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



 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2007

                              ----------                              


                       WEDNESDAY, MARCH 29, 2006

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:35 p.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Craig, Allard, Feinstein, 
Johnson, Landrieu and Murray.

                     DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY
ACCOMPANIED BY:
        JONATHAN B. PERLIN, UNDER SECRETARY FOR HEALTH
        DANIEL L. COOPER, UNDER SECRETARY FOR BENEFITS
        WILLIAM F. TUERK, UNDER SECRETARY FOR MEMORIAL AFFAIRS
        TIM S. McCLAIN, GENERAL COUNSEL
        ROBERT J. HENKE, ASSISTANT SECRETARY FOR MANAGEMENT

               STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. The subcommittee will come to order. Our 
hearing today, of course, is to review the fiscal year 2007 
budget request for the Department of Veterans Affairs.
    I'm very pleased to welcome the Secretary of Veterans 
Affairs, Jim Nicholson; Under Secretary for Health, Jonathan 
Perlin; Under Secretary for Benefits, Daniel Cooper; Under 
Secretary for Memorial Affairs, William Tuerk; General Counsel, 
Tim McClain; and Assistant Secretary for Management, Robert 
Henke.
    We are facing a time when our servicemen and women are 
returning from the Global War on Terror in Iraq and 
Afghanistan, and many of them are coming home wounded. 
Sometimes it would be a loss of limb, sometimes a brain injury 
or post-traumatic stress syndrome. The VA will have its hands 
full for years to care for those who have defended our country.
    Mr. Secretary, I want to say that you have demonstrated 
leadership not only in the war on terror and coming forward 
last year and saying, ``We need more money,'' working with us 
to make that happen in the very best possible way. We 
appreciate that forthrightness that you gave, and also what you 
did during Hurricanes Katrina and Rita. When we look back on 
the emergency planning for the Veterans Affairs, you really did 
everything right. Under your watch, the VA did not lose a 
patient, and I saw many of those evacuees, myself, in Houston. 
And I want to say, especially, thank you to Dr. Perlin for your 
real creativity not only for the planning for the hurricanes 
but also the electronic health records, which really made a 
huge difference for those veterans who were displaced so 
quickly. They never lost a record. Everybody was ready to treat 
them, it was seamless. And HealtheVet is a terrific system that 
you are credited with, and we thank you for that.
    Mr. Secretary, I think it's a wonderful news story that the 
veterans healthcare system is now getting so much good 
publicity, and the care is renowned to be among the best in the 
country. And I know that also has caused problems, because now 
more veterans, who wouldn't have come to the veterans system 
before, now are coming. So, that is creating a bigger workload.
    Certainly, the VA's budget request for this year is $80.6 
billion in budget authority for fiscal year 2007, $42 billion 
is mandatory programs, and discretionary is $38.5 billion. I 
think this is a good budget. Most of the increases, however, 
are based on increased collections and savings that rely on 
enacting legislative proposals that are in your budget request, 
including an annual enrollment fee of $250, a pharmacy 
copayment increase to $15 for priority 7 and 8 veterans. And 
without the proposed legislation, the increase in the medical 
services budget would be $2.7 billion, or 8.7 percent. So, we 
want to work with you, but I think you know that the committee 
is not supportive of the revenue requirements in the budget. 
So, we want to talk with you, work with you to try to see how 
we can address these issues, and perhaps look for some other 
options for revenue.
    I also want to mention the Gulf War Illness research, which 
is certainly a great area of interest to the committee. And I 
note that your research budget is 3.16 percent below last 
year's level, so I will want to hear how you plan to do Gulf 
War Illness research and the other prosthetic research that I 
know you're also looking at doing with that lower budget.
    Last year, the subcommittee directed the VA to consolidate 
its IT project with procurement, hardware, software, under one 
organization overseen by the Office of Information Technology. 
And we would like to have an update on how that reorganization 
is going. There is also a reduced request for the major 
construction account, which I hope that you will also be able 
to address.
    So, overall, I think, Mr. Secretary, we have a budget with 
which we'll be able to work on and we look forward to working 
with you. And we do appreciate the leadership that you have 
shown at the Department of Veterans Affairs.
    With that, I would like to ask my very wonderful colleague 
and friend--I started to say my ranking member, but I feel like 
she's one of our most productive and equal members of our 
committee. And so, I'll call on my colleague Senator Feinstein.

                 STATEMENT OF SENATOR DIANNE FEINSTEIN

    Senator Feinstein. Thank you very much, Madam Chairman.
    And welcome, Mr. Secretary and gentlemen. I wish I could 
say ``ladies and gentlemen.'' But at least I can say 
``gentlemen.'' Welcome.
    I sincerely hope this will be a smoother year than last 
year, and that we do not have the repeat of the shortfalls that 
we saw last year. As you all well know, California's home to 
the largest number of veterans in America. And I think Texas is 
either second or third. Certainly,--second?--and then, I guess, 
Florida is third. So, this is a major concern to both the 
chairman and to myself.
    While I believe the fiscal year 2007 budget is a good 
starting point from which to formulate the appropriations bill, 
I have some concerns in some areas.
    The first, and most glaring, are the fee proposals 
contained in the budget request. This budget assumes savings 
and fee collections of over $795 million by doubling 
prescription drug copayments and imposing a $250 enrollment fee 
on middle-income veterans, many of whom are struggling to make 
ends meet on incomes as low as $26,903 a year. More than 
200,000 veterans would be adversely affected by these 
proposals. I believe they are unrealistic assumptions. Congress 
has rejected them in the past. And I, for one, hope we will 
continue to reject them.
    Additionally, I remain concerned by the savings the budget 
has assumed regarding efficiencies. This year, the President's 
budget request contains over a billion in anticipated resource 
savings associated with so-called efficiencies. As you know, 
last year this subcommittee directed the VA to provide detailed 
justification for management efficiencies. It remains clear, to 
this day, what those efficiencies actually are. I understand 
that this year the VA has termed these savings ``clinical 
efficiencies'' rather than ``management efficiencies.'' Mr. 
Secretary, I hope in your testimony you will shed some light on 
the difference between these two and exactly how you're going 
to achieve these efficiencies, or savings, without cutting 
services.
    I'm also very concerned about the special needs of those 
veterans returning from combat in Iraq and Afghanistan. Roughly 
505,000 Iraq and Afghanistan veterans have separated from 
military service following their tour of combat. The latest 
figures show the VA having treated over 144,000 of these for a 
variety of healthcare problems. The VA has estimated that it 
would treat 110,556 of these veterans in 2006. However, 
according to VA statistics, through January the VA had already 
treated almost 75,000. And, at that time, there were still 8 
months left to go in the fiscal year. In 2007, the VA is 
estimated it will treat 109,191 Iraq and Afghanistan veterans. 
This seems somewhat low, considering the trend that's upward.
    Now, I know, Mr. Secretary, these are tough issues, but I 
hope you'll address them. And, if you don't, we certainly will 
in our questions. But I want to welcome you, and I want to 
thank all of you for the service to our country.
    Thanks, Madam Chairman.
    Senator Hutchison. Thank you. In order of arrival--Senator 
Johnson.
     Senator Mitch McConnell has submitted a statement to be 
entered into the record.
    [The statement follows:]

             Prepared Statement of Senator Mitch McConnell

    Senator McConnell will continue to work with the Kentucky 
Congressional delegation to advocate vigorously on behalf of the 
Commonwealth's veterans.
    American bravery and courage have been demonstrated in the heroic 
efforts of our Nation's veterans since the founding of our country. 
That rich tradition continues in the stalwart efforts of today's 
generation of American soldiers. In the continued struggle to rid the 
world of terrorism, our fighting men and women have time and again 
demonstrated their willingness to stand guard against the enemy and 
defend our way of life. This protection has come at a great cost, 
however, with over 2,600 soldiers having paid the ultimate price for 
our freedom. Furthermore, many more soldiers have also sacrificed of 
themselves, and as a result, bear the lasting scars--both physical and 
mental.
    As the nearly 18,000 wounded soldiers who have bravely served our 
country in Iraq and Afghanistan return home, it is important that they 
receive the first-rate medical care they need. These soldiers--many 
from Kentucky--will be dependent on the Department of Veterans Affairs 
(VA) to provide them with the proper care.
    The VA's CARES Stage I Summary Report for Louisville points out 
that there are over 117,000 enrolled veterans living within the 
Northern Market of VISN 9--an area that encompasses most of Central and 
Eastern Kentucky. Unfortunately, the report also details that only 61.6 
percent of those enrolled veterans, many living in Kentucky, have a VA 
primary care facility that is readily accessible to them. This is a 
full eight percentage points lower than the threshold the VA has deemed 
acceptable. Given this fact, and that there are nearly 400,000 veterans 
living in Kentucky, it is troubling that the VA has not requested 
funding for construction of new veterans' healthcare facilities for any 
community within the Commonwealth for the next fiscal year.
    As we begin to examine the issues facing our Nation's veterans in 
the upcoming year, I will continue to work with my colleagues from 
Kentucky here in Congress to advocate vigorously on behalf of the 
Commonwealth's noble veterans. All of us are interested in ensuring 
that the VA follows through with its proposals to create several new 
facilities throughout the State.

                    STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Well, thank you, Madam Chairman. Welcome, 
Secretary Nicholson.
    I have just come from South Dakota, where we had an 
interesting roundtable discussion with returning Afghan and 
Iraq veterans, with a particular focus on PTSD and other 
emotional mental health issues, and I look forward to your 
testimony in that regard.
    In order to expedite things this morning, Madam Chairman, I 
will submit an opening statement for the committee record, and 
I look forward to the testimony of the Secretary.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    I would like to thank Chairwoman Hutchison and Ranking Member 
Feinstein for calling today's hearing on the fiscal year 2007 budget 
for the Veterans Administration (VA). Your continued efforts on behalf 
of our Nation's veterans are greatly appreciated, and I look forward to 
working with you both as we move forward with this year's VA budget.
    I would also like to thank Secretary Nicholson for appearing before 
the Subcommittee, and for your willingness to serve. As Secretary of 
the VA, you have a very difficult job and an incredibly important 
responsibility to our veterans.
    Ensuring that our Nation's veterans receive the benefits they have 
earned and deserve is one of my most important duties as a Senator, and 
one I do not take lightly. While the President's fiscal year 2007 
budget request is a step in the right direction, I am concerned we will 
fail to meet our obligations unless additional money is appropriated 
above the level requested by the President.
    Recently, I had the privilege of meeting with a number of veterans 
in South Dakota who have returned from serving in Iraq and Afghanistan. 
One young man shared with me the difficulties he has had readjusting to 
civilian life following his tour of duty. He was currently attending 
college in South Dakota after serving in Iraq with the 82nd Airborne, 
and had been waiting months for an appointment with the VA. He required 
treatment because he was experiencing stress-related problems following 
his deployment.
    Even though he wasn't able to schedule an appointment in a timely 
fashion, he wasn't resentful. Rather, I was struck by his positive 
attitude. Like many soldiers, he was proud of his service in Iraq and 
thankful for the opportunity to serve his country. In fact, he said it 
made him a better person.
    We are all proud of our men and women in uniform, and we must do 
all we can to ensure that those returning from combat zones are getting 
the help they need. In addition to making certain that the VA has 
adequate funding for mental health services and readjustment 
counseling, we must also guarantee that the budget is properly funded 
each fiscal year and not subjected to emergency supplemental 
appropriations.
    As you are well aware, the primary reason for the budget shortfall 
last year was because the VA underestimated the projected costs of 
caring for soldiers returning from Iraq and Afghanistan. In my opinion, 
the funding crisis last summer underscored the necessity of mandatory 
funding. That is why I introduced S. 331, the Assured Funding for 
Veterans Health Care Act of 2005. I firmly believe the VA budget cannot 
be subjected to the whims of discretionary spending, and the only 
solution to this problem is to support my bipartisan mandatory funding 
legislation.
    In addition to new veterans enrolling in the VA, we must also 
remember those who have served our country in past conflicts. Often 
times, these veterans rely upon the VA as their only source of health 
care. That is why I am deeply concerned by the Bush Administration's 
continued insistence on implementing annual enrollment fees and 
increased prescription drug co-payments for our Priority 7 and 8 
veterans.
    These fees are designed to generate revenue in order to help offset 
VA expenditures. However, some veterans may be forced to seek health 
care elsewhere because they cannot afford either the annual enrollment 
fees or the increased co-payment costs. Rather than relying on budget 
proposals aimed at driving veterans out of the VA in order to save 
money, we should focus our efforts on providing adequate funding to 
ensure all those who have defended our country receive the health care 
they have earned and deserve.
    Without question, we are facing tough budget choices this year. 
However, if we are serious about our national security, and recruiting 
the best and brightest to defend our country, we must make honor our 
commitment to our Nation's veterans.
    Once again, thank you Madam Chairwoman for calling today's hearing. 
I look forward to working with my colleagues on the Subcommittee as we 
begin consideration of the fiscal year 2007 Military Construction and 
Veterans' Affairs Appropriations bill.

    Senator Hutchison. Thank you very much.
    Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Madam Chairman, thank you. Thank you 
specifically for holding this hearing. It's a necessary 
hearing, because we are in the appropriation process, and I'm 
looking forward to hearing from the witnesses today before the 
committee.
    And I would like to especially welcome a good friend of 
mine, and a fellow Coloradoan, the Secretary of the Veterans 
Administration, Secretary Nicholson. Jim, it's good to see you 
here, and thank you.
    Clearly, this committee has many new challenges before us 
this year. In addition to the roles of veterans from World War 
II, Korea, Vietnam, and Desert Storm that the VA already cares 
for, the number of men and women injured while performing their 
duties in Iraq and Afghanistan grows daily and will only add 
continued stress to the Veterans Health Administration. Now, 
while these needs increase, the United States also faces a 
challenge in reining in Federal spending and reducing our 
Federal debt over the next few years. This is a precarious 
balancing act that must always focus on answering the call for 
those men and women who have served their country courageously.
    And, Mr. Secretary, I just look forward to discussing these 
issues with you further today.
    And, with that, I'd like to, again, reiterate my thanks for 
appearing in front of us today, and look forward to your 
testimony.
    And thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Allard.
    Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Thank you very much, Chairman Hutchison and 
Ranking Member Feinstein, for holding today's hearing. 
Secretary Nicholson, it's good to see you again before one of 
our committees.
    And I just want to say, before I do my opening statement, 
that I want to just thank Congressman Lane Evans, who announced 
his retirement yesterday, for his tremendous service to all 
veterans. He owes--we all owe him a debt of gratitude for the 
tremendous job he's done, and we will miss him as a Member of 
Congress. And I know many people here share that sentiment with 
me.
    Madam Chairman, I do want to start with the good news in 
this budget proposal. After years of seeing inadequate budgets 
in a massive shortfall, last year we finally, I think, have a 
decent budget proposal for VA healthcare from this 
administration, and I want to commend you, Secretary Nicholson, 
for the focus you give to the wellness initiatives in your 
budget.
    But, overall, I have to say, I am still very concerned that 
the President's fiscal year 2007 budget doesn't fix the funding 
problems and is built around denying care instead of meeting 
the real needs. It seems to me this budget takes one step 
forward by providing a good number overall for VA healthcare, 
but takes two steps backwards in limiting access and not being 
based on real needs.
    This budget plan actually locks the hospital doors to 1.1 
million deserving veterans, and will keep another 200,000 
veterans from accessing the VA, and that is on top of the 
260,000 veterans that were denied access last fiscal year. So, 
while the bottom-line number looks good, how you get there is 
troubling.
    The Bush administration, as Senator Feinstein mentioned, is 
imposing new fees and copayments and blocking access for 
veterans to reach that funding number, and I just think that's 
wrong.
    I know that many times in a budget we rob Peter to pay 
Paul, but in this case what we're actually doing is denying 
care to 1.1 million veterans to provide care for others. And, 
to me, that's just morally wrong. And that is on top of the 
VA's efforts to cut back on outreach to 25 million veterans, of 
which only 5 million currently access care.
    I'm very concerned about the lack of outreach, that it is 
keeping many of our veterans who have service-related injuries 
out of the VA, and it's especially troubling when many of those 
veterans have illnesses specific to their service, like 
veterans who suffer from the impacts of Agent Orange or Gulf 
War syndrome.
    We all know that when veterans signed up to serve, they 
were promised healthcare. There wasn't any asterisk. There was 
no fine print saying ``exclusions apply.'' We made a promise to 
every veteran, and we need to keep that for every veteran.
    And I'm also very concerned about the other step backward I 
see, and that this budget is still not based on actual demands 
so that we can know what we need to see, in terms of numbers, 
for fiscal 2007. Everyone in this committee remembers what 
happened last year with the tremendous shortfall, and we could 
be setting ourselves up again for the same kind of shortfall if 
we don't have a budget that's based on real numbers. Now, I 
will recognize that the VA is making progress. And I want to 
commend Secretary Nicholson for that. He has told us that he's 
been asking for discharge numbers from the Department of 
Defense, and, under the law that we passed last year, he is 
meeting with us quarterly to review those numbers. And I really 
appreciate that.
    But I am concerned that the VA's model still leaves out 
some very critical factors that will impact a number of 
veterans. We continue to underestimate the number of veterans 
from Iraq and Afghanistan. This--the model does not account for 
the many seniors who are today being steered into the VA when 
they seek access to the new Medicare drug program. This budget 
doesn't take into consideration the influx of Vietnam veterans, 
who are now, as they age, increasing their need to have 
healthcare and are accessing the VA system for the first time. 
It doesn't account for all the veterans who are today in this 
country losing their employer-based healthcare and are, for the 
first time, turning to the VA for care. And, probably most 
importantly, the VA may give the VISNs adequate funds to 
provide care, but then it doesn't budget for various programs 
that they're mandated to enact, like increased mental health 
care. VA should take these programmatic efforts into account 
when they do their budgeting to ensure that we do not face any 
shortfalls.
    So, Madam Chairman, for these reasons, I think we still 
don't have an accurate model, and that is really disconcerting 
to me. Like many of my colleagues, I spent the March recess 
going out, talking to a number of veterans, and I talked to a 
representative from the Washington State Department of Veterans 
Affairs who told me that they had just completed a voluntary 
survey of Guard members in Washington State who recently 
separated after serving in Iraq and Afghanistan. And of the 
5,300 surveys they sent out, 1,700 responded, 370 of them were 
still unemployed since separation. That is 22 percent of them. 
And 416 said they were underemployed. That's 46 percent of our 
Guard members who are unemployed or underemployed. Veterans 
Service officers have told me about veterans coming back from 
Iraq and Afghanistan who were able to get an initial 
appointment with the VA within 1 to 3 months upon their return, 
but then they had to wait 6 months for a consultation, and 
another 7 months for surgery. So, it is taking our veterans 
still today over a year before they're getting the care that 
they are seeking from the VA.
    So, Madam Chairman, I will be looking closely at these 
numbers and to the Secretary's response today, but our veterans 
and our VA staff, as I have said many times, deserve to have a 
budget that is based on real numbers and on real demand, and 
not on gimmicks and fees that are designed to limit care.
    Thank you very much.
    Senator Hutchison. Thank you, Senator Murray.
    Senator Landrieu, did you have an opening statement?
    Senator Landrieu. Madam Chair, I will submit the statement 
for the record. I'd like to save my time for some questions on 
some specific matters. So, thank you very much.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Madame Chairman, Senator Feinstein, thank you for calling the 
hearing today to discuss the Veterans Affairs fiscal year 2007 budget 
submission. I would also like to thank Secretary Nicholson for joining 
us today and for answering any questions this Subcommittee may have 
regarding the VA's fiscal year 2007 budget submission.
    When Americans put on military uniforms and go to the front line, 
our Nation makes a long term promise to care for them during their term 
of service and long after the battle is over. Unfortunately, over the 
years our government has not kept its promise to our Nation's veterans. 
Over the past years the Veterans Administration has seen an 
overwhelming increase in enrollees, while support for medical services 
and benefits has barely increased--not nearly enough to keep pace with 
increased need and demand. And, as we all know, some veterans are not 
allowed to enroll in the VA health care system at all.
    Each of us has a responsibility to ensure that the VA health care 
and benefits system receives full authorized funding, and do so without 
increasing the out-of-pocket fees paid by veterans. We all have an 
obligation to the men and women who serve our Nation, and we must 
ensure that the Veterans Administration receives the support it so 
desperately needs to meet these goals.
    While the VA's fiscal year 2007 request, shows an increase, but 
there are a number of red flags raised. In particular, a few areas for 
concern are: the proposed increase in prescription co-payment, 
establishment of a $250 enrollment fee, mental health, State War 
Veterans Homes, burial benefits, and blinded veterans care.
    As of this month we have more than 17,000 wounded military men and 
women who have earned Purple Hearts in Operation Iraqi Freedom. Coupled 
with those who have been wounded in Afghanistan we could see over 
21,000 combat wounded by the end of the year. The physical wounds 
sustained by our soldiers heal, however, there is mounting evidence 
that demonstrates for many of our veterans, the injuries of war never 
end.
    I would like to commend the VA on setting aside $3.2 billion in the 
fiscal year 2007 discretionary funding request for mental health care. 
While today's soldier sees an increased chance of survival due to 
advances in things such as Kevlar body armor, mental health is not 
given the proper attention it requires.
    Mental health issues largely manifest themselves in the form of 
Post Traumatic Stress Disorder (PTSD) which touches both the active 
duty as well as the citizen-soldiers of the National Guard and 
Reserves. These brave patriots who fought for this country's ideals 
were raised in communities to which they will return to seek comfort 
and healing. Because of the silently devastating effects of PTSD, 
family members, friends, and members of the community may never know 
the extent of the damage caused by a soldier's experience in the war.
    If we are not vigilant and continue to seek solutions at the VA 
level regarding mental health issues, veterans returning from war will 
potentially be under siege for the rest of their lives.
    My home State of Louisiana is proud to operate and maintain three 
war veteran's homes in Jackson, Monroe, and Jennings. These homes have 
been innovative and important to the long term care of many veterans 
that live in these three distinct parts of the State. In order to 
preserve the fiscal healthcare of these tenants it is critical that we 
increase VA per diem payments to State Veterans Homes. VA per diem 
payments are authorized to cover up to 50 percent of the average daily 
cost of care, the current rate ($63.40 for skilled nursing care) covers 
less than 30 percent of that cost. As the number of veterans health 
care needs increase the Federal Government must meet its responsibility 
to provide the best resources to our veterans.
    The per diem program needs protection from attempts to compromise 
its future. Congress thwarted an attempt last year by the 
Administration to severely restrict per diem payments which, if 
enacted, would have cut per diem payments for up to 70 percent of 
veterans in State Homes.
    There are a range of concerns regarding blinded veterans that 
include issues like lengthy delays in admissions at Blind 
Rehabilitation Centers (BRC's) to the expansion of Blind Rehabilitative 
Outpatient Services (BRO's). Veterans who have lost their vision 
deserve first class treatment and a commitment by the VA to address the 
issues which will lighten the heavy burden they will endure for a 
lifetime.
    As with other areas that need improvement, the goal for the VA 
should be to deliver the highest quality of care in a timely manner. 
Unfortunately, goals often fall short from 400,000 people in a logjam 
with claims pending at the Board of Veterans Appeals to blinded 
veterans waiting an average of close to 19 weeks to enter one of ten 
BRC's. This rehabilitation is essential to assisting blinded veterans 
in adjusting to their blindness. We must do better.
    Madame Chairman, thank you for you and the ranking member's 
leadership and I look forward to the remarks from our guest.

