[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                THE U.S. DEPARTMENT OF VETERANS AFFAIRS

                  BUDGET REQUEST FOR FISCAL YEAR 2008
=======================================================================


                                HEARING

                               before the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 8, 2007

                               __________

                            Serial No. 110-1

                               __________

       Printed for the use of the Committee on Veterans' Affairs




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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            DAN BURTON, Indiana
STEPHANIE HERSETH, South Dakota      JERRY MORAN, Kansas
HARRY E. MITCHELL, Arizona           RICHARD H. BAKER, Louisiana
JOHN J. HALL, New York               HENRY E. BROWN, JR., South 
PHIL HARE, Illinois                  Carolina
MICHAEL F. DOYLE, Pennsylvania       JEFF MILLER, Florida
SHELLEY BERKLEY, Nevada              JOHN BOOZMAN, Arkansas
JOHN T. SALAZAR, Colorado            GINNY BROWN-WAITE, Florida
CIRO D. RODRIGUEZ, Texas             MICHAEL R. TURNER, Ohio
JOE DONNELLY, Indiana                BRIAN P. BILBRAY, California
JERRY McNERNEY, California           DOUG LAMBORN, Colorado
ZACHARY T. SPACE, Ohio               GUS M. BILIRAKIS, Florida
TIMOTHY J. WALZ, Minnesota

                   Malcom A. Shorter, Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                            February 8, 2007

                                                                   Page
The U.S. Department of Veterans Affairs Budget Request for Fiscal 
  Year 2008......................................................     1

                           OPENING STATEMENTS

Hon. Bob Filner, Chairman, Full Committee on Veterans' Affairs...     1
    Prepared statement of Chairman Bob Filner....................    62
Hon. Steve Buyer, Ranking Republican Member, Full Committee on 
  Veterans' Affairs..............................................     3
    Prepared statement of Congressman Buyer......................    63
Hon. Michael H. Michaud, Chairman, Subcommittee on Health........     7
Hon. John J. Hall, Chairman, Subcommittee on Disability 
  Assistance and Memorial Affairs................................     8
Hon. Phil Hare...................................................     8
Hon. Ginny Brown-Waite...........................................     9
    Prepared statement of Congresswoman Brown-Waite..............    67
Hon. Ciro D. Rodriguez...........................................     9
Hon. John T. Salazar.............................................     9
    Prepared statement of Congressman Salazar....................    67
Hon. Doug Lamborn................................................    10
    Prepared Statement of Congressman Lamborn....................    67
Hon. Joe Donnelly................................................    10
Hon. Gus M. Bilirakis............................................    10
    Prepared statement of Congressman Bilirakis..................    66
Hon. Zachary T. Space............................................    10
Hon. Timothy J. Walz.............................................    11
    Prepared Statement of Congressman Walz.......................    68
Hon. Henry E. Brown, Jr., prepared statement of..................    65
Hon. Jeff Miller, prepared statement of..........................    65
Hon. Corrine Brown, prepared statement of........................    68
Hon. Cliff Stearns, prepared statement of........................    69

                               WITNESSES

U.S. Department of Veterans Affairs, Hon. R. James Nicholson, 
  Secretary; accompanied by Michael J. Kussman, M.D., MS, MACP, 
  Acting Under Secretary for Health, Veterans Health 
  Administration; Hon. Daniel L. Cooper, Under Secretary for 
  Benefits, Veterans Benefits Administration; Hon. William F. 
  Tuerk, Under Secretary for Memorial Affairs, National Cemetery 
  Administration; Paul J. Hutter, Acting General Counsel; Hon. 
  Robert J. Henke, Assistant Secretary for Management; and Hon. 
  Robert T. Howard, Assistant Secretary for Information 
  Technology and Chief Information Officer.......................    11
    Prepared statement of Secretary Nicholson....................    70

                                 ______

American Legion, Paul A. Morin, National Commander...............    46
    Prepared statement of Mr. Morin..............................    82
American Veterans (AMVETS), David G. Greineder, Deputy National 
  Legislative Director...........................................    52
    Prepared statement of Mr. Greineder..........................    79
Disabled American Veterans, Brian Lawrence, Assistant National 
  Legislative Director...........................................    49
    Prepared statement of Mr. Lawrence...........................    93
Paralyzed Veterans of America, Carl Blake, National Legislative 
  Director.......................................................    44
    Prepared statement of Mr. Blake..............................    97
Veterans of Foreign Wars of the United States, Dennis M. 
  Cullinan, Director, National Legislative Service...............    50
    Prepared statement of Mr. Cullinan...........................    99
Vietnam Veterans of America, John Rowan, National President......    53
    Prepared statement of Mr. Rowan..............................   105

                   MATERIAL SUBMITTED FOR THE RECORD

Pre-Hearing Questions and Responses for the Record:
    Hon. Bob Filner, Chairman, Committee on Veterans' Affairs, to 
      Hon. R. James Nicholson, Secretary, U.S. Department of 
      Veterans Affairs, letter dated January 25, 2007............   111

Post-Hearing Questions and Responses for the Record:
  Written questions for the record submitted to the VA follow:
    Hon. Bob Filner, Chairman, Committee on Veterans' Affairs, to 
      Hon. R. James Nicholson, Secretary, U.S. Department of 
      Veterans Affairs, letter dated March 5, 2007...............   130
    Hon. John Salazar to Hon. R. James Nicholson, Secretary, U.S. 
      Department of Veterans Affairs, questions dated February 8, 
      2007.......................................................   132
    Hon. Steve Buyer, Ranking Republican Member, Committee on 
      Veterans' Affairs, to Hon. R. James Nicholson, Secretary, 
      U.S. Department of Veterans Affairs, letter dated February 
      20, 2007...................................................   133
    Hon. Henry E. Brown, Jr., to Hon. R. James Nicholson, 
      Secretary, U.S. Department of Veterans Affairs, questions 
      dated February 8, 2007.....................................   138
    Hon. Gus M. Bilirakis to Hon. R. James Nicholson, Secretary, 
      U.S. Department of Veterans Affairs, questions dated 
      February 8, 2007...........................................   139
    Hon. John Boozman, Ranking Republican Member, Subcommittee on 
      Economic Opportunity, to Hon. R. James Nicholson, 
      Secretary, U.S. Department of Veterans Affairs, questions 
      dated February 8, 2007.....................................   140
    Hon. Ginny Brown-Waite to Hon. R. James Nicholson, Secretary, 
      U.S. Department of Veterans Affairs, questions dated 
      February 8, 2007...........................................   145
    Hon. Michael R. Turner to Hon. R. James Nicholson, Secretary, 
      U.S. Department of Veterans Affairs, questions dated 
      February 8, 2007...........................................   147

