consolidation--12/04
  --San Antonio, TX--Ward Upgrades and Expansion--1/05
  --San Diego, CA--Seismic Corrections--1/05
  --San Francisco, CA--Seismic Corrections--12/03
  --Tampa, FL--SCI--10/04
  --Tampa, FL--Upgrade Electrical--10/04
  --Tucson, AZ--Mental Health Clinic--8/04
  --Wes Los Angeles, CA--Seismic Corrections--3/03
    Construction Awards:
  --Chicago Westside, IL--Modernize Inpatient Space--9/04
  --North Chicago, IL--Surgical Suite Emergency--9/04
  --Pensacola, FL--Outpatient Clinic--3/05
                                 ______
                                 

              Questions Submitted by Senator Patty Murray

                       REAL HEALTH CARE INCREASE

    Question. This budget cites an increase of $522 million over last 
year; however, the number is much lower in reality--about $100 million. 
As is typical of this Administration, smoke and mirrors are used to 
deflect attention from the real number. Mr. Secretary, let's be 
perfectly clear about what the President is offering as an increase for 
VA health care. Your testimony cites a 2.5 percent increase for medical 
spending. The Majority staff on the Veterans' Affairs Committee 
provided a terrific chart which tries to make sense of the number and 
found that the requested increase is under $80 million. That's only $80 
million more for the nearly 7 million veterans who are enrolled in VA 
healthcare, for the 170 hospitals and hundreds of outpatient clinics, 
for medical inflation, and payroll increases for thousands of VA health 
care workers. Mr. Secretary, Washington state has nearly 700,000 
veterans and the population is growing. The CARES commission and my 
VISN director have told these veterans that two outreach clinics--in 
North Central Washington and Whatcom County--are on the way. But now 
they are on hold because of funding shortages.
    Simply put: help me to understand how an $80 million increase keeps 
our promise to veterans? Set aside the possible increased revenue from 
insurance companies and the spending associated with new veterans' 
fees.
    Answer. The President's 2006 request includes budgetary resources 
of $30.7 billion which will enable VA to provide the high-quality 
health care services that VA has become renowned for to more than 5.2 
million patients in fiscal year 2006.
    Question. The Budget proposes $30.7 billion (including collections) 
for medical care--a $0.8 billion (2.5 percent) increase over the 2005 
enacted level--to treat over 5.2 million patients. The Budget assumes 
that Congress will authorize new authority whereby veterans with higher 
incomes and no military disabilities will pay a $250 annual enrollment 
fee and higher drug co-pays (from $7 to $15). These will still be low 
and more aligned with other public and private health plans.
    What is the amount the President is requesting Congress appropriate 
for VA's hospitals and clinics?
    Answer. VA is requesting the following appropriations in fiscal 
year 2006:

                        [In thousand of dollars]
------------------------------------------------------------------------
                       Description                            Amount
------------------------------------------------------------------------
Medical Services........................................      19,789,141
Medical Care Collections Fund...........................       2,588,000
Medical Administration..................................       4,439,124
Medical Facilities......................................       3,888,469
                                                         ---------------
      Total 2006 Budget Request.........................      30,704,734
------------------------------------------------------------------------

    Question. And again to be clear: what is the amount associated with 
payroll increases and inflation? The amount associated with payroll and 
inflation for VA health care is more than $1 billion, so the 
President's request doesn't even cover inflation.
    Answer. The 2006 budget request reflects an increase of $858.9 
million for payroll increases and an increase of $539.7 million for 
inflation. These increases are offset by a decrease in requested 
appropriations of $1.1 billion from a comprehensive set of legislative 
and regulatory policy proposals and a decrease of $590,000 for 
management efficiencies.

       INCREASED COSTS FOR MIDDLE-INCOME VETS/BAN ON PRIORITY 8S

    Question. This budget includes an increase in the drug co-payment 
and an annual enrollment fee of $250 for Priority 7 and 8 veterans. The 
threshold for Priority 7 is only $25,163 a year, so veterans with 
incomes above this level would be required to pay these new fees. The 
budget also continues the ban on Priority 8 veterans, who in some 
regions of the country can be making as little as $28,000 a year and 
still not be eligible for VA care. The President's co-pay increase and 
new enrollment fee are designed to literally drive veterans out of the 
system. Two years ago, the President had no qualms about prohibiting 
enrollment for new ``middle-income'' veterans. That policy continues 
today. In fact, the testimony touts that the President's enrollment 
decision was the ``most effective'' vehicle to manage health care 
resources. This budget takes a different route, however. The goal is to 
make the cost of coming to VA for health care prohibitively expensive. 
Either way, I have to question the priorities of this Administration. 
As you know, my father returned home from World War II as a disabled 
veteran and during the Viet Nam War, I interned in the Seattle VA 
hospital. I know first-hand the scars and wounds that burden our 
veterans when they come back home.
    Mr. Secretary, our veterans--new and old--are some of our most 
important national security assets. Why not provide sufficient 
resources to care for all veterans?
    Is this care not part of the cost of past wars and the current 
conflicts in which we are engaged?
    Do you agree that VA healthcare for our soldiers returning home is 
a cost of war?
    Answer. In the Eligibility Reform legislation, Congress established 
a priority-based enrollment system and required the VA Secretary, every 
year, to assess veteran demand for VA health care and determine whether 
or not resources are available to provide timely, quality care to all 
enrollees. Using this legislatively mandated system for prioritizing 
care to veterans, VA suspended enrollment in Priority 8 and has 
proposed cost-sharing policies for Priority 7 and 8 enrollees as a 
means of balancing veteran demand for VA health care and available 
resources. These policies also refocus the VA health care system on 
those veterans who need us most. With the implementation of the 
enrollment fee for Priority 7 and 8 enrollees, VA expects that 71 
percent of all those using VA's health care system in 2006 will be 
veterans with service-connected medical conditions, special needs, and 
low incomes, up from 66 percent in 2004. The fees are more closely 
aligned with other public and private health plans.