                    STATEMENT OF R. JAMES NICHOLSON

    Senator Hutchison. Secretary Nicholson, welcome.
    Secretary Nicholson. Thank you, Madam Chairman, members of 
the committee. I have a written statement that I would also 
like to submit to the committee to be entered into the record.
    Senator Hutchison. Without objection.
    Secretary Nicholson. You know, as Secretary, it's a great 
privilege, and responsibility, of course, to lead the 
Department of Veterans Affairs.
    Earlier this year, President Bush announced a landmark 
budget for the Department of Veterans Affairs, a budget of 
$80.6 billion. That's truly historic in its scope of service to 
veterans.
    Behind the figures is a great story, one of America's truly 
good-news stories. And I'd be remiss, I think, if I didn't 
recount one of the best news stories, and one of the least 
known, of 2005, although, gratefully, you did mention it, Madam 
Chairman, and that is the heroic efforts of the VA employees 
during Hurricanes Katrina and Rita. Not only did our staffs 
evacuate several hundred patients to other hospitals out of the 
Gulf Coast area quickly and efficiently, they did so at great 
personal risk and considerable personal loss. One woman, who is 
a nurse, caught up with, in a hospital in Houston, where we had 
relocated many of her patients off of her ward at the New 
Orleans Hospital, said she could see her house during the 4 
days they were in there, before we finally got them evacuated, 
and all she could see was the roof and the chimney. And she 
didn't know the disposition of her own family, but she stayed 
right with her patients, and then relocated with her patients, 
got on an airplane, actually, and didn't know where she was 
going to end up. And that was--that's quite typical of scores 
of VA health caregivers in that great catastrophe.
    And, Madam Chairman, the citizens of the great State of 
Texas opened their hearts, as well, to our veterans that we 
relocated there, and their health caregivers, welcomed them to 
cities like Houston and San Antonio in their time of need, and 
Dallas.
    The DeBakey VA Medical Center provided much-needed care and 
comfort to all of the displaced citizen soldiers moved there, 
that were affected by the hurricane, and they did so in true 
Texas style. They were made to feel at home. And we are very 
grateful to all of those who made that possible.
    It's also a fact that the VA knows how to protect our 
veterans' vital health information against this kind of 
catastrophic event that swept over the Gulf Coast region. 
Because veterans healthcare records are electronic, no matter 
where our New Orleans veterans were eventually relocated, their 
complete health records were available for them, and for their 
givers, in an uninterrupted manner.
    Following a decade-long healthcare transformation, the VA 
is now at the forefront of America's healthcare industry. And 
that's not just a proud Secretary saying that, but, more 
importantly, it's being said by a host of organizations within 
and outside of the healthcare community.
    Let me mention just a few examples. The Journal of American 
Medical Association has applauded VA's dedication to patient 
safety. Since you're sitting down, I will say even the New York 
Times recently characterized the VA as a model for our Nation. 
And just recently--I think it was the week before last--the 
``NBC Nightly News'' aired a story on the VA that described our 
healthcare system as, quote, ``the envy of healthcare 
administrators and a model for healthcare nationwide,'' end of 
quote.
    Our veterans--these are the people that really count to us, 
the people that we take care of--they rank our care a full 10 
percentage points above their counterparts in the private 
sector. For the sixth consecutive year, the American Customer 
Satisfaction Index reports that veterans are more satisfied 
with their healthcare than any other patients in America.
    Because our first-rate, high-quality healthcare--because of 
that, veterans are coming to us in ever-greater numbers. Fully 
7.6 million veterans are now enrolled for our care. And this 
year we expect to see approximately 5.4 million of them. Last 
year, we had 55 million patient encounters in our system.
    Madam Chairman, President Bush, in his 2007 budget proposal 
for the Department of Veterans Affairs, is fulfilling his 
promise to our veterans with a strong budget that respects 
their service to our country and takes a significant step 
toward redeeming America's debt for our heroes. The President's 
total request is for $80.6 billion. This is an increase of 12.2 
percent over last year's record amount. It is $8.8 billion 
above the level of last year. This budget contains the largest 
dollar increase in discretionary funding for the VA ever 
requested by a President.
    Madam Chairman, our written statement presents a detailed 
description of the President's proposal for 2007. But I would 
like to take a few moments to highlight several of the key 
components of this historic budget.
    Let's start with veterans healthcare. During 2007, as I 
said, we expect to treat approximately 5.4 million patients, 
including more than 109,000 combat veterans who served in 
Operation Enduring Freedom and Operation Iraqi Freedom. The 3.8 
million veteran patients in priorities 1 through 6 will 
comprise 72 percent of our total patient population in fiscal 
year 2007. This will be an increase of 2.1 percent in the 
number of patients in this core group, and will represent the 
fourth consecutive year during which those veterans who count 
on us the most will increase as a percentage of all patients 
treated.
    The President's 2007 budget request includes our funding 
request for the three medical-care appropriations: $27.5 
billion for medical services, including $2.8 billion in 
collections; $3.2 billion for medical administration; and $3.6 
billion for medical facilities. The total proposed budgetary 
resources of $34.3 billion for the medical-care program 
represent an increase of 11.3 percent, or $3.5 billion over the 
level for last year, and it is 69.1 percent higher than the 
funding available at the beginning of the Bush administration.
    Madam Chairman, I want to emphasize VA's commitment to 
pursue the Gulf War Illness research through our new $15 
million a year research partnership over the next 4 years with 
the University of Texas Southwestern Medical School. Our Under 
Secretary for Health, Dr. Jonathan Perlin, will be joining you 
in Dallas soon, with other members of our staff, to discuss 
this newest avenue of investigation into what is certainly a 
pressing healthcare issue, a consistent, persistent, pressing 
issue for our Gulf War veterans, and for their families.
    Madam Chairman, the VA is focused on delivering timely, 
accurate, and consistent benefits to veterans, and their 
families, as well. The volume of claims receipts has grown 
substantially during the last few years, and is now the highest 
that it's been in 15 years as we received over 788,000 claims 
during fiscal year--or during calendar year 2005, last year. 
This trend is expected, most assuredly, to continue. We are 
projecting the receipt of over 910,000 compensation and pension 
claims in 2006, and nearly as many in 2007.
    One of the key drivers of new claims activity is the 
increase in size of the Active Duty military force, now 
including reservists and National Guard members who have been 
called to Active Duty to support Operation Enduring Freedom and 
Operation Iraqi Freedom. Another is the aging of our veteran 
population. This has led to a sizable growth in the number of 
new claims, and we expect this pattern to continue.
    A natural outcome of this increasing claims workload is 
growth in our mandatory spending accounts, which are growing 
even faster than VA's discretionary budget. We estimate that 
mandatory spending will increase by 14.5 percent, to over $42 
billion, from an estimated fiscal year 2006 spending level of 
$36.7 billion.
    Regarding burials, our veterans are leaving this life at an 
ever-increasing pace. In fact, 1,800 a day now pass away. 
Buglers will play Taps for more than 107,000 veterans in our 
national cemeteries in 2007. That is a 5.4 percent increase 
over the 2006 estimate, and 15 percent more than the number of 
interments in 2005.
    The President's 2007 budget request for the VA includes 
$160.7 million in operations and maintenance funding for the 
National Cemetery Administration. This represents an increase 
of $11.1 million, or 7.4 percent, over the estimate for last 
year.
    We will expand access to our burial program by increasing 
the percent of veterans served by a burial option in a national 
or State veterans cemetery within 75 miles of their residence, 
to 83.4 percent in 2007. This is an increase of 6.7 percent 
over last year. Our plan is for the biggest expansion of the 
national cemetery system since the Civil war. And we are on 
track.

                           PREPARED STATEMENT

    Madam Chairman, I started out my testimony by saying that 
this budget is historic, that this is a landmark proposal of 
funding unmatched by any previous VA budget ever. And I also 
said that VA's 235,000 employees are doing a terrific job 
throughout our country in taking care of our veterans. Veterans 
don't seek the spotlight of approval, so, as Secretary of 
Veterans Affairs, it's my privilege to lead our national 
applause in grateful thanks for every gift our veterans have 
given us. This proposed budget for VA is President Bush's 
appreciation for them, our heroes.
    Thank you, Madam Chairman.
    [The statement follows:]

                Prepared Statement of R. James Nicholson

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

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

                              MEDICAL CARE

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

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

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

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

Quality of Care
    VA's standing as the Nation's leader in providing safe, high-
quality health care is evident and has been well documented. For 
example:
  --in December 2004 RAND investigators found that VA outperforms all 
        other sectors of American health care across a spectrum of 294 
        measures of quality in disease prevention and treatment;
  --the Department's health care system was featured in the January/
        February 2005 edition of Washington Monthly in an article 
        titled ``The Best Care Anywhere'';
  --the May 18, 2005, edition of the prestigious Journal of the 
        American Medical Association noted that VA's health care system 
        has ``. . . quickly emerged as a bright star in the 
        constellation of safety practice, with system-wide 
        implementation of safe practices, training programs and the 
        establishment of four patient-safety research centers'';
  --the July 18, 2005, edition of the U.S. News and World Report 
        included a special report on the best hospitals in the country 
        titled ``Military Might--Today's VA Hospitals Are Models of 
        Top-Notch Care;'' and
  --on August 22, 2005, The Washington Post ran a front-page article 
        titled ``Revamped Veterans' Health Care Now a Model.''
    It should be noted that for the 6 consecutive year, VA set the 
public and private sector benchmark for health care satisfaction based 
on the American Customer Satisfaction Index survey conducted by the 
National Quality Research Center at the University of Michigan. VA's 
inpatient index was 83 compared to 73 for the private sector, and our 
outpatient index was 80 compared to 75 for the private sector.
    These external acknowledgments of the superior quality of VA health 
care when compared to other public and private health plans reinforce 
the Department's own findings. We use two primary measures of health 
care quality--Clinical Practice Guidelines Index and Prevention Index. 
These measures focus on the degree to which VA follows nationally 
recognized guidelines and standards of care that medical literature has 
proven to be directly linked to improved health outcomes for patients. 
Our performance on the Clinical Practice Guidelines Index, an internal 
accountability measure focusing on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to reach 78 percent in 2007, or a 1 percentage 
point rise over the 2006 estimate. Similarly, VA's Prevention Index, a 
set of measures aimed at preventive health care, including 
immunization, health risk assessments, and cancer screenings, is 
projected to remain at the estimated 2006 high rate of performance of 
88 percent.

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

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

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

                            MEDICAL RESEARCH

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

                       GENERAL OPERATING EXPENSES

    The Department's 2007 resource request for General Operating 
Expenses (GOE) is nearly $1.5 billion. It is $131 million, or 9.7 
percent, above the 2006 current estimate. Within the 2007 total funding 
request, $1.168 billion is for the management of the following non-
medical benefits administered by the Veterans Benefits Administration 
(VBA)--disability compensation; pensions; education; housing; 
vocational rehabilitation and employment; and insurance. This is an 
increase of $114 million (or 10.8 percent) over the 2006 level. Our 
request for GOE funding also includes $313 million to support General 
Administration activities, an increase of $17 million, or 5.7 percent, 
from the current 2006 estimate.