Reports:
    ``The Fiscal Year 2008 Independent Budget for the Department 
      of Veterans Affairs''......................................   148
    ``Soldiers Returning from Iraq and Afghanistan: The Long-term 
      Costs of Providing Veterans Medical Care and Disability 
      Benefits, Faculty Research Working Papers Series,'' by 
      Linda Bilmes, John F. Kennedy School of Government, Harvard 
      University, January 2007...................................   285


                THE U.S. DEPARTMENT OF VETERANS AFFAIRS



                  BUDGET REQUEST FOR FISCAL YEAR 2008

                              ----------                              


                       THURSDAY, FEBRUARY 8, 2007

                     U.S. House of Representatives,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 9:30 a.m., in 
Room 334, Cannon House Office Building, Hon. Bob Filner 
[Chairman of the Committee] presiding.
    Present: Representatives Filner, Brown of Florida, Snyder, 
Michaud, Herseth, Mitchell, Hall, Hare, Salazar, Rodriguez, 
Donnelly, McNerney, Space, Walz, Buyer, Stearns, Moran, Baker, 
Brown of South Carolina, Miller, Boozman, Brown-Waite, Turner, 
Lamborn, Bilirakis.

              OPENING STATEMENT OF CHAIRMAN FILNER

    The Chairman. Good morning. This hearing of the House 
Committee on Veterans' Affairs is in order. Thank you all for 
being here. I thank the Members of the Committee.
    We are here to welcome the Secretary of the VA and your 
staff, and we appreciate your spending the morning with us, 
maybe the afternoon, maybe all night. I do not know. But thank 
you for being here.
    You have characterized the budget for fiscal year 2008, Mr. 
Secretary, as a ``landmark budget,'' and we certainly 
appreciate that you are submitting a budget that calls for an 
increase for veterans' healthcare, unlike the budget that was 
submitted 2 years ago.
    And I believe it does give us a basic framework from which 
to begin our analysis as to whether the VA's budget submission 
will meet the needs of veterans in the coming fiscal year.
    Of course, our job as a Committee is to make sure that as 
we follow this ``landmark budget'', we do not get off course 
and lose our way.
    You have requested an increase for VA medical care of $1.9 
billion over the level provided in the Joint Funding Resolution 
for 2007. That is a 6 percent increase.
    We did provide this fiscal year a 12 percent increase over 
2006. Both the Independent Budget that we will discuss in the 
panel after you, and The American Legion, both recommend more 
than a 12 percent increase for fiscal year 2008.
    The Vietnam Veterans of America recommend substantially 
more. So I look forward to your explanation as to why you 
believe the 6 percent increase will suffice for our veterans.
    Your budget submission also states that $1.4 billion of 
your increase for medical care is attributable to inflation. 
Once this is factored in, the recommended increase leaves 
precious few dollars to meet the increasing needs of our 
nation's veterans.
    And although the waiting list for new enrollees has indeed 
declined, and you are obviously to be applauded for that and we 
all appreciate that, I believe that no veteran should have to 
wait for healthcare appointments simply because the VA does not 
have the resources to care for that veteran. I would hope that 
you can assure the Committee that the budget request before us 
has the dollars to address this problem.
    Last year, your budget request claimed $197 million in 
efficiencies for a total of $1.1 billion. This year's budget 
submission also claims ``clinical and pharmacy cost 
avoidance,'' in your words.
    Our Committee would like to know whether you believe you 
will achieve these efficiencies for 2007 and what exactly are 
your dollar estimates as to your efficiencies in these two 
areas for 2008.
    I see that you are requesting an additional $56 million for 
a total of $360 million for your mental health initiative. Your 
submission also claims that the VA plans to spend $3 billion 
for mental health services and, yet, the GAO reported last 
November that you failed to fully allocate the resources you 
pledged in 2005 and 2006 for that mental health initiative.
    In light of this report, I hope that the VA will fully 
allocate the $306 million for this initiative in 2007 and $360 
million for 2008, and I hope you can assure us of that. And I 
would like to make sure you do answer the question, ``Do you 
currently have the resources you need to address the mental 
healthcare needs of our veterans, especially in light of the 
significant mental issues that seem to plague those coming back 
from Iran and Afghanistan.''
    I have to note, and I know many on this Committee agree, if 
not all, that we are disappointed that you have once again 
brought forward legislative proposals as part of your budget 
submission. Instituting enrollment fees and increasing pharmacy 
co-payments have been rejected, as you know, year after year by 
this Congress.
    Last year, you claimed that the enactment of these 
proposals would reduce your need for discretionary healthcare 
dollars. This year, your proposals are deemed mandatory 
spending and are taken out of your own mandatory spending 
allocation.
    I hope you will explain to this Committee why you have 
offered these proposals again and the policy reasons for 
deeming the expected receipts from these proposals mandatory 
dollars.
    We both agree, we all agree, that the VA is facing an ever 
greater claims processing crisis--over 600,000 backlogged as of 
today. In light of this, I would expect your budget submission 
to aggressively request additional dollars to address this 
growing problem.
    But as I read the budget, and correct me if I am wrong when 
you testify, I see that your request for General Operating 
Expenses Account, which funds the claims processors at the 
heart of the process, is close to $9 million less than the 
amount provided for in the 2007 funding resolution.
    I would like to know what steps you are taking to meet that 
challenge and why the VA has not requested a sizable increase 
in this account to address the claims backlog.
    Your VA research request seeks less than you will receive 
under this year's Joint Funding Resolution. I think you should 
be requesting at least an $18 million increase just to keep up 
with inflation. This is especially true when, once again, you 
are seeking more resources from other Federal sources and the 
budget for NIH is going to be static.
    I look for a full explanation of your information 
technology request, including transfers from other accounts. We 
have to ensure that the VA is moving in the right direction in 
Information Technology and that the funding level you receive 
in 2008 will lead to better security, more innovation, and 
fewer incidents like the one that occurred in Birmingham, 
Alabama last week.
    I know that you are seeking increases in both the Major and 
Minor Construction accounts, and I am sure we will all be 
interested in learning how you selected the projects for this 
request.
    There is much work to be done to ensure that the VA has the 
funding it needs in the coming fiscal year and to ensure that 
the VA spends the resources it receives properly and 
diligently.
    Mr. Secretary, we look forward to hearing from you this 
morning, to work closely with you to make sure that the needs 
of our veterans, especially in the midst of war and those 
returning from Iraq and Afghanistan and the veterans from our 
previous conflicts, are met.
    I would like to just add a personal note for my colleagues. 
As the Secretary and I have met and talked together on more 
than a few occasions since the change in the Congress, I 
appreciate that dialog. I appreciate your keeping me in touch 
with things that need to be touched upon. We will be traveling 
together to see some things in the VA that we want to do 
together. I think we have set up a good working relationship, 
Mr. Secretary, and I appreciate the response to the new 
situation, the new majority in this Congress.
    And I want to assure our colleagues on both sides of the 
aisle that we have, I think, established the basis of a 
relationship that we will be working together and that we will 
seek what is best for our veterans.
    I think your commitment does not need to be questioned on 
that, Mr. Secretary, and this Committee will work with you to 
ensure that every one of our veterans is cared for properly.
    I will yield to the Ranking Republican, Mr. Buyer, for a 
statement.
    [The prepared statement of Chairman Filner appears on p. 
62.]