             REAL EFFECTS OF INCREASING OUT-OF-POCKET COSTS

    Question. The Administration's budget calls for increasing the drug 
co-payment from $7 to $15 per 30-day prescription for Priority 7 and 8 
veterans, as mentioned in an earlier question. It also would require 
these veterans to pay a $250 annual enrollment fee. At the bottom end 
of this spectrum, older veterans on fixed incomes could be making as 
little as $26,000 a year and still be subject to these increases in 
costs.
    I'd like to briefly discuss the potential impact of some of your 
proposals on veterans in the ``middle-income'' bracket. Some of these 
veterans could be making as little as $26,000 a year and still be 
subject to the increases in out-of-pocket costs that are built into 
your budget. And, for a veteran living on a fixed income in a city with 
a high cost of living, like Seattle, this is quite harsh. For example, 
an older veteran on an average of eight medications would see a cost 
increase per year of more than $1,000, just to continue getting his or 
her needed medications and continue enrollment in VA health care.
    How do you reconcile this with VA's mission of providing care to 
all who have served?
    Answer. In the Eligibility Reform legislation, Congress established 
a priority-based enrollment system and required the VA Secretary, every 
year, to assess veteran demand for VA health care and determine whether 
or not resources are available to provide timely, quality care to all 
enrollees. Using this legislatively mandated system for prioritizing 
care to veterans, VA has proposed cost-sharing policies for Priority 7 
and 8 enrollees as a means of balancing veteran demand for VA health 
care and available resources. These policies also refocus the VA health 
care system on those veterans who need us most. With the implementation 
of the enrollment fee for Priority 7 and 8 enrollees, VA expects that 
71 percent of all those using VA's health care system in 2006 will be 
veterans with service-connected medical conditions, special needs, and 
low incomes, up from 66 percent in 2004. The fees are more closely 
aligned with other public and private health plans.

              STATE VETERANS HOMES: ON THE CHOPPING BLOCK

    Question. This budget contains proposals that will severely affect 
the State Veterans Home program. On the one side, the President will be 
seeking authority to restrict who can receive VA funding for care in 
these homes. While 50 percent of the veterans currently being cared for 
in Washington state's three facilities, the State Home Association has 
told me that in many States, 80 percent or more of State Home residents 
will be excluded by this change. According to the VA's average daily 
census for long-term care, there are estimated to be more than 19,000 
individuals in State nursing homes. This budget would slash that figure 
to about 7,000--a 62 percent decline in 1 year.
    Explain to me how you believe these homes will remain viable if 
these proposed policies are accepted?
    Answer. State Veterans Homes are owned, operated, and financed by 
the States. VA provides limited financial assistance to the States in 
the form of per diem grants for nursing home, hospital, domiciliary, 
and adult day healthcare. Only the nursing home per diem is affected by 
the fiscal year 2006 budget proposal. The cost of care in State 
Veterans Homes varies from State to State, as does the amount of 
assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. In addition, VA long-term 
care has shifted from inpatient to outpatient, similar to the private 
sector. This is more convenient to patients and their families, and is 
more cost-effective

              VA NURSING HOMES: ALSO ON THE CHOPPING BLOCK

    Question. The Administration would also like to reduce VA's in-
house capacity by almost 14,000 beds.
    What can you tell me about where VA is in meeting the non-
institutional capacity called for by GAO, and relied upon so heavily in 
your budget, to make up for this loss?
    Answer. Non-institutional home and community-based care (HCBC) is 
part of the medical and extended care benefits package available to all 
enrolled veterans. We recognize that access to these services varies 
across VA's health care system. Last year, VA adopted a policy of 
increasing HCBC capacity by 18 percent annually to meet the full need 
of enrolled veterans by 2011, and established a performance measure for 
Network Directors to meet that goal. Capacity growth is targeted to 
those regions with the greatest current and projected need for services 
in order to reduce variability in access to care. Progress so far has 
been excellent. Capacity growth exceeded 20 percent in fiscal year 2004 
and is at 113 percent of target so far in fiscal year 2005. The number 
of individual programs is also expanding. For example, VA recently 
approved its 100th Home-Based Primary Care Program (up from 77 less 
than 5 years ago), and Care Coordination services have now been 
approved in all 21 VISNs.
    Care Coordination services involve the ongoing monitoring and 
assessment of selected patients using telehealth technologies to 
proactively enable prevention, investigation, and treatment that 
enhances the health of patients and prevents unnecessary and 
inappropriate utilization of resources. Care coordination provides 
patients a continuous connection to clinical services from the 
convenience of their place of residence.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. So with that, we are in our second vote 
and I am going to close this meeting. I thank you very much for 
your patience and look forward to working with all of you. And 
thank you, Dr. Perlin, for your comments as well.
    [Whereupon, at 3:37 p.m., Tuesday, March 15, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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