Compensation and Pensions Workload, Performance, and Staffing
    VA is focused on delivering timely and accurate benefits to 
veterans and their families. Improving the delivery of compensation and 
pension benefits has become increasingly challenging during the last 
few years due to a steady and sizeable increase in workload. This 
growing workload is the result of several factors--more claims are 
being filed; we are experiencing more direct contact with veterans and 
service members, particularly those who served in Operation Enduring 
Freedom and Operation Iraqi Freedom; the complexity of claims is 
increasing; and more appeals are being filed.
    The volume of claims receipts has grown substantially during the 
last few years and is now the highest it has been in the last 15 years 
as we received over 788,000 claims in 2005. This trend is expected to 
continue. We are projecting the receipt of over 910,000 compensation 
and pension claims in 2006 (which includes over 98,000 claims resulting 
from the special outreach requirements of recently enacted legislation) 
and more than 828,000 claims in 2007.
    One of the key drivers of new claims activity is the size of the 
active duty military force. The number of active duty service members 
as well as Reservists and National Guard members who have been called 
to active duty to support Operation Enduring Freedom and Operation 
Iraqi Freedom have increased. This has led to a sizeable growth in the 
number of new claims, and we expect this pattern to persist. An 
additional reason that the number of compensation and pension claims is 
climbing is the Department's commitment to increase outreach efforts. 
Our outreach efforts are critical to the men and women who are entitled 
to VA benefits and services. We have an obligation to extend our reach 
as far as possible and to spread the word to veterans about what VA 
stands ready to provide.
    Disability compensation claims from veterans who have previously 
filed a claim comprise almost 60 percent of the disability claims 
receipts each year, and the number of such claims is climbing at a rate 
of 2 to 3 percent annually. Many veterans now receiving compensation 
suffer from chronic and progressive conditions, such as diabetes, 
mental illness, and cardiovascular disease. As these veterans age and 
their conditions worsen, we experience additional claims for increased 
benefits.
    The growing complexity of the claims being filed also contributes 
to our workload challenges. Since the beginning of 2000, the number of 
veterans receiving compensation has increased 14 percent, from slightly 
over 2.3 million to more than 2.6 million. However, the total number of 
disabilities for which veterans are being compensated has increased 37 
percent during this time, from nearly 6.0 million disabilities to 8.2 
million disabilities. In addition, we expect to continue to receive a 
growing number of complex disability claims resulting from Post-
Traumatic Stress Disorder, environmental and infectious risks, 
traumatic brain injuries, complex combat-related injuries, and 
complications resulting from diabetes. Each claim now takes more time 
and more resources to adjudicate. Additionally, as the Department 
receives and adjudicates more claims, this results in a larger number 
of appeals from veterans and survivors.
    In addition to the growing complexity of compensation and pension 
claims, there are special outreach requirements that will have a 
significant impact on our workload and program performance. These 
outreach requirements will result in nearly 100,000 additional claims. 
As a result of the increasing volume and complexity of claims, the 
average number of days to complete compensation and pension claims is 
now projected to rise from 167 days in 2005 to 185 days in 2006, and to 
fall slightly to 182 days in 2007. In addition, we anticipate that our 
pending inventory of disability claims will climb throughout 2006 as we 
receive new claims, reaching nearly 418,000 by the end of this year. 
The inventory will fall by 5 percent during 2007 to around 397,000. 
Despite these significant workload challenges, we remain committed to 
reaching our strategic goal of processing compensation and pension 
claims in an average of 125 days.
    We will address our ever-growing workload challenges in several 
ways. First, we will continue to improve our productivity as measured 
by the number of claims processed per staff member. Second, we will 
continue to move work among regional offices in order to maximize our 
resources and enhance our performance. Third, we will simplify and 
clarify benefit regulations and ensure our claims processing staff has 
easy access to the manuals and other reference material they need to 
process claims as efficiently and effectively as possible. And fourth, 
we will further advance our efforts to improve the consistency and 
quality of claims processing across regional offices.
    Even though we will implement several management improvement 
practices, we will need additional staffing in order to address our 
workload challenges in claims processing. Our 2007 budget includes 
resources to support over 13,100 staff members (including nearly 7,900 
staff in direct support of the compensation and pensions programs), or 
about 170 above the staffing supported by our 2006 budget.

Education and Vocational Rehabilitation and Employment Performance
    Key program performance will improve in both the education and 
vocational rehabilitation and employment programs. The timeliness of 
processing original education claims will improve by 8 days during the 
next 2 years, falling from 33 days in 2005 to 25 days in 2007. In 
addition, the rehabilitation rate for the vocational rehabilitation and 
employment program will climb to 69 percent in 2007, a gain of 6 
percentage points over the 2005 performance level.

Funding for Initiatives
    The 2007 request for VBA includes $3.4 million to continue 
development of comprehensive training and electronic performance 
support systems. This ongoing initiative provides technical training to 
compensation and pension staff through a multimedia, multi-method 
training approach that has a direct impact on the accuracy and 
consistency of our claims processing.
    The 2007 resource request for VBA includes $2.0 million to continue 
the development of a skills certification instrument for assessing the 
knowledge base of current and new veterans' service representatives and 
will also result in a skills certification module for a variety of 
program staff. This initiative will help identify those employees who 
need additional training in order to better perform their duties and 
will allow us to improve our screening process involving applicants for 
higher-level positions.

                    NATIONAL CEMETERY ADMINISTRATION

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

              CAPITAL (CONSTRUCTION AND GRANTS TO STATES)

    The President's 2007 budget request includes $714 million in 
capital funding for VA. Our request includes $399 million for major 
construction projects, $198 million for minor construction, $85 million 
in grants for the construction of State extended care facilities, and 
$32 million in grants for the construction of State veterans 
cemeteries.
    The 2007 request for construction funding for our medical care 
program is $457 million--$307 million for major construction and $150 
million for minor construction. All of these resources will be devoted 
to continuation of the Capital Asset Realignment for Enhanced Services 
(CARES) program to renovate and modernize VA's health care 
infrastructure and to provide greater access to high-quality care for 
more veterans. When combined with the $293 million that was enacted in 
the Hurricane Katrina emergency funding package in late December 2005 
to fund a CARES project for a new hospital in Biloxi, Mississippi, the 
total CARES funding since the 2006 budget totals $750 million and since 
the 2004 CARES report amounts to nearly $3 billion.
    Our major construction request for medical care will fund the 
continued development of two medical facility projects--$97.5 million 
to address seismic corrections in Long Beach; and $52.0 million for a 
new medical facility in Denver. In addition, our request for major 
construction funding includes $38.2 million to construct a new nursing 
home care unit and new dietetics space, as well as to improve patient 
and staff safety by correcting seismic, fire, and life safety 
deficiencies at American Lake (Washington); $32.5 million for a new 
spinal cord injury center at Milwaukee; $25.8 million to replace the 
operating room suite at Columbia (Missouri); and $7.0 million to 
renovate underutilized vacant space located at the Jefferson Barracks 
Division campus at St. Louis as well as provide land for expansion at 
the Jefferson Barracks National Cemetery.
    We are also requesting $53.4 million in major construction funding 
and $25.0 million in minor construction resources to support our burial 
program. Our request for major construction includes funds for cemetery 
expansion and improvement at Great Lakes, Michigan ($16.9 million), 
Dallas/Ft. Worth, Texas ($13.0 million), and Gerald B. H. Solomon, 
Saratoga, New York ($7.6 million). Our request will also provide $2.3 
million in design funds to develop construction documents for gravesite 
expansion projects at Abraham Lincoln National Cemetery (Illinois) and 
at Quantico National Cemetery (Virginia). In addition, the major 
construction request includes $12 million for the development of master 
plans for six new national cemeteries in areas directed by the National 
Cemetery Expansion Act of 2003--Bakersfield, California; Birmingham, 
Alabama; Columbia-Greenville, South Carolina; Jacksonville, Florida; 
Sarasota County, Florida; and southeastern Pennsylvania.

                    INFORMATION TECHNOLOGY SERVICES

    The President's 2007 budget for VA provides $1.257 billion for the 
non-payroll costs associated with information technology (IT) projects 
across the Department. This is $43.2 million, or 3.6 percent, above our 
2006 budget.
    The 2007 request for IT services includes $832 million for our 
medical care program, $55 million for our benefits programs, $4 million 
for our burial program, and $366 million for projects managed by our 
staff offices, most notably non-payroll costs in our Office of 
Information and Technology and Office of Management to support 
department-wide initiatives and operations.
    The most critical IT project for our medical care program is the 
continued operation and improvement of the Department's electronic 
health record system, a Presidential priority which has been recognized 
nationally for increasing productivity, quality, and patient safety. 
Within this overall initiative, we are requesting $51.0 million for 
ongoing development and implementation of HealtheVet-VistA (Veterans 
Health Information Systems and Technology Architecture) which will 
incorporate new technology, new or reengineered applications, and data 
standardization to continue improving veterans' health care. This 
system will make use of standards that will enhance the sharing of data 
within VA as well as with other Federal agencies and public and private 
sector organizations. Health data will be stored in a veteran-centric 
format replacing the current facility-centric system. The standardized 
health information can be easily shared between facilities, making 
patients' electronic health records available to all those providing 
health care to veterans.
    Until HealtheVet-VistA is operational, we need to maintain the 
VistA legacy system. This system will remain operational as new 
applications are developed and implemented. This approach will mitigate 
transition and migration risks associated with the move to the new 
architecture. Our budget provides $188 million in 2007 for the VistA 
legacy system.
    In support of the Department's education program, our 2007 request 
includes $3 million in non-payroll costs to continue the development of 
The Education Expert System. This will replace the existing benefit 
payment system with one that will allow the Department to automatically 
process education claims received electronically.
    VA's 2007 request provides $57.4 million for cyber security. This 
ongoing initiative involves the development, deployment, and 
maintenance of a set of enterprise-wide security controls to better 
secure our IT architecture in support of all of the Department's 
program operations.

                                SUMMARY

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

    Senator Hutchison. Thank you very much. We appreciate that 
testimony.

                    MEDICAL AND PROSTHETIC RESEARCH

    And I would like to ask you a question, with my time, on 
the research budget, the area that we discussed, and you 
addressed, the Gulf War syndrome research, but the other area 
would be the ``smart limb'' technology, prosthetics, and other 
research efforts. And I just wanted to get a read from you on 
how that is progressing and what other priorities you see. I so 
appreciate your commitment to Gulf War, because I think we can 
do so much, not only for the veterans who have symptoms, but 
for prevention for future potential chemical warfare that might 
have a causal connection. But on the area of prosthetics, and 
then what other priorities do you see with your research 
budget? And are you okay with that slight decrease?
    Secretary Nicholson. I'll answer the last part first by 
saying, yes, we have--in the last two budget cycles, have had 
significant increase in research for prosthetics and for mental 
health and post-traumatic stress disorder. In the area of 
prosthetics, I think you mentioned ``smart limbs'' or C-limbs, 
we call the legs, the below-the-knee prosthetic now, which is a 
phenomenal device made of microprocessors that somehow has 
figured out how to think like the other leg and function 
accordingly. It's just astonishing. It's a product of research 
and compassion.
    I visit Walter Reed, in Bethesda, regularly, and, every 
Friday night that I can, I get together, my wife and I, for 
dinner with the wounded folks that are ambulatory enough to go 
to a restaurant that--we meet in here, and they are--they are 
just amazing. And the work that's being done for them is 
amazing, as well. And our commitment to the--you know, to the 
research, both in its--it's both clinical and practical, 
because we have the opportunity to monitor them, these new 
returnees, so closely--is--I think it's just--it's world class.
    As to the specific details that inquiries of chemicals and 
so forth, I'll defer to Dr. Perlin and ask him if he would 
flesh that out with more detail.
    Dr. Perlin. Thank you, Mr. Secretary, and thank you, Madam 
Chairman.
    The research that's being done in VA is truly spectacular. 
The Secretary mentioned things like the C-leg, but one of the 
products I'm most excited about is the artificial retina. I'm 
sure this committee has heard about the cochlear implant that 
was developed for hearing for people with loss of the outer 
ear, but with the nerves intact. Two of our sites have really 
brought the retinal implant to fruition. It's actually being 
tested in some patients, and, we believe that--for some 
individuals, it will be able to do things as exciting as 
restoring vision.
    In the area of combat-related research, we will actually 
conduct over $160 million of activity in things ranging from 
acute and traumatic injury to sensory loss, military 
occupational exposures, bioterrorism, and pathogens, brain 
disorders, and brain injury. And as the Secretary mentioned, on 
top of that our prosthetics program for the delivery of these 
devices actually increases to $1.4 billion, an increase of $160 
million, 2006 to 2007.

                     POST-TRAUMATIC STRESS SYNDROME

    Senator Hutchison. In my remaining time, would you just 
elaborate a little bit on your post-traumatic stress syndrome, 
the centers of excellence, progress on that. Is it making a 
difference, putting caregivers with that expertise into one 
facility that can be a regional magnet? I'd just like to have a 
progress report on that.
    Secretary Nicholson. The short answer is, yes, indeed. We 
now have put a certified post-traumatic stress disorder, PTSD 
expert at each one of our 154 medical centers so that we have 
at least one in each of our centers. We have positioned others 
in some of our vet centers and in some clinics. Because we're 
forward-looking, we're--we want to outreach to these young 
people who are coming back, and even be suggestive that if 
they're experiencing any of these symptoms, that they should 
come in and see us, and see one of these experts, because what 
they are experiencing is a common reaction to the uncommon 
experience they've just been through, and that if we can begin 
to treat them early enough, there's a great probability of 
success and recovery from any long-term effects of this. And we 
also are doing a considerable amount of research, that's being 
funded generously by you all, at our National PTSD Research 
Center, which is in White River Junction, Vermont.
    Senator Hutchison. Thank you very much.
    Senator Feinstein.

              PROPOSED LEGISLATION ON FEES AND COPAYMENTS

    Senator Feinstein. Thank you very much, Madam Chairman.
    Mr. Secretary, let me take on the issue of fees. As you 
know, last year Senator Burns moved an amendment on the floor 
which actually received a vote, a unanimous vote, to reject the 
fee proposal. And you've put it back again this year. The $250 
annual enrollment fee, a doubling of the pharmaceutical 
copayments, eliminating the practice of offsetting or reducing 
copayments with collections recovered through third-party 
insurers. How many veterans does the VA estimate will be 
affected by this policy? These are, I guess, the priority 7 and 
8 veterans.
    Secretary Nicholson. I think the number, Senator, would be 
approximately 200,000. I think it's 198,000.
    Senator Feinstein. Okay. That's both priority 7s and 8s.
    Secretary Nicholson. Yes.
    Senator Feinstein. Is that correct? Okay.
    Secretary Nicholson. And we also know, about them, that 
about 95 percent of them have insurance. But I think that----
    Senator Feinstein. In those--these are people that make 
under $26,000 a year, and you're saying----
    Secretary Nicholson. Not all of them. Some of them might. 
It depends on where they live.
    If I might, I would sort of frame it. Because I happen to 
personally believe in this. And I'm not just being a good 
soldier, putting this in the budget. I think that there's a 
real equity in this. And, you know, they--by the way, the 
people that enter into the armed services are never told 
they're going to have lifetime healthcare. The people who are 
told they're going to have lifetime healthcare, and who were 
told that, are those that stay in a career. And those that stay 
in for a career, maybe 30 years, and do two or three combat 
tours, when they come out of the military, they get TRICARE, 
which is a program with which they're quite pleased. And I was 
involved in that in another way at another job, getting that. 
It's a good benefit. But they have a copay and enrollment fee, 
which is significantly higher than this, that we are asking 
for, for veterans, only for categories 7 and 8, which are 
veterans that have had no service-connected disabilities and 
who have jobs, and they have served 2 years----
    Senator Feinstein. Okay. But let me talk to you about the 
real world. This was last year, the Burns amendment. It passed 
100 to nothing. This is an election year. Somebody is sure to 
make the same amendment again. You're going to lose--if that 
happens, what is the total amount that you would lose? Is it 
$795----
    Secretary Nicholson. $795.
    Senator Feinstein [continuing]. Million dollars. What would 
your plan be, then, if you lose $795 million? I mean, I think 
you've been forewarned. That happens, 100 to zero. Pretty good 
warning that somebody's going to try it again. And the 
opportunity for it passing is certainly very high.
    Secretary Nicholson. I wouldn't argue with that, Senator, 
but I--that doesn't mean that it's not the right and equitable 
thing to do. But I will tell you, the question is a good one, 
about the $795 million, because that's important, because we--
that is assumed in this budget. And if we do not get those 
policy proposals, we would need--we will need that money, to do 
what we think we have to do in this budget year.
    Senator Feinstein. So, what would you do?
    Secretary Nicholson. Well, what we would do is ask you to--
if you don't approve that, to increase the appropriation by 
that amount.
    Senator Feinstein. Okay. Has the VA worked with the Defense 
Department to run any kind of actuarial modeling to determine 
the impact of these fees on VA patient loads?
    Secretary Nicholson. I think the answer is, no, we've not 
worked with the Defense Department, but we've certainly worked 
with our own actuaries to see what----
    Senator Feinstein. Because the----
    Secretary Nicholson [continuing]. The effect of----
    Senator Feinstein [continuing]. DOD is also requesting 
these fees on the DOD healthcare system.
    Secretary Nicholson. Yes.
    Senator Feinstein. So, I would--so, no modeling has been 
done to show what the effect of that is.
    Secretary Nicholson. Well, they're two separate systems. 
And----
    Senator Feinstein. Understand that.
    Secretary Nicholson [continuing]. We have----
    Senator Feinstein. But you're one government, 
theoretically.
    Secretary Nicholson. We have not. I think we have not. But 
we've certainly modeled it ourself to know what it--the patient 
impact would be.
    Senator Feinstein. Okay. I have another question. I see the 
light is on. Perhaps we could have a second round.
    Thank you----
    Senator Hutchison. Yes, we will----
    Senator Feinstein [continuing]. Madam Chairman.
    Senator Hutchison [continuing]. We will have a second 
round.
    Senator Allard.
    Senator Allard. Thank you, Madam Chairman.

                     ROCKY MOUNTAIN REGION COLORADO

    The hospital plans for the Rocky Mountain region, for 
veterans I want to address that a little bit. The Fitzsimons 
Hospital there in Denver--and it was designed some 50 years 
ago, and obviously a lot of what people envisioned for 
healthcare then, and what we're getting now, is lot of needs in 
the hospital simply can't be met with an older facility. And 
so, you are moving ahead with the Rocky Mountain facility. And 
I truly appreciate that. My question is, how are you moving 
forward with that particular facility? And how does it fit into 
the Capital Assessment Realignment for Enhanced Services, 
commonly known as the CARES plan?
    Secretary Nicholson. Well, thank you, Senator Allard. The 
CARES plan is the predicate for the determination that there is 
a need for a new hospital in Denver. And that takes into 
account current projected patient loads and capacity to serve. 
And we are moving forward with that. We are moving forward. We 
are--need to build a new hospital in Orlando, in Las Vegas, in 
Denver. And we have a recent agreement with the authority that 
has control over the land at the old--the Fitzsimons Army 
General Hospital. We've agreed to a site and a price, and we 
are in stages of seeking approval for getting the money 
authorized to acquire the land. And the planning--the site 
planning and space planning for the hospital is ongoing. So, 
it's moving--it's moving well, but we now need to acquire the 
land here----
    Senator Allard. And the----
    Secretary Nicholson [continuing]. Shortly.
    Senator Allard [continuing]. Authorization language, that 
would come out of the Veterans Committee itself. And you're 
working on that.
    Secretary Nicholson. Yes, we are working on it.
    Senator Allard. And then, I notice that the President also 
has in his budget here some money to begin to finance the new 
facility there in Denver.
    Secretary Nicholson. Yes. And that's----
    Senator Allard. And----
    Secretary Nicholson [continuing]. And that's----
    Senator Allard. So, right now you don't see any real 
hitches. I mean, things are--seem to be moving along pretty 
good at this point?
    Secretary Nicholson. Yes, they do.
    Senator Allard. Okay. That's good news. And thank you for 
that effort.