             OPENING STATEMENT OF HON. STEVE BUYER

                   RANKING REPUBLICAN MEMBER

              FULL COMMITTEE ON VETERANS' AFFAIRS

    Mr. Buyer. Thank you, Mr. Chairman, and good morning. I 
would like to welcome everyone to the first hearing of the 
110th session of Congress.
    And, wow, Mr. Chairman, you have come a long way from 
sitting in this chair demanding that the Secretary resign 9 
months ago. So I am glad you two have been able to work this 
out.
    For housekeeping, before we move into these questions, I 
have sent you a letter, Mr. Chairman, requesting next week for 
us to bring in the VSOs and the MSOs to go over the budget.
    As you know, last year when we ended the joint hearings, we 
opened up the unprecedented access for the VSOs and the MSOs so 
we could get all of their testimonies prior to doing the budget 
views and estimates. And we also then did the look back, look 
ahead. So never before had the VSOs and the MSOs had such 
access to this Committee, and I am hopeful that you will give 
consideration to the request.
    Secondly, you still have not submitted to the minority a 
proposed budget for the operations of this Committee, and so 
you and I need to start out on a bipartisan basis and you do 
that by talking about the budget of this Committee. So I am 
still utterly dumbfounded, and so I still await that draft 
budget so you and I can move on with business.
    Mr. Secretary, I am glad you could be with us today to 
share with the Committee the President's proposed budget for 
2008. I commend you yet again for embracing the challenge of 
improving the VA's budget process.
    Building on last year's progress, when we had that hearing 
to examine the budget modeling and you disclosed the shortfall 
on a budget that you had inherited, you said you were going to 
take ownership of that budget, and you did that. And you are a 
man of your word, and you submitted to us a pretty big budget 
increase.
    Obviously with the challenges last fall, the Senate not 
completing its work, I compliment the Democrat majority in 
working with the budget that we had last year and we got that 
CR. We are interested in your input from us.
    I am sure you have had some management challenges over 
those last four months and what impact that is going to have 
upon your budget and whether or not you expect any carry-over 
funds into next year would be interesting to find out.
    Mr. Secretary, as you observe your second anniversary as 
the chief steward of our nation's veterans, we can look back 
and note it has been a year of challenges and successes. I 
thank you for your willingness to squarely meet the challenges 
and commend you on your successes as you work with all Members 
of this Committee.
    Based on the priorities in the last Congress, this 
Committee focused on the disabled veterans, those with special 
needs, and the indigent veterans. We passed major legislative 
initiatives, Public Law 109-461, the ``Veterans Benefits, 
Health Care, and Information Technology Improvement Act.'' This 
bill was the result of a strong bipartisan effort of this 
Committee in concert with our colleagues in the Senate. They 
brought issues to the table. We brought issues to the table. 
And the democratic process worked.
    We also listened to 20 VSOs and MSOs and incorporated many 
of their suggestions. We authorized 24 major construction 
projects in 15 States, approved continued leasing of eight 
medical facilities and required VA to explore options for 
construction of a new medical facility in San Juan, Puerto 
Rico.
    With regard to our returning Iraq and Afghanistan veterans, 
we added 65 million to increase the number of clinicians 
treating post-traumatic stress disorder and improve their 
training. Public Law 109-451 further authorized spending for 
collaboration in PTSD diagnosis and treatment between the VA 
and DoD.
    We authorized more funding for additional blind 
rehabilitation specialists and increased the number of 
facilities where these specialists could be located.
    We expanded the eligibility for dependents' education 
assistance to the spouse and child of a servicemember 
hospitalized or receiving outpatient care before the 
servicemember's discharge for a total permanent service-
connected disability. The intent here was to help enhance the 
spouse's earning power as early as possible before discharge of 
the servicemember. We made Chapter 35 more flexible for you, 
Mr. Secretary, so you can be responsive to the spouses and the 
dependents.
    We restored entitlements for members of the National Guard 
and Reserves who care for the active duty during the school 
year. We extended work study provisions to ensure a veteran did 
not lose a job during the school year, and required the VA to 
report ways to streamline administration of the GI Bill to 
shorten the time to get that first check.
    And I look forward to working with the Chairman on his 
proposed improvements to the GI Bill.
    Listening to the VSOs and MSOs who expressed concerns about 
the veteran's ability to afford a home, we authorized VA to 
guarantee co-op housing units, which are often the most 
affordable housing in many areas. And so if you have any 
comments on it, Mr. Secretary, please let us know.
    This Committee also focused on the disabled veteran-owned 
businesses, so we gave the VA the tools to increase the amount 
of business they do with veterans by giving service-disabled 
veterans-owned business preference over all other set-side 
groups and ensuring that the survivors of veterans business 
owners who acquired ownership continue their veteran-owned 
status with the VA.
    The VSOs and MSOs also expressed the need to revitalize the 
veterans employment programs at the Veterans Employment and 
Training Service, so we made several changes to strengthen 
mandatory training for DVOPs and LEVRs, revise the incentive 