                    NATIONAL CEMETERY ADMINISTRATION

    The other question I have to--has to deal with cemeteries. 
How is it that we establish whether an area needs cemeteries--
or is appropriate to put a cemetery in that area? How do we 
determine that?
    Secretary Nicholson. I have Under Secretary Tuerk here with 
me, who is responsible for Memorial Affairs. And I'll let him 
give you the detail. Essentially, there are criteria which set 
out a goal for the VA to have a cemetery within 75 miles of 90 
percent of the veterans in our country. And as I said in my 
testimony, we are in the greatest expansion of cemeteries since 
the Civil War, because our veterans are aging, and they're 
passing on at a pretty rapid rate. We need to be there. And 
there is another criteria of distance, and I'll ask Secretary 
Tuerk if he'd like to address that.
    Senator Allard. Mr. Tuerk.
    Mr. Tuerk. Yes, Senator. Generally speaking, we look at a 
given site and determine whether there is a national or State 
cemetery option available in proximity to that site, defined by 
75 miles away. That number is based on our own internal studies 
of the distance beyond which veterans tend not to view a 
cemetery as a practical alternative.
    Over the years, using that 75-mile criterion, we have 
identified cities and locations and ranked them according to 
the number of veterans who are unserved. For example, starting 
back in 1987, Chicago was at----
    Senator Allard. Yeah.
    Mr. Tuerk [continuing]. The top of the list, with----
    Senator Allard. Now----
    Mr. Tuerk [continuing]. A million----
    Senator Allard [continuing]. Let me get down to specifics, 
as my time's about ready to run out here.
    Mr. Tuerk. Okay.
    Senator Allard. There is a population number that goes into 
that--those statistics that you look at, isn't correct?
    Mr. Tuerk. Correct, Senator.
    Senator Allard. And my information is that this--they're--
they go back quite a distance. What is it? Clear back to the 
2000 Census.
    Mr. Tuerk. As we have come down the list of----
    Senator Allard. Or do they go back to the 1990 Census?
    Mr. Tuerk. They are based on the 2000 Census.
    Senator Allard. Census, okay.
    Mr. Tuerk. And we have come down the list, and the most 
recent newly-mandated cemeteries--we had come down to the point 
where we're selecting cities that had veteran populations of 
about 170,000 that didn't have a cemetery in proximity.
    Senator Allard. Yeah. That--you know, I've--some areas of 
the country, they really had a--not only have they had a rapid 
growth in the population there, but the veteran population has 
probably increased even more. And then, on top of the--because 
of the war, and then also because of their aging and just the 
fact the demographics of people are moving into the area--and 
so, if you have an area that, say, is maybe on the borderline 
in change, is there a mechanism in there, or do you have to 
wait til the next Census before that whole area gets 
reevaluated?
    Secretary Nicholson. You know, I think the answer, Senator 
Allard, is, absent a showing of some kind of an exponential 
growth spurt or something, we would have to wait for the next 
Census, yes.
    Mr. Tuerk. And I'm advised, Senator, that we do have 
actuaries retained who try to estimate population changes 
between the Censuses every 10 years, but they're not precise 
numbers.
    Senator Allard. I would just like to solicit your 
cooperation in, kind of, working with this formula. We've got 
one of those areas in Colorado Springs.
    Mr. Tuerk. I would also mention, Senator, that the formula 
itself, if it can be properly called that, is not set in stone. 
And, as a matter of fact, we are undergoing a program 
evaluation right now to examine the underlying assumptions of 
that formula and see if it's an appropriate way to proceed 
henceforth.
    Senator Allard. Well, yeah, I would just ask that Secretary 
Nicholson, and maybe you, Mr. Tuerk, would just kind of work 
with us a little bit and just see where we are. We've got 
somebody that's going to donate land, and there's a huge 
growing population in there. And, looking from the Census, it's 
probably grown a little bit. I need to kind of work with the 
Veterans Affairs to see where you stand on that proposal, and 
all I need from you is a commitment to, kind of, work with us a 
little bit on that, and work with that formula, and see if 
there's a potential need there that--for a cemetery, that 
perhaps qualifies, that we've somehow or the other ignored.
    Mr. Tuerk. I'm happy to do that, Senator.
    Senator Hutchison. Senator Murray.

                             VA HEALTHCARE

    Senator Murray. Mr. Secretary, I just--I want to clarify a 
response that you gave to Senator Feinstein. Are you saying 
that VA military recruiters are not using VA healthcare as a 
recruiting tool?
    Secretary Nicholson. No, I didn't say that. I said that 
there is no undertaking in the law to provide a recruit for a 
lifetime of VA healthcare----
    Senator Murray. Right. Well, it's my understanding that 
healthcare is the number one tool that recruiters are using 
today, in terms of veterans having healthcare. Is that not 
accurate?
    Secretary Nicholson. I don't--I couldn't--I couldn't tell 
you whether it is or not. I----
    Senator Murray. Well, I would just submit to this committee 
that most of our soldiers who are serving in Iraq and 
Afghanistan are under the assumption, having been told by a 
recruiter that they would get healthcare, that, indeed, they 
would get healthcare. So----
    Secretary Nicholson. Well, every member of the Armed Forces 
who serves in the combat zone is eligible for VA healthcare.
    Senator Murray. That's correct. And they are not told 
anytime by a recruiter that they are going to be based on what 
income they have when they return.
    Secretary Nicholson. They--it shouldn't be, because they're 
eligible for it, for----
    Senator Murray. Right.
    Secretary Nicholson [continuing]. For 24 months, the----
    Senator Murray. Because I misunderstood what you said to 
Senator Feinstein, then, because I thought you said that 
soldiers were not----
    Senator Hutchison. He did. He said they're not required to 
provide it for a lifetime.
    Secretary Nicholson. Right.
    Senator Murray. Right. But they are being told by 
recruiters that healthcare is part of what they will get for 
their service. So, I think----
    Secretary Nicholson. Well, I don't know what the recruiters 
are telling them. If they're injured--if they're injured in 
their service, they would be provided----
    Senator Murray. Right. I understand that. But----
    Secretary Nicholson [continuing]. Healthcare.
    Senator Murray [continuing]. I would just say that we--if 
we were not going to guarantee them healthcare, we'd better 
tell our recruiters to say something else.

                            VA BUDGET MODEL

    But, anyway, what I really wanted to ask you about was the 
model that you have for the 2007 budget. We went through a 
tremendous challenge last year, as you will recall. Have you 
changed the model for how you project how much money will be 
needed by the VA?
    Secretary Nicholson. The answer, Senator Murray, is that, 
no, we haven't changed the model. We used the same modeling 
consultant, but we've certainly supplemented it and looked 
outside of it in a--you know, in a subjective way with 
looking--more inputs and more intuitive elements. But the basic 
model is the same.
    And I'll ask Dr. Perlin if he wants to expand on that, 
because he is----
    Senator Murray. Well, what I'd really like to know is why 
you don't base the budget on demand.
    Secretary Nicholson. Well, of course, we do base it on 
demand. What we're trying to do is project what the demand will 
be.
    Senator Murray. And you're using the same model as you had 
before we had a war in Iraq and Afghanistan?
    Secretary Nicholson. Yes. But if you'll remember my 
testimony of last year, when I--that we were working on the 
2005 budget, it was based on 2002 data. And in 2002 there was 
no war. That's just a victim of our cycling times. We're 
working 2007 right now, and this--the 2007 data is based on--
you know, on 2004 numbers.
    Senator Murray. Well, I just remain sincerely concerned 
that the--what we--the demands on the VA today are dramatically 
different than they were 5 years ago, on OIF and OEF soldiers 
returning, on increasing number of Vietnam veterans who are 
accessing it, on the increased cost of healthcare overall, on 
the fact that many people are losing healthcare and going into 
the VA that weren't, necessarily, before. Why are we not 
changing the model so that we don't end up in shortfall come 
next July or August here?
    Secretary Nicholson. Well, we use the best predictive tools 
that are available. That is the model that we use. It's used by 
almost all the major healthcare providers and integrated 
systems. It's--and then we've supplemented it by some of our 
own unique offerings, like long-term care and dental, and so 
forth. But it is a dynamic field. I would tell you that. And it 
is growing. But let me say that the patient loads are 
increasing considerably, but as to the combat, the OIF/OEF, 
we--you know, we see about 5.4 million people a year right now; 
and, of that number, about 110,000 to 120,000 are those 
combatants. That's about 2 percent of----
    Senator Murray. Are they----
    Secretary Nicholson [continuing]. That total.
    Senator Murray. How many OIF and OEF veterans have you 
budgeted for this year?
    Secretary Nicholson. For 2007, 109,000.
    Senator Murray. How many did you see in the first half of 
2006?
    Secretary Nicholson. Which is about to end--we will have 
seen, I think, 85,000.
    Senator Murray. How many did you expect to see in 2007, 
which you based your budget on?
    Secretary Nicholson. 109,000.
    Senator Murray. So, in the first half of the year, you saw 
85,000, and you're budgeting a whole year on 109,000?
    Secretary Nicholson. Budget next year on 109,000, yes.
    Senator Hutchison. Did you--you're--I'm not sure I 
understand. Are you saying that there were 85,000 just in half 
a year?
    Senator Feinstein. Yes, that's right.
    Senator Hutchison. I don't think that's what you----
    Senator Murray. Well, let--you saw 85,000 in 6 months. Your 
whole budget for 2007, you said, is--you're basing it a 
hundred-and-----
    Secretary Nicholson. Nine.
    Senator Murray [continuing]. 109. I do not----
    Senator Hutchison. Well, wait a minute, let me go back and 
then ask--What was the full year, the year before?
    Secretary Nicholson. Last year?
    Senator Murray. Last year.
    Senator Hutchison. Yes.
    Secretary Nicholson. It was about--it was, like, at 
119,800.
    Senator Murray. And we're looking at 2007, and the budget 
is based on less than that, 109,000. That's my point. I'm very 
concerned about that, obviously.
    Senator Hutchison. Well, let's let him answer why that 
would be.
    Secretary Nicholson. Yeah, sure. Dr. Perlin will.
    Dr. Perlin. Thank you, Senator Murray. Your question makes 
logical sense, but I want to make sure that we distinguish the 
cumulative number of patients we've been from the annual 
number. Indeed, the 2007 budget budgets for about 109,000, and 
2006 will see--we project about 110,000. And we're running 
about 38 percent ahead. I should explain two things. First--and 
something that we're really very proud of is that we have much 
better hand-in-glove relationship with the Department of 
Defense that is reaching out to returning combat veterans, 
something I think we all want. And that has increased. And that 
gets to the model. The base of the model predicts about 25 
percent of the OIF/OEF veteran utilization. The remainder is 
the experience in reality. Because, as the Secretary said, the 
model, of necessity, is based on experience of a couple of 
years back, we don't want to put all of our eggs in that one 
basket and ever suffer a repeat of not coming up to the right 
numbers.
    Senator Murray. But from what I can see is that you are 
basing 2007 on less numbers than you saw in 2006. What you're 
asking for, for funding, is based less, yet we know that there 
are more soldiers returning, more accessing the VA, and more 
coming. So, I just have a serious concern about the reality of 
the numbers that we're going to see----
    Dr. Perlin. I think----
    Senator Murray [continuing]. Based on your budget.
    Dr. Perlin. I think, certainly, this is one of the things 
that we will discuss during our quarterly meetings, are 
discussing now, that it's running slightly ahead. I should say 
that is line with that. We are actually running below the 
projected expenses. So, in point of fact, the budget is----
    Senator Murray. Well, and----
    Dr. Perlin [continuing]. Completely robust----
    Senator Murray. I know you----
    Senator Hutchison. No, I----
    Senator Murray [continuing]. I've used my time----
    Senator Hutchison. No, I want to go ahead----
    Senator Murray [continuing]. But they're asking----
    Senator Hutchison [continuing]. And finish this thought, 
because it--I just am not----
    Senator Murray. We're asking our----
    Senator Hutchison [continuing]. I think there's a 
disconnect.
    Senator Murray [continuing]. To do more, in terms of Gulf 
War syndrome and reaching out, and we're seeing more veterans, 
but we're being asked to fund them at less. So, I'm--I just 
think we have a real problem with what we're seeing requested 
here.
    Senator Hutchison. I think the--there's an increase in the 
amount, but you are saying that you expect to see fewer 
patients----
    Senator Murray. Than we will----
    Senator Hutchison [continuing]. This year that we're 
talking about, 2007----
    Senator Murray. The budget is based on that, that's what--
--
    Senator Hutchison [continuing]. Than what you are going to 
have in 2006. And I don't think that's what you mean, or else 
there's an explanation that's not there.
    Secretary Nicholson. Let me try to clarify. The--you're 
talking OIF/OEF returnees. And, as I said, that's about 2 
percent of our total projected patient load. In total patients, 
we are predicting to see an increase. In----
    Senator Murray. That's because Vietnam veterans are aging. 
It's because a number of people are accessing the VA system for 
other reasons.
    Secretary Nicholson. Right.
    Senator Murray. So, that doesn't surprise me. And that's 
good. But for OIF/OEF, you are projecting we will see less than 
last year. I'm very worried that is not going to be reality. 
And I doubt that's what you're going to see.
    Secretary Nicholson. We're--we are projecting that we'll 
see about 11,000 fewer than we saw last year. That is, in 2007, 
we'll see that, fewer than 2006.
    Senator Murray. And I think that's----
    Senator Hutchison. What do you base that on, I think is the 
question? Is it because you have had the major part of the 
injuries or----
    Secretary Nicholson. Well----
    Senator Hutchison [continuing]. There some--must be some--
--
    Secretary Nicholson. It's a question of the cumulative 
versus new patients, and the uniques.
    I'll ask Dr. Perlin if he can explain that.
    Dr. Perlin. Thanks. I think it's important, as was 
mentioned at the beginning, there are about half a million 
veterans who have separated, having served in combat in OIF/
OEF. And, thus far, about 144,500 have come to VA since the 
inception. And so, I think we should put that number aside for 
a moment.
    Not all of those veterans will come back for return 
service, because, by and large, most veterans, fortunately, are 
younger and healthier. There will be some that will carry 
forward. And so, the way the projection goes is, it's based on 
how many veterans will come forward from previous years and how 
many new OIF veterans will come into the system.
    I think you are absolutely correct that there are, at this 
point in the year, more veterans than we had initially 
anticipated. And I make this point, because this is part of 
Department of Defense's going out and not only doing post-
deployment health assessment, but a reassessment. We're 
tracking that number. We are well within budget. And, as the 
Secretary says,--because these are obviously extremely 
significant veterans and all veterans are significant, we place 
particular attention here. The overall budget cares for 98 
percent other veterans. And we are absolutely within the 
resources, not only as budgeted for this population, but as 
budgeted for the entire population, as well.
    Senator Murray. Well, Madam Chairman, I have other 
questions, but we'll get back to them.
    Senator Hutchison. Okay, we certainly will.
    Senator Landrieu.

                    NEW ORLEANS REPLACEMENT HOSPITAL

    Senator Landrieu. Thank you, Madam Chair.
    My question is specific to the supplemental that was just 
passed by the House, Mr. Secretary, that included the $550 
million for the new hospital, which, at our agreement, was 
taken out of the previous supplemental and put on hold until we 
could do a little bit more groundwork on standing up the 
medical complex in New Orleans after Katrina and Rita. And I 
think we're making some progress on that. And I know you all 
have been working very closely with Secretary Leavitt and--as 
we try to develop a new system there.
    But the House inserted $275 million that could be taken out 
of this account for, I guess, quote, ``unanticipated medical 
costs of returning veterans fighting global war on terror.'' Do 
you support that inclusion of $275 million? Does the 
administration support that?
    Secretary Nicholson. We did not ask for that, Senator, no.
    Senator Landrieu. Is it your intention to use any of that 
$550 million for the new hospital with this line item?
    Secretary Nicholson. No. We currently do not plan to have 
to use any of that for operational purposes, no.
    Senator Landrieu. Now, let me be clear. Is it your 
intention to use any of this $550 million, which is earmarked, 
at your request, for the hospital to use for the $275 million 
that the House added into this supplemental?
    Secretary Nicholson. No. The answer is, no, we do not.
    Senator Landrieu. Okay.
    Secretary Nicholson. Which is another way of saying that we 
plan to use the $550 million plus the $75 million for the 
hospital.
    Senator Landrieu. For the purposes in which we have 
basically all agreed we need to move forward----
    Secretary Nicholson. Right.

                             MENTAL HEALTH

    Senator Landrieu [continuing]. And only postponed it last 
time because we agreed with you that it wasn't--it's critical, 
but it wasn't critical 3 months ago. It's critical now, as we 
only have--just for reference of this committee, I just 
learned, today, we only have--let me get these--I'll get the 
numbers; I don't want to give the wrong ones--but of the 3,000 
beds we had open pre-Katrina--hospital beds--I think we only 
have 400 open in the whole metropolitan area, of a city that 
had 3,000 hospital beds, of which this hospital is, of course, 
closed down. We need to stand it up. So, it's quite urgent, in 
terms of healthcare for this whole region.
    Let me ask something on mental health. I understand this is 
the first year that we've earmarked in the budget, in 
discretionary budget, something specific for mental health, or 
is that not true? Is it $2.2 million for mental health? It's 
not the first time?
    Secretary Nicholson. It wouldn't be the first time.
    Senator Landrieu. It wouldn't be the first time?
    Secretary Nicholson. No.
    Senator Landrieu. But we have a slight increase for mental 
health?
    Secretary Nicholson. We have, I think, $3.2 billion in 
the----
    Senator Landrieu. $3.2 billion.
    Secretary Nicholson [continuing]. Budget for mental health.
    Senator Landrieu. Okay. I want to commend you for trying to 
push these numbers slightly higher for mental health. It's been 
something that many of us on the committee have worked on. What 
concerns me is part of the GAO report that was just recently 
issued about the lack of assessment teams at the hospitals that 
will actually make the determination as to who might be 
eligible for these services. I understand that we only piloted 
three programs last year--one in California, one in Texas, and 
one in New York. So, is there money in this budget to establish 
the assessment teams so that we can make the proper assessments 
for these veterans to give them the mental health counseling 
that has become so obvious?
    Secretary Nicholson. Well, they're--absolutely. That's one 
of the reasons that, you know, we've--asking for $3.2 billion, 
which is an increase of $339 million. And, as I stated earlier, 
Senator, we have, in every one of our 156 major medical 
centers, like--New Orleans would be one of those--was--we have 
a PTSD expert that we've posted in each of these to head those 
teams for assessment. And we have a very comprehensive 
assessment----
    Senator Landrieu. But according to the report, that there 
are only three complete teams, and then a coordinator, is that 
not true?
    Secretary Nicholson. That is not true. I gather that you--
that you--there may be confusion, because you mentioned 
California and New York and Texas. What has happened is that 
the Congress, you all, in the last few months, have designated 
three locations to be centers of excellence----
    Senator Landrieu. Okay.
    Secretary Nicholson [continuing]. For mental healthcare. 
Those are Canandaigua, New York; Waco; Texas, and San Diego, 
California.
    Senator Landrieu. To coordinate the efforts nationally----
    Secretary Nicholson. But those----
    Senator Landrieu [continuing]. For these----
    Secretary Nicholson [continuing]. Those will just be 
supplemental to a vast system now.

                     GRANTS FOR STATE EXTENDED CARE

    Senator Landrieu. Okay. And one final, on the VA nursing 
homes, we have a total of $85 million nationally in the budget.
    Secretary Nicholson. Yes, I think that's correct. Yes, 
ma'am.
    Senator Landrieu. The budget was $104 million, last year? 
And there's earmarked a fairly large center in California. What 
is the total amount of that money, and how will it affect the 
building of the other centers around the country?
    Secretary Nicholson. I'm going to ask Dr. Perlin to respond 
to that particular area you've asked.
    Senator Feinstein. Don't think of taking it from 
California.
    Dr. Perlin. Well, first, thank you very much for the 
question. Let me confirm, as the Secretary said, the budget is 
$85 million, asked for in the 2007 budget. California is a 
large project, unequivocally. We have a few mandates in front 
of us. First, we also have to pay attention to life safety. And 
we will fund those. In fact, there is conference language that 
asked that we do that. And we have not released the ultimate 
2007 decision, in terms of priorities. But, obviously, we've 
already set aside funding for the California project very 
substantially--in fact, $68.2 million--in 2006. And we are 
working with California to make sure that we can, obviously, 
complete the project in which we both have mutual interests, 
and meet needs elsewhere in the country, including not just new 
projects, but also life safety.
    Senator Landrieu. And I want to say that I most certainly 
support it, and I'm sure that the Senator who's given great 
leadership to this committee, could justify every penny for 
this project. I just raise it that there's a whole country out 
there of other veterans' homes that are long on the waiting 
list. And to limit the budget to only that, and also try to 
accommodate a large project like this, I think, is a disservice 
to the rest of the country.
    So, I'm going to--my time is up, but let me also just say, 
for the record, I'm going to submit a suggestion on the ratios 
of how these can be funded in a little bit fairer system than 
having every State to have to come up with a match, regardless 
of the economic need of the community.
    Thank you.
    Senator Feinstein. The chairman went down to vote. She's 
coming back. And then I'll go. But you're up. So, why don't you 
go ahead?
    Senator Craig [presiding]. Thank you very much, Madam 
Chairman.
    Let me submit my full statement for the record and deal 
with a couple of questions that I think are legitimate. And 
some of them go back to what Senator Murray was discussing 
earlier, as it relates to how we get the record straight.
    [The statement follows:]

               Prepared Statement of Senator Larry Craig

    Thank you Madame Chair. My comments will be brief. Mr. Secretary, 
good afternoon and welcome. You and I have already spoken at some 
length about your budget proposal in my capacity as Chairman of your 
authorizing Committee. First, I want to compliment you and the 
President once again for making veterans one of the highest priorities 
in your budget. This historic request of nearly $80 billion 
demonstrates this Nation's commitment to our veterans.
    As you know, I supported your budget request in my ``views and 
estimates'' letter to the Budget Committee this year. As you also know, 
my authorizing Committee only has to comment on your budget. This 
Committee, on the other hand, has the responsibility of balancing your 
request against all of the other needs of the Federal Government. Mr. 
Secretary, quite frankly, that balancing act is becoming increasingly 
difficult.
    If this Committee follows the recommendations set forth in the 
budget resolution we've just passed, including the Burns amendment, we 
will provide VA's health care system with a 12.4 percent increase in 
direct appropriations. That would mean that since 2001, VA's health 
care budget has increased by nearly 70 percent.
    I know we all strongly support our veterans, especially in a time 
of war. The care of our veterans is not a partisan issue. But, this 
Committee is the place where the ``rhetoric meets the road.'' If we do 
not make some serious decisions about VA's health care spending rates, 
its budget will double every 6 years and will eventually collide with 
all other areas of Federal spending--things like agriculture, parks, 
and education. That is not a disputable fact. It's a mathematical 
reality.
    I know many of you on this Committee are not prepared to begin 
charging certain veterans or increasing the copayments many of them 
already pay for medications. I understand that. But, I strongly believe 
that the time is coming for us to take the necessary steps to properly 
manage VA's health care system even if that means charging $21 per 
month for certain veterans to access the system.
    I say to my colleagues: we are charged with the oversight and 
funding of what is now considered to be one of the Nation's best health 
care systems. It is a system of first choice, not one of last resort. 
Today's veterans enjoy good access to high quality medical care. Now we 
have a responsibility to ensure that its financial footing is sound and 
sustainable so that tomorrow's veterans will also receive the benefits 
of VA's enormous success.
    Those management decisions will not be easy. Good management rarely 
is easy. But, failure to make the decisions will be even harder on 
tomorrow's veterans than it is on us today. I am prepared to talk or 
work with any of you on ways to address this issue. In my capacity as 
Chairman of the authorizing committee, I have already challenged our 
VSOs to work with me. What I am not prepared to do is ignore this issue 
and simply pass it on to the next guy. The challenge is too real and 
the consequences too serious.
    Mr. Secretary, thank you again for being here. Thank you Madame 
Chair.

    Senator Craig. And I know Louisiana and California feed 
over money, but right now----
    Senator Feinstein. Well, I made it pretty clear.
    Senator Craig. She's got to understand who runs this 
committee. No.

                            OIF/OEF VETERANS

    During the floor debate in the Senate budget resolution, I 
heard many of my colleagues express concerns about certain 
facts. It has reemerged again today as it relates to OIF and 
OEF veterans and numbers coming in. And I think it's important 
that we get the record as clear as we can in light of this 
historic budget. And it is a historic budget in size and scope. 
You are comfortable with the 2 percent figure at this moment as 
it relates to veterans coming into the system out of these two 
conflicts.
    Secretary Nicholson. Yes, sir, we are. The size of the 
force over there is also somewhat diminished. And so, we're 
comfortable, based on the experience that we've had, yes.
    Senator Craig. More importantly, the funds that VA has 
budgeted for in OIF and OEF veterans in this fiscal year, how 
do you--how do actual expenditures compare with what VA 
budgeted for thus far?
    Secretary Nicholson. They are running less, by about 34 
percent, than we had budgeted for this category of patients.
    Senator Craig. So, in light of where the money seems to be 
headed at this moment, based on your projections, you feel 
you're on target.
    Secretary Nicholson. Yes, I do. We're, I think, in good 
shape. We are seeing somewhat more at this point, the halfway 
point in the year, but our costs are less. So, we think that we 
will be able to see--care for those that we see.
    Senator Craig. And this also includes the outreach that DOD 
is currently doing.
    Secretary Nicholson. Yes, sir.
    Senator Craig. Could you explain the distinction between 
the cumulative number of OIF and OEF veterans who have been 
treated at the VA since budget assumes will seek treatment in 
the current year--the current fiscal year of 2007?
    Secretary Nicholson. Yes. Because we see--let's say, in the 
beginning, we--you know, we see X number, and then in the next 
year, or the next measuring unit, we would see Y. But some of Y 
are made up of those that we had already seen. So, in terms of 
unique patients--that is, individual patients--it would be 
different.
    Senator Craig. Okay. Madam Chairman, I have some additional 
questions I want to ask. Are you prepared to recess, and we'll 
run and vote and come back?
    Senator Feinstein. I thought--the chairman's going to come 
back. But I thought I'd go down. And that way, we'd just keep 
it going.
    Senator Craig. All right.
    Senator Feinstein. We'll do a second round.
    Senator Craig. Okay.
    Senator Feinstein. But if you're not finished, and would 
like to do more, I can run and vote, and--well, you have to 
vote, too.
    Senator Craig. Well, why don't you go ahead, and I'll stay 
here until the--until the chairman gets back. And if I find I'm 
at risk, I'll recess it until she gets here.
    Senator Feinstein. All right, excellent.
    Senator Craig. Thank you.
    Senator Feinstein. I will go, because I don't want to miss 
you. We've got to talk reprogramming the money, which I know 
you'll be delighted about.

                    QUARTERLY REPORTING TO CONGRESS

    Senator Craig. I think, for the record, it's also important 
to establish, based on, I think, the frustration of those on 
the authorizing committee and the appropriating subcommittee 
here, had in light of the past fiscal environment and the 
shortfalls that became obvious, at our request, and your 
urgence, we have established a quarterly reporting system so 
that we can effectively monitor both outlays and anticipations 
of movement beyond where the budget was established. We've had 
that--we've had the first quarter report, and those will 
continue.
    Would you wish to comment on that as it relates to that 
process, the modeling process, and, frankly, a new tracking 
mechanism that you've incorporated that includes those kinds of 
outputs to us?
    Secretary Nicholson. Yes, Senator. Yes, Senator, I would. I 
welcome the chance to comment on that, because, as I've said 
earlier, this is a dynamic arena that we are in, with a war 
going on and a large number of patients and potential patients 
for this large system. So, we are very glad that we've gone to 
a quarterly reporting system with you, the oversight people, 
the Congress. With OMB, we're doing it monthly. And we've 
instituted that. So, to do that monthly, we have, you know, an 
almost daily tracking system, from a management point of view. 
So, we have a--we have a much better feel for what is going on 
at any given time than we've had in the past. And if we see not 
just red lights, but yellow lights, we plan to be as fully 
transparent as possible with you all about this, and the fact 
that we may need your help to help the veterans.
    Senator Craig. Well, I think that's important, that the 
record show that, from that which some have a reason to be 
concerned and have--and are making judgments to where we are 
today, it is significantly different than how we have operated 
in the past, and, I think, appropriately so, as we deal with a 
dynamic process and the potential that that might change in 
relation to conflict and activities and the outreach programs 
the DOD is working in, in relation to that 24-month window in 
which those coming out of Iraq and Afghanistan have opportunity 
of services beyond what might be connected to actual injury or 
problems arising from their service in the theater.
    For the sake of me not missing a vote, or prolonging it, 
I'm going to recess the subcommittee for a few moments. The 
chairman will return, and I will return, also. So, the 
subcommittee will stand in recess.

              INFORMATION TECHNOLOGY SYSTEMS CONSOLIDATION

    Senator Hutchison [presiding]. I want to reconvene the 
hearing. There were two, and possibly three Senators who do 
plan to come back for a second round. But I wanted to ask if 
you could give me an update on the IT consolidation.
    Secretary Nicholson. Yes, I can, Madam Chairman. By way of 
background, we've done a spectacular job at the VA--and I say 
``we,'' it's really the people who proceeded me; we're sitting 
on their shoulders--and, you know, our electronic medical 
records, it's a phenomenal achievement. But now we need to 
bring the rest of the information technology of the VA into the 
21st century. And it's a very spread-out system. It covers this 
Nation--Hawaii, Alaska, Philippines, Guam. And there are a 
lot--there have been a lot of individual kinds of systems and 
applications out there, which is very inefficient, very 
expensive, and not effective.
    And so, we hired a very prestigious consultant to come in 
and look at that, and make a set of recommendations to us. And 
they have done that. And we have chosen to implement 
essentially what they recommended, which is to centralize the 
IT in this big bureau. And that is underway. I've signed the 
implementing documents to do that. It involves the transference 
of thousands of people in the Department from where they have 
been into the governance of the chief information officer, the 
Assistant Secretary for IT.
    Senator Hutchison. Have you been able to see any results 
yet, or is it just premature to see if there are savings or 
efficiencies?
    Secretary Nicholson. Well, it's just--it has just begun.
    Senator Hutchison. Just begun.
    Secretary Nicholson. Uh-huh.

                        RIO GRANDE VALLEY, TEXAS

    Senator Hutchison. I wanted to ask you something on a 
parochial level. The veterans in South Texas, as you know, have 
been very concerned about their lack of a hospital there, and a 
major clinic. You have, I think, come out with a terrific 
proposal for a clinic in conjunction with a medical facility 
that I think is going to be--it sounds, by the description, 
like it's going to be a wonderful service for our veterans. But 
then, on the subject of the hospital, I had had a 
recommendation from a city council member that there was a 
facility that had been closed that should be suitable for a 
hospital. And you agreed to look into it. Has there been any 
result from that yet, or is that still in progress, as well?
    Secretary Nicholson. That is in progress. What I agreed to 
was to do a study, an assessment of the needs in that Rio 
Grande----
    Senator Hutchison. Valley.
    Secretary Nicholson [continuing]. Valley area to, number 
one, try to assess what the populations of veterans were, what 
their needs are, and what we have there available to serve 
them, and what is possible that we could add. But that is an--
--
    Senator Hutchison. In progress.
    Secretary Nicholson [continuing]. Ongoing progress, yes.
    Senator Hutchison. Well, that's what I asked for. And then 
I did make the suggestion, which is in your office, of just 
looking at this facility. I haven't seen it myself, so I'm not 
saying it's appropriate, but if it is something that would be 
feasible and lower cost and be more efficient, and if the 
population warrants it in your priority list. Today, they have 
to travel several hundred miles from that lower Rio Grande 
Valley to San Antonio VAMC to Audie Murphy VAMC, if they are 
going to need day surgery or day care, but some of it would be 
overnight, as well. So, I would just look forward to hearing 
about that.
    The other area was your major construction account, which 
is also somewhat reduced. And I just wanted to ask what your 
thinking was on being able to justify a reduction in the major 
construction account.
    Secretary Nicholson. Well, we have, as I mentioned, several 
ongoing projects, big projects. You know, the VA has not built 
a hospital--not opened a new hospital now, I think, in 13 
years, but we need to some new hospitals, and we're ongoing in 
that process. But you can't spend all the money at one time. 
And so, while we're going forward with Las Vegas and going 
forward with Orlando, they really didn't need a lot of money in 
the 2007 budget. So, we have in there the other projects. We 
have several that need seismic repair. They're--it's just one 
of those things, doesn't add much value to--it's like putting 
new plumbing in your house, but you have to do it, if it's 
needed. And, in this case, we have some properties that are 
subject to earthquake vulnerabilities, and we're having to 
spend, as you can see there, considerably amount of money for 
seismic. And so, it--you know, it's a matter of those felt 
safety needs versus some of the projects that needed some money 
to keep them moving in this process.
    Senator Hutchison. Are you looking, in the next 5 years, at 
a 5-year plan for new hospitals, where you do see significant 
needs? Is that part of your assessment, both for the Rio Grande 
Valley, but for other places?
    Secretary Nicholson. Yes. In fact, the CARES process, which 
is a major comprehensive assessment to the capital assets of 
the agency, versus projected populations, projected out to, I 
think, the year 2012, and we have that data, and that's been 
the basis for the decisions for new hospitals, in the case of 
those that I've mentioned.
    Senator Hutchison. And, of course, I know that I'm--I'm 
dealing right now with the supplemental, and we have a major 
commitment for New Orleans. And then there will be a major 
commitment for the Armed Forces Retirement Home in Gulfport and 
then a major commitment in Biloxi for facilities, as well. So, 
I suppose that those are going to be coming into the regular 
budget after they are built and able to operate.
    Secretary Nicholson. Well, for operating, the--indeed, they 
will. But New Orleans is in a supplemental----
    Senator Hutchison. Right.
    Secretary Nicholson [continuing]. Mode at--I think right 
now we have requested $600 million and $75 million has 
previously been appropriated.
    Senator Hutchison. Right.
    Secretary Nicholson [continuing]. It's only 8 miles away.
    Senator Hutchison. Right. And that is going to be more a 
regional center, as I understand it.
    Secretary Nicholson. Yes.
    Senator Hutchison. We're working right now on the 
supplemental for what we can do with that--the land there at 
Gulfport. I think we have a good solution for compensating the 
Veterans Affairs for that land.
    Secretary Nicholson. At Gulfport?
    Senator Hutchison. Yes.
    Secretary Nicholson. Uh-huh, yes.
    Senator Hutchison. Yes.

                           CLAIMS PROCESSING

    Can you give us an update on the progress the VA is making 
on reducing the backlog of benefit evaluations?
    Secretary Nicholson. Yes. I'll give you a--you know, kind 
of the big picture. Then I'm going to ask Under Secretary 
Cooper to, if he would, give you the detail.
    But we are hiring new people, and training them, in the 
effort to bring down the backlog. I just visited a--one of our 
major regional offices in St. Paul last week. They're hiring 
and training. There is a training gap with these people. It 
takes about 15 months to really qualify a claims adjudicator, 
you know, to do this, and do it carefully and accurately.
    And, with that, I'd ask Admiral Cooper if he'd have 
anything to add.
    Admiral Cooper. Yes. We're attempting to attack that every 
way we possibly can. We are hiring more people, and we're going 
to do centralized training to ensure that we get them trained 
properly to do the same thing across the country at 57 
different regional offices. So, training is one of the main 
things.
    We're looking at some consolidation. We have a program 
called Benefit Delivery at Discharge, which is for those people 
coming out of the service at the end of their careers, and we 
have consolidated that activity at two sites--one in Winston-
Salem, North Carolina, and other in Salt Lake City--so that 
those two regional offices are doing those particular claims 
and, therefore, hopefully doing them better and eventually a 
little bit faster.
    We do a lot of brokering. We try to look at those regional 
offices which have a little bit more capacity. And as soon as a 
claim is ready to rate, we broker it to those offices, so we 
don't have an issue of not having enough people to rate the 
claim at a specific site.
    So, we're doing a lot of moving around. Primarily, however, 
it is through training and hiring that we hope to eventually 
succeed.
    The major problem, however, is that we can do a lot for 
output, but incoming is something we can't control. And as long 
as the incoming keeps increasing, then we're sort of fighting 
against it. But eventually we will get there.
    Senator Hutchison. Senator Craig.
    Senator Craig. Thank you very much, Madam Chairman.