program to make it more effective, and establish a pilot 
licensing and credentialing program.
    And the VVA especially noted that the Department of Labor 
needed to develop regulations to implement the ``Jobs For Vets 
Act,'' so we did that too.
    Since this time last year, we have seen the Department 
embrace the idea of centralizing its IT under the VA's CIO. I 
believe that this innovation has been seen as part of your 
legacy, Mr. Secretary, to the Department of Veterans Affairs, 
and I congratulate you. And I am sure Mr. Filner joins all 
Members of this Committee who unanimously supported and 
endorsed that move, and we congratulate you.
    As part of our work on IT, we engaged in a bipartisan 
fashion to increase data security in order to protect our 
Nation's veterans. Recognizing that as you centralize that 
system, breaches are still going to occur, we set forth those 
mitigation efforts and gave you the tools.
    And so that is why we recognize that when you had this 
latest breach in Alabama, you did not see the outrage of alarm 
from Mr. Filner and myself because we pragmatically have given 
you the tools and we understand these things are going to 
happen, and we want to work with you when they do. And we 
appreciate also the notification process that you have been 
giving to the Committee and to the Senate and the Armed 
Services Committee.
    We also worked through the complexities and will continue 
to work with the Charleston model, whether it is in Charleston, 
South Carolina or as we move with the facility in New Orleans. 
This is a new way and exciting way to build a hospital, and we 
want to work with you.
    It is our job also to preserve those areas of excellence 
and to work together in a bipartisan fashion to ensure every 
service of the Department meets its highest standards. One of 
the most important services remains the determination awarding 
of benefits, and I think, Mr. Chairman, you said it about 
right. The claims backlog has reached an all-time high. It is 
the big elephant in the room, and we have to go after this.
    To help lead the way, Mr. Chairman, I organized a Compensa- 
tion of 
Benefits Accountability Task Force in December of 2005, and it 
had almost 1 year of work. They provided me a powerful work 
product with numerous recommendations, and I want to commend 
those who spent many hours working on this valuable product.
    Mr. Wartman, the Associate Legislative Director of 
PVA; Mr. Dorn, the National Service Director of AMVETS; Rick 
Wiedman the National Legislative Director of Vietnam Veterans 
of America; John Lopez, Chairman of the Association of Service-
Disabled Veterans; and Mr. Smithston, the Assistant Director of 
the National Veterans Affairs and Rehabilitation Commission of 
The American Legion.
    Gentlemen, I thank you for your efforts. We will take that. 
We will work with the Chairman as we approach these issues 
along with the Secretary.
    It is also worth noting again this year, the President 
proposed substantial increases in the budgets of agencies 
focused on fighting the War on Terror, the Department of 
Defense and the Department of Homeland Secretary.
    I am pleased again this year, the Department of Veterans 
Affairs, an agency focused on caring for those who have borne 
the battle, also received a substantial increase of 
approximately 8 percent over the level contained in House Joint 
Resolution 20.
    At a time when much of the rest of the government received 
a 2.2 percent increase, I believe this reflects a commitment of 
you, Mr. Secretary, and of the Administration to care for our 
nation's veterans during time of war.
    As you know, Mr. Secretary, a budget is more than numbers 
and in the end, it must translate into real actions on the 
ground, for a positive effect on America's veterans. As I look 
at this budget, I view it in light of my three top priorities 
which I discussed, focusing on the disabled, caring for the 
special needs, and the indigent.
    We have an obligation to those who bear those burdens of 
war and military service and their survivors, and our work must 
move toward fulfillment of that obligation. Therefore, I will 
judge this budget not just by the numbers, but for what it does 
for America's veterans given these priorities.
    When you send us a budget of this magnitude, Mr. Secretary, 
I expect also to find those outcomes you seek successful. This 
Congress is not a blank check. We will be looking for 
accountability. Generally I think this is a good budget.
    As we look at desired outcomes, we will work with the VSOs 
and the MSOs. I am hopeful we can do those hearings. If we 
cannot do those hearings, I invite all the VSOs and MSOs to be 
in touch with me to get your input. If you choose not to be in 
touch with me, then I understand what your positions are.
    Mr. Secretary, I applaud you for the direct and forthright 
budget process that you have used in developing this year's 
budget. It appears to be the gimmicks of years past have been 
removed. And so I want to applaud you for that. That is a 
leadership statement that I took out of this budget when I 
looked at it.
    Mr. Secretary, last year, you brought us similar requests 
for the enrollment fees and co-pays. I recognize I am a 
minority here in Congress. I support co-pays. I support 
enrollment fees. When I created TRICARE for Life, I included 
those.
    There was an error that we made. When we opened up the 
process here on this Committee, we did not give sufficient 
management tools to the Executive Branch. That is an error that 
we made. And there is a lack of will for people to now give you 
those tools. So I understand what you are doing.
    At this point, I will yield back.
    [The prepared statement of Congressman Buyer appears on 
p. 63.]
    The Chairman. Thank you, Mr. Buyer.
    I will entertain short opening statements from our 
colleagues.
    Mr. Michaud.