                               VA BUDGET

    Let me make a few comments, and then I have one last 
question. I'll stay within our time limits here that are--I 
think are important to make, because what I think I have said, 
and others have said, and I think it's important that the 
record show, that under this precedent we are looking at a 
historic request of nearly $80 billion for veterans in this 
country. That is a phenomenal prioritizing of resource, and it 
demonstrates, without any question, in my opinion, the 
commitment of this administration.
    I also want to tell you that I've had a bite at this apple 
prior to this subcommittee getting it. As chairman of the 
authorizing committee, I have the responsibility of doing views 
and estimates in a letter to the Budget Committee for the 
purpose of establishing the level of funding that we will deal 
with here, and that you in this committee must allocate. And, 
in doing so, I think it is important to understand that we have 
a problem growing here that we chose not to face this year on 
the floor. And I think the Senator from California, in part, 
touched it when she talked about the Burns amendment, stepping 
back from the fees for 7s and 8s, and also the pharmaceutical 
fee.
    Here's the reality, though. This is a 12.4 percent increase 
over last year. And I think it's important to understand that. 
That means that, since 2001, VA healthcare budgets have 
increased by 70 percent. That's also to suggest that if we 
continue this trend, VA budgets will double every 6 years. And 
I must tell this committee, that is not a sustainable course. 
No matter how much we want for our States, or expect, or try to 
find and get unique services, we cannot sustain by continuing 
to ask at the level we're asking unless we ask something 
different.
    So, I chose this year to accept the administration's 
approach, and to suggest that 7s and 8s, who have no 
connection, in the sense that they are service-connected or 
disabled--and, as you've already heard the Secretary say, of 
which many of them already have healthcare--to pay less than a 
carton of cigarettes a month to have access to the best 
healthcare system in the country. And every VSO said no. And 
the Congress said no.
    Well, what the Congress is failing to recognize is that 
they cannot sustain what they're doing. And we have to change 
that. And I'm willing now to stand up and speak out and say 
it's time to change. I accept what we've done. I accept what 
this committee's been handed. And we will monitor and try to 
act as wisely as we can. But we have a phenomenal collision on 
course at this moment, because we are dealing, as I think we 
all recognize, with largely discretionary funding that collides 
with everything else we want to do. And mathematically the 
reality at hand is the reality of great complication.
    I've challenged all of the VSOs to work with me in the 
coming year, because there was a time not long ago when they 
accepted exactly what they rejected this year. And what we have 
to look at are a variety of different approaches, I think, to 
find revenue sources, the some $790 million that we decided not 
to fund through these kind of new revenues. And, therefore, 
because we decided not to fund them, and by funding them, 
199,000, or somewhere near that, of that large number would 
have dropped off from the 7s and 8s, because they have 
alternative healthcare. That would have changed the real value 
of this--of revenue in the reality of savings over--to well 
over $800 million.
    Well, we've chosen not to do that, so it's real dollars. It 
isn't the $795 million that we would have gained by the new 
revenue sources. It's actually over $800 million. I say that. I 
think it's important that it be said for the record. It is my 
opinion. And I will speak it as loudly as I can, recognizing 
that my priority is to serve veterans, and the priority of this 
committee and the Congress is to serve veterans, is to suggest 
that we must find a sound and sustainable course of funding for 
VA, not just for today's veterans, but for tomorrow's veterans, 
in a very real problem that we have out there.
    And I'm going to fight awfully hard over the course of the 
next 12 months as to our--the priorities we establish and how 
they get funded, because there is a reality that I think can--
that all of us can withstand the test of. Those who are in 
need, those who deserve treatment, are being treated, and 
they're being treated by the best healthcare system in the 
world. And we've extended, to 24 months out, for those coming 
out of Iraq and Afghanistan, services that heretofore they had 
not had unless they were directly connected to a theater of a 
war and a disability involved. It's important that, I think, we 
say that.
    Now, in saying that, let me ask this question. Mr. 
Secretary, in my analysis of, and your feedback, over the 
period of the last several months as we've looked at this 
budget in dealing with 7 and 8 priority veterans, and 
anticipating that by the action of raising a monthly fee so 
that they could gain access, or be eligible for access, that 
there would have been a certain number who would have left, 
simply stepped back from it, because they had alternative forms 
of healthcare, they would choose not to pay the $21 a month. Is 
that correct?
    Secretary Nicholson. That's correct, Senator.
    Senator Craig. And we believe that was about how many?
    Secretary Nicholson. About, I think, 199,000--200,000.
    Senator Craig. And it is an--it is believed, based on your 
surveys, that 95 percent of those had healthcare, and that's 
why they would have stepped back.
    Secretary Nicholson. Yes, sir.
    Senator Craig. And so, the reality of the $790 million 
raised by both pharmaceuticals and prescription drug copay and 
also the fee would have been $790 million, but this loss, in 
total benefit to the budget, would have been over $800 million. 
Is that not correct?
    Secretary Nicholson. $795 million is the amount.
    Senator Craig. In new revenue.
    Secretary Nicholson. No. It's the----
    Senator Craig. Oh----
    Secretary Nicholson [continuing] Combination.
    Senator Craig [continuing]. Combination of, okay.
    Secretary Nicholson. Revenue plus----
    Senator Craig. I wanted to make sure I--I was dancing off 
the top of my head in memory, and I wasn't quite sure. So, 795.
    Secretary Nicholson. $795 million.
    Senator Craig. $795 million.
    Well, Madam Chairman and Ranking Member, that's a reality 
check. And that's why I say what I say, because we're going to 
squeeze these budgets, and squeeze them hard, to maximize 
service to our veterans. At the same time, we are on an 
unsustainable course. I do believe that. Because I think the 
three of us will be presiding over $100 billion budget to the 
VA in a very short time, and certainly within our tenure, at 
the current rate.
    And my suggestion to you is that you're going to have a 
budget chairman at some point in time tell this committee that 
that money simply is no longer available at that level of 
increase.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Craig.
    I appreciate what you have said. It is--it's a tough 
situation. And I am working with my staff on some potential 
alternatives, that are not this one, but maybe other things, 
that wouldn't hit a $28,000 level of annual income. But I would 
look forward to working with you, Senator Feinstein, with the 
VA, to see if there are other options besides the ones that are 
envisioned in the bill that might be acceptable to the VSOs and 
the committee, as well.
    Senator Craig. Well, Madam Chairman, thank you. I know that 
you and I have had those discussions. I really appreciate that 
kind of thinking, because I think to continue to serve at the 
level of service we want to provide for our veterans, we're 
going to have to become creative in looking at a variety of 
approaches to resolve this issue.
    Thank you.
    Senator Hutchison. Senator Feinstein.
    Senator Feinstein. Thank you very much, Madam Chairman.
    And I think, Senator Craig, what you've said is both wise 
and sobering. The question is really whether somebody on the 
floor comes up with something, whether there are enough 
lemmings that are going to follow along. And--oh, I'm--
shouldn't have said that word.
    But I'm really concerned, because we have a lot of wounded, 
and we have a lot of people now that are going to be using 
veterans services for a long, long time, and many with, you 
know, terrible injuries. And so, we have to be ready for it.

                     MEDICAL SERVICES REPROGRAMMING

    And I'm concerned with the planning model used, Mr. 
Secretary. And let me tell you how I'm concerned. You've 
submitted a reprogramming request, which is what I want to talk 
about. And that proposal is to transfer $370 million from the 
medical services account to the medical administration account. 
You say that it's needed to perfect the distribution of funds 
between these two accounts as a result of requesting and 
receiving the 2005 supplemental of $1.5 billion, and the 2006 
budget amendment of $1.452 billion, entirely in the medical 
services account. Both of those came to the medical services 
account.
    Now, what concerns me is that you're transferring this 
money, but you're not annualizing the cost, and you're saying 
that it was known at the time that this was going to be done. 
It was never told to us that this was going to be done, when 
last year's budget was considered. And this is going to fund 
salaries in the new account, but, as I understand it, it isn't 
annualized.
    Would you please comment on what impact this is going to 
have on the delivery of healthcare services? Do we now figure 
that you're going to be short $370 million for healthcare 
services? And, also, as you know, one budget affects the other, 
so does this mean that you're going to need, at some point 
during the year, an additional $370 million above the 
President's 2007 figure? Your comments are very important. 
They're going to be inscribed----
    Secretary Nicholson. Yes, I--thank you, Senator Feinstein. 
I hope that I can allay your apprehensions about this, because 
there should be none. Zero. This will have no impact on the 
delivery of healthcare. This is an accounting issue.
    The Congress authorized us three accounts: a medical--a 
services account, an administration account, and a facilities 
account. And we were given money and--through a supplemental. 
And it was deposited into one account, although the 
justification that we gave for it was the detail of how we're 
planning to use the account. But the money was deposited into 
one account. This is not new, by the way. This has happened in 
previous years.
    Now what we're asking is that we transfer this money, which 
happens to be in the--I think about 1.2 percent of the total; 
it's $370 million--into the medical administration account. And 
that--you're right, that is where we pay the help there. But it 
was--it is not a diminution of the resources needed for medical 
services. It was just that it was all put into one account. It 
would be like if you had, you know, gotten your paycheck into 
one account, but you use it out of three to run your 
operations. That's all it is.
    Senator Feinstein. Okay. So, it's just going to be an 
accounting. We will asterisk the record, and hopefully will not 
have to send it to you later in the year.

                         MENTAL HEALTH FUNDING

    Okay. One of my concerns is that, once again, you may--and 
I don't know that you are, but you may be underfunding. And if 
I look at just one thing, veterans patients in fiscal year 2005 
and the first 4 months in 2006--these are mental disorders. In 
2005, from October 1, 2004 to September 30, 2005, there were 
31,860. In 2006, from October 1, 2005 to January 30, 2006--
that's just 4 months--you almost reach that number. There's 
24,268. My question is--I hope your modeling is dynamic enough 
to pick up the increase, and do it accurately.
    Secretary Nicholson. Okay, I--that's a good question, and 
I'm going to ask Dr. Perlin to give you the detail on it.
    Dr. Perlin. Thank you, Mr. Secretary.
    Senator Feinstein, that's a great question. As you know, 
here we are in 2006, talking about 2007. And, of course, we're 
using data from the completed year of 2004. And that's the 
reality of the budget cycle. Now, the model is, as the 
Secretary said, really a terrific model. It's used by over 100 
million--or used to predict the costs of over 100 million 
beneficiaries, including in all the Blue Cross programs, Aetna, 
Cigna, public programs, DOD components, Medicaid programs, et 
cetera. So, it's very good. But obviously there is a lag time 
inherently. And so, I think what we've tried to say is, with 
your encouragement, we have the quarterly meetings, so, on top 
of the model, we superimpose the reality. And, in fact, the 
mental health budget is, as the Secretary has discussed, 
extremely robust, $3.2 billion, up $339 million. And, in fact, 
it actually is not only sufficient to meet the needs of those 
veterans, but to anticipate even--and improve--services to 
really the height of world-class service. So, it is a solid 
budget, but it is the reality on top that's much more dynamic 
than the model could ever be.
    Senator Feinstein. So, in other words, you've corrected the 
planning model that you had used before that got us into the 
problems where we were, and you can assure us that there isn't 
going to be a problem this year, this next year.
    Dr. Perlin. There will not be a problem this year. It's a 
solid model. And----
    Senator Feinstein. Well, this next--the 2007 year.
    Dr. Perlin [continuing]. And as changes--as changes, or if 
world conditions that can't be foreseen by any of us this 
moment change, that's the purpose of the quarterly meeting. But 
we stand by this model, these projections, and our comfort in 
them is solid.
    Senator Feinstein. Okay. I know we have a vote, Madam 
Chairman. I think that's it for me.

                            OIF/OEF VETERANS

    Why--one last question--why is the VA estimating a decrease 
of Iraq/Afghanistan veterans in 2007, when the trends suggest 
you might see more, rather than fewer?
    Secretary Nicholson. Senator, we've, you know, looked at 
that carefully. We now have several years of data also to look 
at. And the--you know, the size of the force is actually 
diminished in the deployment in the combat zone. That 
influences that number, as well. It is diminished by about 
11,000 that we're projecting in the 2007 budget from what we're 
projecting that we will see in 2006.
    Senator Feinstein. I have 109,191 in 2007.
    Secretary Nicholson. Right.
    Senator Feinstein. And for the entire fiscal year, VA has 
estimated we treated a total of 110,556 Iraq and Afghanistan 
war veterans. Is that wrong?
    Secretary Nicholson. For 2006?
    Senator Feinstein. For the entire fiscal year.
    Secretary Nicholson. Yeah.
    Senator Feinstein. That's this fiscal year, right? Yeah, in 
this fiscal year, 110,000. You're estimating, for the next 
fiscal year, 109,000. So, you're cutting it back. Now, you're 
saying there are fewer troops?
    Secretary Nicholson. Cutting it back by 1,000.
    Senator Feinstein. Right.
    Secretary Nicholson. Uh-huh.
    Senator Feinstein. It's the----
    Secretary Nicholson. It's based on--you know, we're 
consulting much closer with DOD on deployments, and it's--you 
know, it's not materially different. It's about 1,000. The 
number I gave you before was based on our 2005 experiences.
    Senator Feinstein. Well, I hope so. I hope that comes true, 
that there is not going to be some other event that's going to 
greatly increase the numbers. But----
    Secretary Nicholson. Well, I'd like to----
    Senator Feinstein [continuing]. I guess my overall----
    Secretary Nicholson [continuing. Comment on that.
    Senator Feinstein [continuing]. Point is that you--even a 
12.4 percent increase, you are really closely budgeted.
    Secretary Nicholson. I would agree with that, Senator 
Feinstein. And, as I've said, and I would say again, that I 
think we're doing, you know, an able and a careful job of 
trying to predict this. But it is a dynamic situation. We are 
at war. And there are a lot of veterans out there that are 
eligible for VA care who have not yet, you know, made it 
available--or taken advantage of it. So, it is dynamic. And 
that's why I think that we all ought to recognize that this 
could change, which is why we've instituted these quarterly 
reviews with the Congress, and a monthly review with the OMB.
    Senator Feinstein. Well, I think it'd be very useful--and 
I'm glad you're doing this quarterly--for us to know, because, 
you know, post-traumatic stress disorder is only a $5.5 million 
increase over last year, and I just cross my fingers and hope 
that this is adequate and that we don't run into the same 
problem.
    So, I thank you very much. And I thank you. The facilities 
really, I think, are greatly improved in their management and 
their care and concern, and I very much appreciate that, and--
--
    Secretary Nicholson. Thank you.
    Senator Feinstein [continuing]. I want you to know that.
    Senator Hutchison. Secretary Nicholson has asked to leave 
at 4:30. Obviously, Senator Murray, you just returned. Would 
you be able to wrap up in 5 minutes? And would you be able to 
stay, Secretary--Mr. Secretary----
    Secretary Nicholson. Sure.
    Senator Hutchison [continuing]. For another 5 minutes or 
so?
    Have you voted already on final passage? I think I'm going 
to go ahead and leave, if you will wrap up. And just know that 
he was trying to leave at 4:30, and then end the hearing. I 
would appreciate it.
    Senator Murray [continuing]. Your answers, the shorter my 
time.
    Senator Hutchison. All right. Thank you.
    Senator Murray [presiding]. No, I do have a couple of quick 
issues and really appreciate your bearing with us as we go back 
and forth on votes.

                         BELLINGHAM, WASHINGTON

    But, Mr. Secretary, I wanted to ask you about the CBOC 
situation in Bellingham, Washington. We got a white paper--
actually sent one to this committee--about evaluating those in 
the context of fiscal year 2007 budget. If I could just ask you 
real quick what the timeline is on that, and when can our 
veterans expect to see progress on the Bellingham CBOC?
    Secretary Nicholson. Senator Murray, we have that on our 
list, and we're--we have it under review. But I would be unable 
to commit to you today when we might do that.
    Senator Murray. Okay. If I could follow up with you on 
that, I was home over the recess and got asked about that 
constantly, so I told my vets I would be seeing you and I would 
ask the question. So----
    Secretary Nicholson. We have committed one to--a new one to 
North Central Washington, as you know.
    Senator Murray. Right. Right. And I was there, and that's 
why everybody in Bellingham wanted to know.

                          TRIBAL MENTAL HEALTH

    On tribal veterans, as you know, our tribal veterans have 
participated in the armed services in a higher per-capita rate 
than any other minority group. And I met with a number of 
tribal veterans over the recess, as well, who were very 
concerned about getting access to culturally relevant services. 
And I'm especially worried that out in VISN 20 Camp Chapparal, 
which is a tribal mental health camp--I don't know if you're 
aware of the services that are there--they're--they've lost 
half their funding. And they're really disappointed. And many 
tribal veterans expressed to me that they thought the VA was 
trying to--had made--actually made a conscious decision to 
ignore their needs. So, I just wanted to raise that with you. 
And if we could explore with you how we can make sure that that 
is funded----
    Secretary Nicholson. Thank you, Senator. I'm going to ask 
Dr. Perlin if he'd respond to that.
    Dr. Perlin. Thank you, Senator Murray.
    And, as you know, we make a serious commitment. Secretary 
Nicholson, in fact, in this budget, supports a $339 million 
increase to bring the mental health budget to $3.2 billion. We 
take this very seriously. And I've been driving a mental health 
strategic plan, and we appreciate your support.
    I appreciate your bringing that to my attention. I will 
look into it and we'll be back to you----
    [The information follows]

    The Veterans Integrated Service Network (VISN) 20 and its 
predecessor organizations provided funding for a week for Camp 
Chaparral from 1992 through 2004 for as many as 75 participants each 
year. Over the years, VA funding climbed from $10,000 to $50,000 per 
year.
    In fiscal year 2005, funding was discontinued for Camp Chaparral 
due to budgetary concerns and the need to direct all discretionary 
funding to direct patient care, with an agreement to reconsider funding 
the Camp in fiscal year 2006. The Yakima Tribe was able to secure 
funding elsewhere for a smaller version of the Camp and VISN 20 
facilities sent 15 participants.
    For fiscal year 2006, the Camp is a project that VISN 20 intends to 
support. Planning for this year's Camp Chaparral is proceeding, and it 
will be held in August 2006. To adjust for continued budgetary 
restraints and tight staffing levels, a smaller number of primarily 
clinical VA staff will attend in a shorter time frame, allowing VA 
staff to have this valuable experience without an entire week away from 
their duty stations. VISN 20 staff has been working directly with 
members of the Yakima Tribe on the planning of this year's Camp.