          OPENING STATEMENT OF HON. MICHAEL H. MICHAUD

                CHAIRMAN, SUBCOMMITTEE ON HEALTH

    Mr. Michaud. Thank you very much, Mr. Chairman.
    This is an extremely important first hearing for our 
Committee. We have a responsibility to make sure that the VA is 
provided with the dollars that it needs and that the VA spends 
those dollars in a wise manner.
    Budgets do reflect our priorities and I think it is 
important for this Congress to make sure that veterans are high 
on our priority list. We have a lot of work to do in this 
Congress dealing with PTSD, homeless veterans, and making sure 
that the CBOCs under the CARES process are implemented.
    So with that, Mr. Chairman, I look forward to working with 
you and Ranking Member Buyer and the Ranking Member of my 
Subcommittee, the Subcommittee on Health, Mr. Miller, as we 
move forward in this Congress. Thank you very much, and I am 
looking forward to hearing both panels today as well.
    I yield back.
    The Chairman. Mr. Moran?
    Mr. Moran. I have no opening statement.
    The Chairman. Thank you.
    Mr. Baker?
    Mr. Baker. No statement at this time.
    The Chairman. Mr. Brown?
    Mr. Brown of South Carolina. No statement.
    [The prepared statement of Congressman Brown of South 
Carolina appears on p. 65.]
    The Chairman. Mr. Miller?
    Mr. Miller. No statement.
    [The prepared statement of Congressman Miller appears on 
p. 65.]
    The Chairman. Mr. Boozman?
    Mr. Boozman. I have got a statement that I would like to 
submit----
    The Chairman. Thank you.
    Mr. Boozman.--in the interest of time. Thank you.
    [No statement was submitted.]
    The Chairman. Mr. Mitchell, Chairman of our Oversight 
Investigations Committee?
    Mr. Mitchell. No.
    The Chairman. Mr. Hall, Chairman of our Disability 
Committee?

             OPENING STATEMENT OF HON. JOHN J. HALL

        CHAIRMAN, SUBCOMMITTEE ON DISABILITY ASSISTANCE

                      AND MEMORIAL AFFAIRS

    Mr. Hall. I would just say that I am looking forward to 
working with you, Mr. Chairman, and Mr. Ranking Member and the 
Secretary and staff in providing a more seamless transition 
from active duty to veteran status, in retaining the facilities 
and not prematurely closing or discarding of Veterans 
Administration facilities before we know what the true demand 
will be in returning veterans coming back from the wars that we 
are currently fighting, and mainly in reducing what most people 
consider to be a scandalous backlog of claims and also a 
scandalous number of homeless veterans. So those are the 
priorities that would leap to the top of many for me, and look 
forward to working with you and thank you.
    The Chairman. Thank you, Mr. Hall.
    Mr. Hare?

              OPENING STATEMENT OF HON. PHIL HARE

    Mr. Hare. Thank you, Mr. Chairman. I look forward to 
serving with you on the Committee.
    I actively sought this Committee out because after working 
for Congressman Evans for 23 and a half years, I saw firsthand 
what veterans go through in our district and whether they are 
homeless and having to do stand-downs or whether it is the 
backlog, as my colleague has mentioned on the disability 
claims, you know, we can do better.
    And I think we have a responsibility to the veterans. I am 
concerned about the numbers of veterans that are coming back, 
whether or not we have the personnel and the facilities. And 
also, as you said, Mr. Secretary, in your statement, for those 
who have given the ultimate price to make sure that our 
veterans are honored with the services and the type of funeral 
befitting heroes.
    So I look forward to serving on the Committee, and thank 
you very much, Mr. Chairman.
    The Chairman. Thank you, Mr. Hare.
    Ms. Brown-Waite.

          OPENING STATEMENT OF HON. GINNY BROWN-WAITE

    Ms. Brown-Waite. Thank you, Mr. Chairman. I have a 
statement that I will submit.
    Once again, we are seeing the imposition of enrollment fees 
for category seven and eight. The Committee has rejected it 
soundly in the past and probably will again, and I am sorry to 
see that this keeps popping up.
    I look forward to hearing from the Secretary, but I will 
submit the full statement. I think we are all here to hear the 
Secretary and discuss the budget.
    The Chairman. Thank you.
    Ms. Brown-Waite. But thank you for the opportunity.
    [The prepared statement of Congresswoman Brown-Waite 
appears on p. 67.]
    The Chairman. And all the opening statements will be 
printed as part of the record.
    Mr. Rodriguez?

          OPENING STATEMENT OF HON. CIRO D. RODRIGUEZ

    Mr. Rodriguez. Thank you, Mr. Chairman, for being here and 
thank you for allowing me just a few comments.
    I know my concerns, I still have a district that is spread 
some 700 miles. We still have people that have to travel two, 
three hundred miles for services, and so I am going to continue 
to work on trying to get access to some of those individuals, 
as well as now the concerns that I personally have in terms of 
a lot of our national Guard and Reservists that are out there 
doing the Lord's work and representing us in Iraq.
    Over 40 percent of our soldiers are out there and, yet, 
when they do retire will not have similar access to veteran 
services, and I think it is an area that we need to kind of 
revisit and check out.
    And in addition, I am also extremely concerned in terms of 
the waiting list that we are seeing and also the vacancies 
throughout our hospital systems and those areas that have not 
filled those vacancies.
    Thank you.
    The Chairman. Thank you.
    I skipped Mr. Salazar. I apologize.