    Senator Murray. If you can--if we could have a conversation 
about that, if you could let me know, because it's an extremely 
important out there in VISN 20.
    Dr. Perlin. Right.
    Senator Murray. So, if we could follow up with you on that?
    Dr. Perlin. Absolutely.
    Senator Murray. Okay.

                         GULF WAR RESEARCH DATA

    I wanted to ask about Gulf War research data, because, at 
the end of the year, VA is going to reach its deadline for data 
collection on Gulf War veterans. We are still learning an awful 
lot about the exposure issues to our veterans from the Gulf 
War, and I wondered if you would be willing to extend, or 
eliminate, that deadline so we could continue the data 
collection.
    Secretary Nicholson. Well, we, you know, have just 
committed, and have entered into an agreement with the 
University of Texas Southwest Medical Center in Dallas, to 
extend our research endeavors with them. They've had a team of 
people there working on it for a long time under a Dr. Haley. 
And that commitment that we have is a 4-year commitment at $15 
million a year. I mean, that presupposes that--you know, the 
approval of that, although we would be able to, I think, manage 
that within our overall research budget. So, we're very 
committed to continuing that research.
    Senator Murray. Okay. Even though the deadline is this 
year? So, you'd be willing to continue to collect data past 
this year?
    Secretary Nicholson. Yeah, the answer is yes. We're very 
committed--I'm going to ask Dr. Perlin, though, because I may 
be missing the important point of the deadline.
    Dr. Perlin. Thank you, Senator Murray.
    I think one of the things that now exists that didn't exist 
10 years ago when we were first looking at how to capture 
information about Gulf War veterans and their health outcomes 
was that then one tried to establish a one-off registry. As 
you've heard a lot of discussion, and we appreciate your 
support for the electronic health record, but there is no 
better mechanism for capturing data, not just the facts that 
are in one registry, but across the entire spectrum of whatever 
the individual comes in with, than the electronic health 
record. And so, our commitment to understanding the health 
outcomes of Gulf War veterans will actually be realized in far 
better ways than we could have envisioned 10 years ago. We use 
the health record, and you actually generate a cohort of every 
Gulf----
    Senator Murray. So, you will----
    Dr. Perlin [continuing]. War veteran.
    Senator Murray [continuing]. Still be collecting that data, 
in a--but in a different way?
    Dr. Perlin. We will be collecting data that actually 
supercedes and augments in the health record.
    Senator Murray. Okay. I think that's really important, 
because we're still learning a lot.
    Dr. Perlin. Yes, ma'am.

              STANDARDIZING DIABETES MONITORING EQUIPMENT

    Senator Murray. Let me quickly ask you about the diabetes 
monitoring issues, the standardization of that. I am hearing a 
lot of concern from our folks back at home. And I know you were 
asked by the chairman in the House, but I'm not sure I knew the 
answer, that, as you know, Congress has reaffirmed its support 
for the current system on a number of occasions, and most 
recently in the fiscal year 2006 Military Quality of Life Act. 
I want to read it to you, because it's important. Section 220 
of that bill said, ``None of the funds available to the 
Department of Veterans Affairs in this act or any other act may 
be used to replace the current system by which the Veterans 
Integrated Service Networks select and contract for diabetes 
monitoring supplies and equipment.''
    As we look at your budget request, I want to take a moment 
for us--I think it's important to understand--to confirm that 
the clear congressional direction is not to allow--or not to 
have standardized diabetes equipment purchases. To your 
knowledge, in the months that has been passed, has your 
Department or any of your staff continued to pursue a proposal 
to standardize diabetes monitoring supplies and equipment?
    Secretary Nicholson. No.
    Senator Murray. Well, okay. To your knowledge, no one has 
been told to do this.
    Secretary Nicholson. No. The--no.
    Senator Murray. Okay. Well, it----
    Secretary Nicholson. Dr. Perlin, you can comment further, 
if you like.
    Dr. Perlin. Thank you, Mr. Secretary.
    Senator Murray, in fact, I think what's worth noting is 
that the ability to educate veterans well about their diabetes, 
to achieve benchmark outcomes, as in the TRIAD study, where 
diabetic patients in VA get better care than in other health 
systems in the country, comes from some degree of consistency 
and use. But the concern, as we've understood it, is that no 
veteran be forced to abandon the equipment they're using, or 
for us to have a rigid one-device type of activity.
    Senator Murray. Right.
    Dr. Perlin. So, that guidance, in terms of not transforming 
from where we are, has been well received and well understood. 
But I think I would be remiss if I didn't acknowledge that 
there is some degree of consistency so that there can be 
consistent training and supplies availability. But we are not--
--
    Senator Murray. Well, they are--it has been reported, and I 
think it's true, that a number of VISN directors still believe 
that there is direction from your Department, despite 
congressional attention, to go to a standardized approach. 
Could you write a letter to each of your VISN directors and 
tell them that the--reaffirming the current process for 
selecting diabetes monitoring equipment? And, if you could, if 
you could provide us with a copy of that correspondence, so we 
can let them----
    Dr. Perlin. Well, I would like to look into the issue, 
because there has not been instruction to--instruction has been 
to follow the precepts of what was provided.
    Senator Murray. I'm sorry----
    Dr. Perlin. I will be happy to look into the issue.
    [The information follows:]

    The Department of Veterans Affairs (VA) is not pursuing a proposal 
to standardize self monitoring blood glucose equipment through a single 
national contract. Clear communication has been provided to VA Central 
Office pharmacy program managers and VISN Formulary Leaders regarding 
the prohibition to pursue standardization contracting. This direction 
to VA came from the fiscal year 2006 Appropriation Bill, which 
prohibits VA from expending funds to pursue a national contract.

    Dr. Perlin. To the best of my knowledge----
    Senator Murray. Okay.
    Dr. Perlin [continuing]. There has not been additional----
    Senator Murray. Okay.
    Dr. Perlin [continuing]. Standardization.
    Senator Murray. Okay. If we could have a conversation with 
you about that, I'd really appreciate it, because I think there 
is confusion out there on that issue.

                 VETERANS INTEGRATED SERVICE NETWORK 20

    I will just ask one more question. And I know you are over 
your time limit. But I just want you to know that as a person 
who represents VISN 20, I am concerned about us being 
consistently the worst VISN for outcomes in primary and 
specialty care, and would just like your assurances that you 
will work with us to try and address this issue. And I'd love 
to hear your response, maybe in writing, about what we can do 
to try and get better care out there.
    Secretary Nicholson. We'd be happy to do that. We have a 
new VISN director, as you know, and have charged him with, you 
know, some certain performance expectations for improvement. 
And we're very hopeful. He's a very capable person. So----
    Senator Murray. Yeah.
    Secretary Nicholson. But we'd be happy to discuss it----
    Senator Murray. Good. I----
    Secretary Nicholson [continuing]. With you at any time.
    [The information follows:]

    As of May 5, 2006, VISN 20 has 6,443 veterans waiting for primary 
care appointments. This is an 11 percent decrease since April 1, 2006, 
when 7,246 veterans were waiting.
    The newly appointed Network Director, Mr. Dennis M. Lewis, FACHE, 
is providing aggressive leadership to improve access both for primary 
and specialty Care. In fiscal year 2005 and 2006 to date, he has 
committed over $31 million to increase operating rooms and intensive 
care units and medical/surgical beds to rebuild VISN 20's 
infrastructure and increase inpatient capacity.
    In December 2005, each facility director in VISN 20 was assigned as 
the ``champion'' of an initiative to address the challenge of 
increasing access and improving quality. The VISN has now developed 
strategies for improving performance in clinical measures of care; 
increasing enrollment in care coordination home tele-health; breaking 
the cycles of peaks and valleys in specialty care capacity, and fully 
implementing panel management.
    The initiatives are closely monitored for progress, and facility 
leadership is required to update the VISN on the results of actions 
taken. In addition, the VISN is tracking the aggressive recruitment and 
hiring of staff that will also increase capacity. More recently, each 
facility has been required to implement group clinics by the end of May 
2005 to increase capacity and to identify what services patients 
require. In all of the strategies that have been developed and are 
being implemented, the Network Director has emphasized that quality 
care requirements must be paramount in any approach that increases 
capacity and access.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Murray. We would all like to understand why it's 
the case, and what's contributing to that, and make sure we're 
focused on doing better. So, I appreciate your response.
    And thank you very much, Mr. Secretary, Dr. Perlin, and 
everyone. We really appreciate your patience with all of us.
    [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

    Question. I'm a little concerned the VA is presenting a research 
budget of $399 million, a 3.16 percent decrease from fiscal year 2006. 
It is even below the fiscal year 2005 appropriated level. Last year, we 
asked the VA to place a high priority on Gulf War Illness research, 
smart limb technology, prosthetics, and other research efforts. This is 
a time when your research budget should fully fund research and 
development for advanced medical technologies and prostheses.
    Would you please tell us how the VA will meet these research 
obligations, even though your budget request for research is less than 
last year's level?
    Answer. The Department of Veterans Affairs (VA) is committed to 
improving the impact of its research program by ensuring that resources 
are targeted to projects with the highest scientific merit and most 
relevance to the needs of veterans.
    VA is projecting total resources of $1.649 billion in fiscal year 
2007 which is an increase of $17 million or 1.1 percent over the 2006 
level. These resources consist of $399 million in direct appropriation; 
$366 million in medical care support funding; $676 million in other 
Federal grants such as from Department of Defense and the National 
Institute for Health; and $208 million from private or university 
funding.
    In fiscal year 2007, VA expects to fund about 2,045 direct projects 
and 2,839 full-time equivalents. In fiscal year 2006 and 2007, the 
research account no longer pays for its Information Technology (IT) 
equipment because the central IT Systems appropriation now pays for 
this type of equipment. The funding which will support IT projects for 
research is about $15 million in each of these fiscal years. The goals 
for research are to ensure a balance among the competing needs for 
meritorious projects, to evaluate and fund existing programs at 
appropriate levels, and to fund new projects to ensure the advancement 
of health care for our veterans. Strategies to accomplish these goals 
include using attrition, transitioning to shorter durations of awards, 
and conducting competitive reviews of research centers. VA is using 
performance-based criteria to decide whether to modify, terminate, or 
expand programs.
    For example:
  --Evaluation of Centers of Excellence.--Centers of Excellence (CoEs) 
        are established only on a competitive basis and their 
        performance is regularly reevaluated through explicit review. 
        In the past year, the Health Services Research and Development 
        Service (HSR&D) closed a HSR&D Center of Excellence because it 
        was not contributing sufficiently to scientific advances. In 
        addition to freeing $458,000 per year for more productive 
        activities, this action is expected to stimulate increased 
        productivity among other CoEs.
  --Evaluation of Research Enhancement Award Programs.--The Biomedical 
        Laboratory and Clinical Science Research and Development 
        Services reduced the number of Research Enhancement Award 
        Program (REAP) sites from 34 to 19. This was done to maintain 
        program quality (a REAP application success rate of 25 
        percent), improve program focus by making REAP awards for study 
        of diseases that are most commonly treated within the VA health 
        care system, and to match resources to those research groups 
        that have contributed most to scientific productivity. The 
        resulting savings of $3.75 million was used to fund an 
        increased number of individual merit review applications.
    Clinical Research Productivity.--Developing and implementing small 
clinical trials within the Medical Research Service was not resulting 
in larger clinical trials. To address this problem, the Medical 
Research Service was reorganized into the Biomedical Laboratory and 
Clinical Science Research and Development Services. The management of 
small clinical trials was transferred into the Clinical Science 
Research and Development Service (CSR&D) and the Cooperative Studies 
Program (CSP) was merged into CSR&D. As a result, the CSP clinical 
trials planning groups can now assist individual investigators planning 
small clinical trials. This is expected to significantly increase 
clinical research productivity.
    Question. The Subcommittee feels strongly that the VA establishes 
specialized medical treatment facilities for mental health and Post 
Traumatic Stress Disorder as ``Centers of Excellence.'' These centers 
will allow the VA to consolidate its specialists in personnel, 
training, and resources to reach the best results for our veterans. For 
Mental Health/PTSD, in particular, the VA was directed to establish 
three centers located in the Medical Centers in Waco, Texas; San Diego, 
California; and Canandaigua, New York.
    Please tell us what progress has been made in each of these 
centers. Are any of these Centers operational?
    Answer. While none of these sites are currently operational, the 
Office of Mental Health Services has been working closely with 
individuals from Central Texas VA Health Care System (CTVHCS) at WACO 
and VISN 17; Canandaigua VA Medical Center and VISN 2; and San Diego VA 
Medical Center and VISN 22 to develop and refine plans for implementing 
the Centers of Excellence on mental health and Post- Traumatic Stress 
Disorder. Each of the Centers will include Research and Educational as 
well as clinical missions to allow them to work toward developing new 
knowledge and new care providers, as well as to meet current care 
needs. Each of the Centers will be multifaceted in their activities. 
Nevertheless, it is possible to summarize their areas of focus: 
Canandaigua will focus on best practices for treatment of PTSD and 
other stress-related disorders and for prevention of complications. 
CTVHCS will focus on both smooth transition from the Armed Forces to 
the community and the VA and on rehabilitation and recovery. San Diego 
will focus on the clinical neuroscience underlying the onset of PTSD 
and related conditions as well as their response to treatment. The 
implementation of these Centers will proceed in steps with the early 
selection and funding for leadership and administrative staffing. This 
will be followed by expedited development and interactive review of the 
research, educational, and clinical plans, and full funding of the 
Centers to implement these programs.
    Question. The purpose of the CARES program is to systematically 
renovate and modernize the VA's health care infrastructure and to 
provide greater access to high-quality care for more veterans. The VA 
is requesting $399 million for Major Construction, a 52 percent 
decrease from the budget request level in fiscal year 2006. There are 
now 17,000 OIF/OEF wounded soldiers, sailors, Marines, airmen, National 
Guard and Reserve forces requiring medical care.
    With many of these many men and women requiring long-term care and 
rehabilitation, what impact will this increased workload have on the 
CARES decisions made in 2004?
    Does the VA have any plans for a new CARES evaluation or study?
    Answer. Since the 2004 CARES decisions were made, VA has modified 
the VA Enrollee Health Care Projection Model (VAEHCPM) to include OIF/
OEF workload projections. This additional workload has been and with 
each model update will be integrated into decisions regarding the level 
and types of services OIF/OEF veterans need, including long-term care 
and rehabilitation services. In light of the enhancements to the 
VAEHCPM and the emphasis on services to OIF/OEF veterans, we do not 
anticipate a separate evaluation or study regarding long-term care/
rehabilitation services for this group of veterans.
    Question. For the Compensation and Pension programs, the VA is 
requesting $38 billion, $4.1 billion above the fiscal year 2006 level 
or a 12 percent increase. In fiscal year 2005, the VA's average days 
pending in rate-related actions was 122; the projections for fiscal 
year 2006 is 150 and for fiscal year 2007 is 141, with a strategic 
target of 78.
    What efforts will VA make to decrease their claims from 150 in 
fiscal year 2006 to 141 in fiscal year 2007?
    Answer. In the fiscal year 2007 budget submission, VA projected a 
significant increase in the volume of incoming disability compensation 
claims as a result of the special outreach mandated in the Military 
Quality of Life and Veterans Affairs Appropriations Act for 2006. The 
increased workload is projected to be received in fiscal year 2006 and 
to continue to impact our pending workload and timeliness of processing 
into fiscal year 2007. Timeliness of processing is projected to begin 
to improve toward the end of fiscal year 2007 as these additional 
claims are processed and the pending claims inventory is returned to 
more normal levels.
    VBA is currently in the process of a major hiring initiative that 
will add over 850 new employees this year. Our aggressive fiscal year 
2006 hiring plan will allow us to enter fiscal year 2007 at or above 
our requested level for fiscal year 2007 of 13,104 FTE. We anticipate 
that the training and experience these new employees will receive this 
year will enable them to have a positive impact on workload reduction 
efforts in fiscal year 2007, resulting in improved timeliness of 
processing.
    Training for all of our employees continues to be enhanced to 
ensure they have the necessary skills and tools to perform their duties 
timely and effectively. An annual core training curriculum for all 
decision makers is now in place that includes special broadcasts on 
current issues and training on the more complex aspects of claims 
processing.
    Question. How will you reach your strategic target of 78 average 
days for claims processing?
    Answer. We are continuing to evaluate the feasibility of a 78-day 
strategic goal for the average age of claims in our pending inventory 
(``average days pending''). Last year, VA changed the strategic goal 
for average days to process a rating decision from 100 days to 125 days 
based on recent changes in the law and in the nature and number of 
disabilities being claimed that have significantly lengthened the 
disability decision process. Our review will determine whether a 
similar change is appropriate in the strategic goal for ``average days 
pending.''
                                 ______
                                 