           OPENING STATEMENT OF HON. JOHN T. SALAZAR

    Mr. Salazar. Thank you, Mr. Chairman. I will submit my full 
statement for the record.
    Mr. Secretary, I have enjoyed working with you over the 
years, being from Colorado as well. Two things that really have 
concerned me.
    I was out at Walter Reed Hospital on Monday and saw many of 
our soldiers returning from Iraq and Afghanistan. I spent time 
with a 25-year-old double amputee. I also met with a third 
soldier, a native from Colorado, out from Burlington, who was 
recently fitted with a prosthetic leg. And it is my 
understanding that this budget cuts funding for research of 
prosthetic limbs. I would certainly appreciate you looking into 
that and making sure that we can care for our returning troops.
    So with that, Mr. Chairman, I yield back.
    [The prepared statement of Congressman Salazar appears on 
p. 67.]
    The Chairman. Thank you.
    Mr. Lamborn?

             OPENING STATEMENT OF HON. DOUG LAMBORN

    Mr. Lamborn. Thank you, Mr. Chairman. I do have a full 
statement that I will submit for the record.
    But very briefly, I just want to say I am honored to be on 
this Committee and to be helping where I can with my other 
colleagues here for those who have served our country. And so I 
am just very excited and honored to be on this Committee.
    [The prepared statement of Congressman Lamborn appears on 
p. 67.]
    The Chairman. Thank you.
    Mr. Donnelly?

             OPENING STATEMENT OF HON. JOE DONNELLY

    Mr. Donnelly. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being here.
    During the time I was back home in the past few years, in 
our district, we had a complete meltdown in clinic service and 
wait times, and the pledge I gave to the folks back home was 
that I would come here to try and make sure that never happens 
again. And I actively sought out the opportunity to be on this 
Committee.
    In addition, we have been in limbo in our State in regards 
to our VA Hospital in Fort Wayne for a long, long time. And my 
commitment is to try to make sure, Mr. Secretary, with your 
help, that we end that limbo and make sure Fort Wayne is 
buttoned down and will be in service to us for a long, long 
time in the VA system in the years ahead.
    It is an honor to be on this Committee, and I want to make 
sure that those who are serving not only from my district but 
from all across the country that when they come back, they can 
get not only the physical care they need but the counseling 
that they may require as well.
    Thank you very, very much, Mr. Chairman.
    The Chairman. Thank you, Mr. Donnelly.
    Mr. Bilirakis?

           OPENING STATEMENT OF HON. GUS M. BILIRAKIS

    Mr. Bilirakis. Yes. Thank you, Mr. Chairman. Thanks for 
scheduling this hearing.
    And I want to welcome the Secretary. And it is a top 
priority of mine to take care of our true American heroes, and 
it is an honor to serve on the Committee. And I will submit my 
statement to the record. Thank you.
    [The prepared statement of Congressman Bilirakis appears on 

p. 66.]
    The Chairman. Thank you.
    Fresh from his appearance on the ``Colbert Report,'' Mr. 
Space.

           OPENING STATEMENT OF HON. ZACHARY T. SPACE

    Mr. Space. Thank you for reminding me, Mr. Chairman.
    The Chairman. You may speak as a Republican if you want. 
You had to watch the show to know what it is.
    Mr. Space. Rather than simply reiterate the remarks of my 
colleagues, let me state that I am just honored to be on this 
Committee and looking forward to the challenges that it 
represents.
    The Chairman. Thank you.
    Mr. Walz?

           OPENING STATEMENT OF HON. TIMOTHY J. WALZ

    Mr. Walz. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, and all the gentlemen joining us today.
    I would like to give a special thank you to those of you 
who are from our VSOs who are sitting out here. For many years, 
I am a member of multiple organizations with you. I am a life 
member of some of those, and I spent a lot of years trying to 
make sure the people setting here heard what you had to say.
    So I cannot tell you how much I appreciate you being here. 
The only thing better is if you were sitting right alongside 
me. I am not quite sitting high enough on this thing to make 
that decision, but we appreciate you being here.
    Please know that this Committee is absolutely committed to 
solving these problems in a nonpartisan--it does not need to be 
bipartisan--these are nonpartisan issues of taking care of our 
veterans.
    And I thank the Chairman profusely for giving me this 
opportunity to do exactly that.
    [The prepared statement of Congressman Walz appears on p. 
68.]
    The Chairman. Mr. Secretary, again, welcome. We hope you 
will introduce your staff at the table and then the floor is 
yours.

     STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY, U.S. 
        DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY 
 MICHAEL J. KUSSMAN, M.D., MS, MACP, ACTING UNDER SECRE- TARY 
  FOR HEALTH, VETERANS HEALTH ADMINISTRATION; HON. DANIEL L. 
    COOPER, UNDER SECRETARY FOR BENEFITS, VETERANS BENEFITS 
  ADMINISTRATION; HON. WILLIAM F. TUERK, UNDER SECRETARY FOR 
  MEMORIAL AFFAIRS, NATIONAL CEMETERY ADMINISTRATION; PAUL J. 
HUTTER, ACTING GENERAL COUNSEL; HON. ROBERT J. HENKE, ASSISTANT 
SECRETARY FOR MANAGEMENT; AND HON. ROBERT T. HOWARD, ASSISTANT 
  SECRETARY FOR INFORMATION TECHNOLOGY AND CHIEF INFORMATION 
                            OFFICER