             Questions Submitted by Senator Mitch McConnell

    Question. Since May 2004, when the Capital Asset Realignment for 
Enhanced Services (CARES) decision was released, 
PricewaterhouseCoopers' consultants have been working with the VA and 
the local community to determine the future healthcare facility needs 
for people living near Louisville, Kentucky. It is my understanding 
that its report and recommendations have been submitted to the VA.
    When do you expect the decision to be made on the future of the 
Louisville medical facility?
    Answer. The Secretary is reviewing and making his decisions 
concerning Stage I Reports for each study site independent of one 
another. This will result in multiple announcements in the near future.
    Question. Louisville and Lexington, Kentucky's two largest cities 
are part of VISN 9 which are not scheduled to receive any funding for 
fiscal year 2007 for constitution projects.
    Why is this?
    Answer. There are two reasons the Louisville and Lexington VAMCs 
are not scheduled to receive Minor Construction funding in fiscal year 
2007:
  --Of the five Minor Construction projects submitted by VISN 9 for 
        fiscal year 2007, one was from a medical center within these 
        two cities--Louisville VAMC. The rest of VISN 9's projects were 
        for the other medical centers within the VISN.
  --Louisville's project is a Research project, ``Renovate Building 8B 
        for Research.'' Although Research projects receive 
        approximately 5 percent of the Minor Construction funding, 
        there were 25 Research projects competing for the resources. 
        Based on the anticipated appropriations, this will most likely 
        fund the top two Research projects; Louisville's Research 
        project ranked in the middle of the list.
    Question. The CARES study recommends seven Community Based 
Outpatient Clinics for VISN 15, which includes Daviess, Hopkins, and 
Graves Counties in Kentucky. Although the budget request includes three 
projects for VISN 15, none of the fiscal year 2007 funds will be spent 
on any of the proposed projects in Kentucky.
    Please explain why Kentucky is not slated to receive any of the 
VISN 15 funding for fiscal year 2007.
    Answer. The Capital Asset Realignment for Enhanced Services (CARES) 
study proposed three Community Based Outpatient Clinics (CBOC) for 
Kentucky that are in the VISN 15 service area. One of the locations, 
the Hanson CBOC (Hopkins County, KY) was activated in August 2005. The 
other two CBOCs for Daviess and Graves Counties, KY, remain pending.
    Contingent upon funding available in fiscal year 2007, Marion (IL) 
VAMC will submit a business plan proposal for an additional Kentucky 
CBOC. Activation will be contingent on VHA review and VA approval.
    Question. Does the VA have criteria in place for determining the 
order in which the recommendations made in the CARES study will be 
implemented? If so, please provide those criteria to the Committee.
    Answer. The VA has a long-standing process to prioritize 
infrastructure projects. Projects are evaluated against a CARES-
specific decision model comprised of the following criteria (in 
priority order):
  --Service Delivery Enhancements (includes realignments)
  --Safeguard Assets
  --Special Emphasis Programs
  --Capital Asset Priorities/Portfolio Goals
  --Departmental Alignment
  --Financial Priorities
    Public Law 108-170, the Veterans Health Care, Capital Asset, and 
Business Improvement Act of 2003, required VA to evaluate projects 
based on a methodology that prioritizes realignments and safety 
projects in the first and second priorities. The VA decision model 
described above has been validated by OMB and Congress as a tool for 
judging competing needs for scarce capital asset project funds in 
Agency budget requests to Congress. A more detailed description of the 
decision criteria can be found in Appendix C of Volume 3, Construction 
and 5 Year Capital Plan, of the fiscal year 2007 Congressional Budget.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

    Question. The Death Pension is a benefit paid to eligible 
dependents of deceased wartime veterans. However, it is clear that 
under the current income eligibility formula, death pension does not 
meet its original intent of covering the living expenses of dependents 
of deceased wartime Veterans.
    Can you describe the current formula and income eligibility levels 
that are now employed to determine whether a dependent of a deceased 
wartime Veteran may receive compensation through the VA?
    Answer. Under the provisions of Public Law 95-588, VA's Improved 
Pension is an income maintenance program designed to assure a level of 
income to wartime veterans and their survivors. To be eligible, a 
claimant may not have income countable for VA purposes that exceeds the 
yearly income limit (maximum annual pension rate) shown in the chart 
below. The maximum pension rate is higher for veterans than for 
survivors.
    The claimant's countable income determines the amount of VA 
benefits paid. There is a dollar-for-dollar reduction from the maximum 
rate for all income received by a claimant (excluding other needs-based 
program payments such as SSI or welfare). Medical expenses that exceed 
5 percent of the maximum annual pension rate and for which the claimant 
is not reimbursed are deducted from the claimant's countable income to 
increase the amount of pension payable. The monthly rate payable is 
calculated by subtracting the claimant's countable annual income from 
the maximum annual pension rate and dividing the difference by 12.

----------------------------------------------------------------------------------------------------------------
                                                           Maximum Annual
                     Death Pension                        Pension Rate (as   Minimum Monthly    Maximum Monthly
                                                            of 12/1/05)          Payment            Payment
----------------------------------------------------------------------------------------------------------------
Surviving Spouse--Without Dependents...................             $7,094                 $1               $591
Surviving Spouse--With One Dependent...................              9,287                  1                774
Surviving Spouse Aid & Attendance--Without Dependents..             11,340                  1                945
Surviving Spouse Aid & Attendance--With One Dependent..             13,529                  1              1,127
Surviving Spouse Housebound--Without Dependents........              8,670                  1                723
Surviving Spouse Housebound--With One Dependent........             10,860                  1                905
Child Only.............................................              1,806                  1                151
----------------------------------------------------------------------------------------------------------------

    Question. What do you believe would be a more acceptable and 
appropriate yearly income threshold that would ensure that low-income 
dependents of wartime Veterans receive adequate compensation through 
death pension benefits?
    Answer. In December 2004, the Evaluation of the VA Pension Program 
concluded that survivors receiving pension are worse off, on average, 
than similarly situated low-income female and elderly Americans. On the 
other hand, veterans receiving pension were found to be generally 
better off than their peers. According to the report, this situation 
exists because veterans are eligible to enroll in VA healthcare, 
whereas survivors are not. Consequently, very few veterans in receipt 
of pension are also receiving Medicaid or SSI benefits. A much larger 
number of survivors, more than 40 percent, receive SSI and Medicaid.
    VA has not determined what, if any, changes should be made to the 
income threshold for the death pension program. It is possible that 
raising the maximum annual pension rate for survivors, especially those 
not entitled to Medicare, could jeopardize their continued eligibility 
for Medicaid. An increase in the death pension rate could potentially 
worsen some pension beneficiaries' overall financial position due to 
the loss of healthcare coverage. We believe that any proposal being 
considered by Congress to raise the income limit for death pension 
eligibility should take this factor into consideration.
    Question. Does VA have any plans to alter the current income 
threshold and eligibility formula to better provide for the needs of 
dependents of wartime Veterans through the death benefits program?
    Answer. Legislation would be required to change the current income 
threshold and eligibility formula for the death pension program. VA 
does not have any current plans to propose legislative changes to the 
death pension program.
                                 ______
                                 

            Questions Submitted by Senator Mary L. Landrieu

    Question. I would like to ask you a question regarding the New 
Orleans VA Medical Center. In the House of Representatives' passed 
version of the Hurricanes of the Gulf Coast Supplemental #4, $550 
million was appropriated to reconstruct the New Orleans VA Medical 
Center. Included in this appropriation was language allowing you to 
transfer up to $275 million to the VA Medical Services account for 
unanticipated medical costs of returning veterans fighting the Global 
War on Terror.
    Do you support the inclusion of this language?
    Answer. VA appreciates the House action in this matter; however, VA 
does not expect to utilize this authority for either the remainder of 
fiscal year 2006 or fiscal year 2007 for the medical costs of returning 
veterans fighting the Global War on Terror because these requirements 
are already funded in the fiscal year 2006 and proposed fiscal year 
2007 budgets. VA needs the referenced funds to construct a new medical 
facility for New Orleans to replace the one severely damaged by the 
Hurricanes last year.
    Question. Is this a warning sign that maybe the VA has 
miscalculated funding needs, yet again, and will need additional money 
to cover the unanticipated medical costs of returning Global War on 
Terror veterans?
    Answer. The President's amendment to the fiscal year 2006 budget 
request provided an additional $1.977 billion for the current fiscal 
year. These resources will enable VA to continue to provide the high-
quality health care to our Nation's veterans. The President's 2007 
request includes total budgetary resources of $34.3 billion for the 
medical care program, an increase of 11.3 percent (or $3.5 billion) 
over the level for 2006 and 69.1 percent higher than the funding 
available at the beginning of the Bush Administration. The cornerstone 
of our medical care budget is providing care for veterans who need us 
the most--veterans with service-connected disabilities; those with 
lower incomes; and veterans with special health care needs. A key 
element of this effort is to make sure every seriously injured or ill 
serviceman or woman returning from combat in Operation Enduring Freedom 
and Operation Iraqi Freedom receives priority consideration and 
treatment. These resources will enable VA to continue to provide the 
high-quality health care to our Nation's veterans.
    Question. If this money is transferred, it is a sure possibility 
this will prevent the final completion on the rebuilding of the new New 
Orleans VA Medical Center.
    If this is happens, how would the VA plan on funding the completion 
of the hospital?
    Answer. As previously stated, VA needs these funds for the 
construction of a new medical center for New Orleans.
    Question. Would you replace the funds in the VA's annual 
appropriations budge?
    Answer. Again, VA does not expect a need to do this. The entire 
$561 million will be required to rebuild the New Orleans VA Medical 
Center.
    Question. Many concerns regarding mental health stem from 
nondisclosure by Service members. This nondisclosure has the potential 
to disrupt early intervention and see an underestimation of future 
demand for VA mental health services.
    With an ever-growing focus on mental health, in your estimation, 
how well-equipped is the VA to deal with this problem?
    Answer. In terms of capacity to provide mental health services to 
those who do disclose problems, I have reviewed the capability of the 
Veterans Health Administration (VHA) to meet the needs for inpatient 
and outpatient Post-Traumatic Stress Disorder (PTSD) diagnosis and 
treatment as well as diagnosis and treatment of other mental health and 
substance abuse concerns of veterans. This review has included 
monitoring on a quarterly basis the mental health diagnosis and 
treatment needs of recently discharged service members from Operation 
Iraqi Freedom and Operation Enduring Freedom. I have found that VHA has 
adequate capabilities to serve their needs.
    In anticipation of any unmet needs or capabilities, VHA identified 
significant additional resources in fiscal year 2005 and fiscal year 
2006 in a variety of mental health programs, including specialized PTSD 
and Readjustment Counseling Center programs to supplement current 
services. Since PTSD often coexists with substance abuse disorder, 
depression, and homelessness, VA supplemented programs in those areas 
in fiscal year 2005 and fiscal year 2006. In fiscal year 2005, new and 
enhanced PTSD programs received funding of $9,953,186, and a new class 
of programs specifically designed for early identification and care for 
returning veterans (Returning Veterans Outreach Education and Care 
(RVOEC) programs were provided funded of $6,676,312. In addition, in 
fiscal year 2005, $7,987, 505 was provided for substance use disorder 
treatment programs; $8,249,348 was provided for Homeless Domiciliary 
programs; and $4,500,000 was provided for homeless grant and per diem 
programs. In fiscal year 2006, $10,865,874 will be provided for new/
enhanced PTSD programs; $6,932,646 will be used for new RVOEC programs; 
and $16,651,698 will be spent on substance use disorder treatment 
programs. Readjustment Counseling Service hiring of counselors who are 
veterans of the Global War on Terror will be provided up to $1,100,000 
in fiscal year 2006.
    Your question also addresses a more subtle issue, which is how to 
encourage self-disclosure of mental health concerns on the part of 
returning service members and veterans. You are correct that our system 
can only provide services when individuals do self-disclose and then 
can be guided in terms of how the system can best respond to the 
problems they are experiencing. There are several issues embedded 
within this overall concern. Generally, there are three major issues we 
can address: efforts to destigmatize mental health problems; efforts to 
help veterans progress in terms of readiness to change; and efforts to 
educate veterans and their families about resources available if they 
do self-disclose.
    First, concerning destigmatization, the Mental Health Strategic 
Plan, which is based in large part on the President's New Freedom 
Commission on Mental Health report as adapted for VA, suggests a wide 
array of activities to combat stigma in relation to mental health. Many 
of these have already been completed, including various educational 
efforts with VA staff. Ultimately, it is the larger society that needs 
to change in terms of reducing the stigma of mental health problems, 
but VA is committed to taking a leading role in that effort. VA also 
supports the efforts of the Department of Defense to deal with this 
issue in relation to active service members.
    Second, there is a large and important literature on the importance 
of understanding and respecting the process of becoming ready to seek 
help and change for mental health problems. Individuals progress from 
an early period of unawareness of and inability to identify developing 
concerns through stages to a point of readiness to engage in action to 
change the problem. It is important to match clinical services provided 
to this level of readiness in order to accomplish optimal outcomes. We 
have designed our programs to follow that natural progression, with 
outreach and educational efforts designed to help those who are earlier 
in the process and a variety of active clinical programs, as described 
in the opening paragraphs, for those who are ready to act and receive 
clinical care for their mental health concerns.
    Third, veterans may fail to self-disclose problems if they are not 
aware of the availability of services to meet their needs. 
Understanding this, we have developed the new class of programs 
described above, the Returning Veterans Outreach Education and Care 
(RVOEC) programs. These are specifically designed to meet the needs of 
newly returning veterans. As the title suggests, efforts are made to do 
outreach to identify such veterans, to educate them about available 
mental health services and the process of accessing these services, and 
to be supportive and contribute to destigmatization by normalizing 
adjustment concerns veterans may have. Similar efforts are made through 
the Veterans Readjustment Counseling programs; the RVOEC teams work 
with and through medical facilities so that such services are available 
to veterans throughout the system. These and other efforts ultimately 
are designed to teach veterans, their families, and the community at 
large that effective treatments are available for PTSD, depression, and 
other stress-related conditions and that VA has the ability to offer 
those treatments to them, if they present themselves for care. 
Ultimately, veterans are more likely to self-disclose if they know that 
their concerns will be handled respectfully, sensitively, and by 
offering appropriate, effective treatment.
    Question. Last year the Administration proposed to restrict per 
diem payments to only a small fraction of veterans living in State 
Homes and placed a moratorium on construction grants. As you also know, 
Congress restored construction grant funding to $85 million last year. 
However, this was almost a $20 million cut from fiscal year 2005 
levels. Although, the fiscal year 2007 budget request did not repeat 
these ill-advised proposals, the construction grant request was only 
for $85 million. It has been expressed to me, by the National 
Association of State Veterans Homes, that although $85 million is 
better than $0 funding, they wish to see the budget restored back to 
$104.3 million.
    Did you consult with the National Association of State Veterans 
Homes before you submitted your request for the fiscal year 2007 
budget?
    Answer. VA program staff regularly participates in the bi-annual 
national meetings of National Association of State Veterans Homes 
(NAVSH), and the Secretary has met with the organization's executive 
leadership. NAVSH interests and concerns are well known to VA through 
these continuing interactions.
    Question. How many construction grants will be given with this $85 
million, how many Homes will see a piece of the $85 million?
    Answer. It is not possible to predict how many construction grants 
will be given until: (1) the fiscal year 2007 Priority List is 
finalized and approved in September 2006; (2) the final price of the 
projects in Priority Group 1 is determined; and (3) the amount of 
carryover of fiscal year 2006 funds, if any, is established.
    Question. How will the construction of the new State Home in 
California affect availability of funds to award other contracts? How 
will it affect the repairs and such at other State Homes?
    Answer. Under the current regulations, VA's conditional award of a 
grant for the construction of the new State home in California before 
the end of this fiscal year would preclude the award of any other 
construction grants in fiscal year 2007 except those that are 
conditionally awarded a grant this fiscal year.
    Question. State Veterans Homes are critical to the healthcare needs 
of veterans throughout the United States. As critical as State Veterans 
Homes have been in my State, I have worked hard to insure the proper 
fiscal attention is given them.
    Do you share the critical need for State Homes and, if so, do you 
agree that Congress should mandate new consultation and reporting 
requirements for VA prior to the implementation of any proposed changes 
to the current per diem system?
    Answer. State Veterans Homes are an important option for veterans 
in considering their health care needs. We do not agree that Congress 
should mandate new consultation and reporting requirements for VA. VA 
consults extensively with individual State homes, with the National 
Association of State Veterans Homes (NASVH), and with the National 
Association of State Directors of Veterans Affairs (NASDVA) and 
provides relevant information regarding State Veterans Home programs to 
all of those stakeholders when it is cleared for public release.
    Question. Blinded Veterans have limited mobility and, oftentimes, 
insufficient infrastructure to deal with their specific needs. There 
are only 10 VA Blind Rehabilitation Centers across the country with a 
waiting list that causes an average waiting time of more than 9 weeks.
    How is the VA working to improve the efficiency and availability of 
care for blind veterans?
    Answer. VA Blind Rehabilitation Service is making significant 
improvements in both the efficiency and availability of care for 
blinded veterans. The VA Blind Rehabilitation Service Program Office, 
in conjunction with the Visual Impairment Advisory Board, has developed 
a continuum of care model. This model is designed to ensure that the 
visual needs of veterans are addressed throughout the progression of 
the vision loss in settings most convenient to the patient. When 
possible, services are provided in the veteran's local community. The 
inpatient Blind Rehabilitation Centers will continue to provide 
advanced rehabilitation services. The intensity of the intervention is 
tailored to the complexity of the patient's needs and additional 
services at the next level of care can be provided as the patient's 
vision rehabilitation needs increase. Placement of the services will be 
determined by patient demographics.
    Under the CARES planning process, two Blind Rehabilitation Centers 
at Biloxi and Long Beach will be created. In addition, Cleveland VAMC 
is adding a new Center. The new Centers will significantly reduce 
waiting times and service patients in those demographic areas.
    To further reduce waiting times for admission to a Blind 
Rehabilitation Center, Blind Rehabilitation Service developed a 
community-based Computer Access Training program to augment the 
inpatient Computer Access Training that is provided in the Blind 
Rehabilitation Centers. In this program, local service providers teach 
Computer Access Training to veterans in their home area, where 
feasible. Locally provided Computer Access Training has proven to be a 
cost effective alternative, which reduced waiting, increased access, 
and benefited blinded veterans.
    Blind Rehabilitation Service has expanded services to blinded 
veterans in their local communities with the establishment of Blind 
Rehabilitation Outpatient Specialist (BROS) positions at VA medical 
centers. There are now 28 BROS positions.
    Since initiating these efforts, the waiting times for admission to 
an inpatient Blind Rehabilitation Center have decreased 37 percent from 
fiscal year 2004 through fiscal year 2005. Waiting times for admission 
to a Blind Rehabilitation Center Computer Access Training program 
decreased 23 percent for the same time period.
    The VA Blind Rehabilitation Service Program Office is working with 
the Information Technology Office to develop a new national database to 
monitor all aspects of blind rehabilitation service delivery including 
waiting times. The anticipated release date is during the fall of 2006. 
This database will increase the efficiency of patient care for blinded 
veterans.

                          SUBCOMMITTEE RECESS

    Senator Murray. This Subcommittee is recessed.
    [Whereupon, at 4:38 p.m., Wednesday, March 29, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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