    Secretary Nicholson. Thank you, Mr. Chairman, and good 
morning all. I have a written statement that I would like to 
submit for the record of this hearing, Mr. Chairman.
    The Chairman. So ordered.
    Secretary Nicholson. And I would like to introduce my 
colleagues that are with me at the table. I will start at my 
left and your right with the Under Secretary of Veterans 
Affairs for the National Cemetery Administration, Mr. Bill 
Tuerk.
    Next is the Under Secretary for Veterans Benefits 
Administration, Admiral Dan Cooper. You will have to grant him 
some indulgence. He spent most of his life below the sea in a 
submarine, but he is doing a great job. Next is the Acting 
Under Secretary for the Health Administration, Dr. Mike 
Kussman. Mike has had a lot of experience including that of 
commanding Walter Reed Hospital. To my far right and your left 
is the Acting General Counsel of the VA, Mr. Paul Hutter.
    Next is the Assistant Secretary of the VA for Information 
Technology, and he is the Chief Information Officer of the VA, 
Mr. Bob Howard, or I should probably say General Bob Howard.
    And next to me is Assistant Secretary for Management of the 
VA. He is also the Chief Financial Officer of the VA, Mr. Bob 
Henke.
    Mr. Chairman, if you would permit me to preface my remarks 
by saying that I look forward very much to working with you in 
the 110th Congress and particularly our Veterans Committee in a 
bipartisan, bicameral way as someone said, and I believe it 
strongly that taking care of veterans is not a partisan matter. 
It is a patriotic matter.
    And I look forward very much in that vein to working 
together, for us benefiting from your scrutiny, your oversight, 
and your support.
    I am here today to discuss President Bush's 2008 budget 
proposals for the Department of Veterans Affairs. The President 
is requesting, using your term and mine, Mr. Chairman, a 
landmark budget of nearly $87 billion to fund our nation's 
commitment to America's veterans.
    This budget will allow us to expand the three core missions 
of the VA, those being to provide world-class healthcare, 
provide broad, fair, and timely benefits, and dignified burials 
in shrine-like settings for our nation's veterans.
    This budget will allow us to continue our progress toward 
becoming a national leader in information technology and data 
security. I believe that with the right resources in the hands 
of the right people, anything and everything is possible when 
it comes to taking care of America's veterans.
    At the VA, we have the right dedicated people. With the 
President's proposed budget, we have the right resources too. 
The $87 billion requested for the VA represents a 77 percent 
increase in veteran spending since this President took office 
on January 20th, 2001. Medical care spending is up 83 percent.
    Mr. Chairman, I will outline the major portions of our 
proposed budget at this time. For the Veterans Health 
Administration, our total medical care request is $36.6 billion 
in budget authority for healthcare. VA healthcare is the best 
care anywhere. That sounds boastful. It is perhaps. Where I 
come from, they used to say it is not bragging if it is true.
    We have asked your staff to distribute to you some 
materials for you to peruse about what others are saying about 
the VA and the quality, the supremacy of its healthcare, 
medical journals, national media, institutions such as the 
Harvard University, who twice in the last 12 months cited the 
VA as providing the best healthcare and leading this Nation in 
healthcare delivery, safety, and technology.
    During 2008, we expect to treat about 5.8 million patients. 
This total is more than 134,000 or 2.4 percent above the 2007 
estimate. Patients in priorities one to six, veterans with 
service-connected conditions, lower incomes, special healthcare 
needs, and service in Iraq and Afghanistan will comprise 68 
percent of the total patient population in 2008. They will 
account for 85 percent of our healthcare costs. I repeat, 68 
percent of them will take 85 percent of our resources.
    The number of patients in priorities one to six will grow 
by 3.3 percent from 2007 to 2008. In 2008, we expect to treat 
about 263,000 veterans who served in Operation Iraqi Freedom 
and Operation Enduring Freedom. This is an increase of 54,000 
or 26 percent above the number of veterans from these two 
campaigns that we anticipate will come to the VA for healthcare 
in this fiscal year. And it is 108,000 or 70 percent more than 
the number we treated in 2006.
    Regarding access to care, with the resources requested for 
medical care in 2008, the Department will be able to continue 
our exceptional performance dealing with access to healthcare. 
Ninety-six percent of primary care appointments and 95 percent 
of specialty care appointments will be scheduled within 30 days 
of the patient's desired time for an appointment.
    We will minimize the number of new enrollees waiting for 
their first appointment to be scheduled. In the last 8 months, 
we reduced this number by 94 percent, and we will continue to 
place strong emphasis on this effort.
    Regarding mental health services, the President's request 
includes nearly $3 billion to continue our effort to improve 
access to mental health services across the country. The VA is 
a respected leader in mental health and PTSD research and care. 
About 80 percent of the funds for mental health go to treat 
seriously mentally ill veterans, including those suffering from 
post-traumatic stress disorder.
    On medical research, the 2008 budget includes $411 million 
to support the VA's unparalleled medical and prosthetic 
research program. This amount will fund nearly 2,100 different 
high-priority research projects to expand knowledge in areas 
most critical to veterans' particular healthcare needs.
    Most notably, research in areas of mental illness, 49 
million; aging, 42 million; health services delivery 
improvement, 36 million; cancer, 35 million; and heart disease, 
31 million. Nearly 60 percent of our research budget is devoted 
to OIF-OEF healthcare issues.
    Regarding polytrauma care, I have traveled to three of our 
four polytrauma centers, and there is no doubt that these 
centers of compassion are where miracles are performed every 
day.
    In response to the need for such specialized medical 
services, the VA has expanded its four traumatic brain injury 
centers, which are in Minneapolis, Palo Alto, Richmond, and 
Tampa, expanded the system to have regional polytrauma centers, 
17 additional of those accompanying the specialties of these 
traumatic brain injury centers, but in 17 more locations making 
them more accessible, more convenient to veterans who settle 
outside and around the country.
    These expanded 21 polytrauma network sites and clinic 
support teams will provide state-of-the-art treatment and, as I 
said, will provide it closer to the injured veterans' homes.
    On seamless transition, one of the most important features 
of the President's 2008 budget request is to ensure that 
servicemembers' transition from active duty to veteran status 
or a demobilized National Guard or Reserve person to civilian 
life is as smooth and hassle-free, as seamless as possible.
    And we will not rest until every seriously injured or ill 
service man or woman returning from combat in Iraq or 
Afghanistan receives the treatment that they need in a timely 
way and in a manner free of tension and hassle.
    The Veterans Benefits Administration, let me focus on 
veterans' benefits and VA's primary focus within the 
administration of benefits remains unchanged. As I said, 
delivering timely and accurate benefits to veterans and their 
families and improving the delivery of compensation and pension 
benefits has become an increasingly challenging issue, as 
several of you have noted so far, during the last few years.
    The volume of claims applications has grown substantially 
during just the last few years and is now the highest that it 
has been in a decade and a half. We received more than 806,000 
claims in 2006. We expect this high volume of claims to 
continue as we are projecting to receive about 800,000 claims a 
year in both 2007 and 2008.
    However, through a combination of management and 
productivity improvements and our 2008 request to add 
approximately 450 additional staff, we will improve our 
performance while maintaining the high quality that we have 
today.
    We expect to improve the timeliness of processing claims to 
145 days with this 2008 budget. We will make better use of new 
technologies and have more trained people to process and 
evaluate claims. With this budget, we project that we can 
reduce our claims processing time by 18 percent.
    For the National Cemetery Administration, we expect to 
perform nearly 105,000 interments in 2008 or 8.4 percent higher 
than those done in 2006. This is primarily the result of the 
aging of the World War II and Korean War veteran population and 
the opening of new cemeteries. Parenthetically, especially for 
those of you who are new in the Committee, every day in our 
country now, about 1,800 veterans die. There are slightly more 
than 24 million veterans, and about 1,800 every day pass away. 
About 600,000 a year pass away. And on a net basis, the veteran 
population in our country decreases between 400 and 500,000 a 
year currently.
    The President's 2008 budget request includes $167 million 
in operations and maintenance funding to activate six new 
cemeteries and to meet the growing workload at existing 
cemeteries by increasing staffing and funding for contract 
maintenance, supplies, and equipment.
    For capital programs relating to the National Cemetery 
Administration, this budget request includes overall 1.1 
billion in new budget authority for capital programs. It 
includes $727 million for major construction projects, $233 
million for minor, $85 million in grants for State extended-
care facilities, and $32 million in grants to build State 
veterans' cemeteries.
    The 2008 request for construction funding for healthcare 
programs is $750 million. These resources will be devoted to 
the continuation of the Capital Asset Realignment for Enhanced 
Services or CARES Program. Over the last 5 years, $3.7 billion 
in total funding has been provided for CARES. Within our 
request for major construction, resources are there to continue 
six medical facility projects that are already underway. They 
are in Pittsburgh, Las Vegas, Denver, Orlando, Lee County, 
Florida, and Syracuse, New York.
    Funds are also included for six new national cemeteries in 
Bakersfield, California; Birmingham, Alabama; Columbia-
Greenville, South Carolina; Jacksonville, Florida; southeastern 
Pennsylvania; and Sarasota County, Florida.
    For information technology, the VA's 2008 budget request is 
$1.8 billion, which includes the first phase of our 
reorganization of IT functions within the Department, and 
establishes a new IT management system in VA. This major 
transformation of IT will bring our program in line with the 
best practices in the IT industry. Greater centralization will 
play a significant role in ensuring that we fulfill my promise 
to make the VA the gold standard for data security within the 
Federal Government. To that end, our 2008 IT budget includes 
almost $70 million for enhanced cyber-security.
    Mr. Chairman, I know the Committee shares with me the 
concern about the VA's ability to secure all our veterans' 
personal information. There have been security incidents that 
are simply unacceptable, and I have made it a priority to 
assure our veterans that we are addressing their concerns. It 
is not that these incidents will never occur. But when they do, 
the VA now has a process to properly respond to them.
    We are encouraging all of our employees to report, 
including self-reporting, thefts or other losses of equipment 
whether in the workplace, at home, or on travel, so that we can 
strengthen our information security procedures through lessons 
learned, reviews, and personal accountability.
    The most critical IT project for our medical care program 
is the continued operation and improvement of the Department's 
electronic health records. I have made it a point for the past 
year to praise our electronic health records for their ability 
to survive hurricanes Katrina and Rita, for example, where we 
had over 50,000 veterans affected, and not one of them lost a 
health record. Compare that to the civilian record, where over 
a million people lost health records.
    Electronic health records are a presidential priority, and 
VA's electronic health record system has been recognized 
nationally for increasing productivity, quality, and patient 
safety.
    Within this overall initiative, we are requesting $131.9 
million for ongoing development and implementation of the 
Healthy Vet-VISTA system. This is the program to modernize our 
existing electronic health records. It 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 
organizations.
    Additionally, Mr. Chairman, in closing, I want to take this 
opportunity to inform you and the Members of the Committee of 
my plan to create a new Special Advisory Committee to the 
Secretary. We have several of these Committees, some chartered 
by statute, some by regulation. This will be a very important 
Advisory Committee to me. It will be on the subject of OIF, OEF 
veterans and their families.
    The panel of the Committee will include veterans, spouses, 
parents, combat veterans, and survivors. It will report 
directly to me and will focus on ensuring that all men and 
women with active military service in Iraq and Afghanistan are 
transitioned to the VA in that seamless manner that I spoke of 
earlier, seamless and informed. The Committee will pay 
particular attention to severely disabled veterans and their 
families.
    Mr. Chairman, this concludes my remarks. I look forward to 
your questions. Thank you.
    [The prepared statement of Secretary Nicholson appears on 
p. 70.]
    The Chairman. Thank you, Mr. Secretary, and I think all of 
us have had experience with advisory committees. They can 
really work well, so we congratulate you on setting that up.
    We will have a first round of questions, 5 minutes from 
each Member. That will include the Chair and the Ranking 
Member.
    The audience cannot see it, but we have a green, yellow, 
and red light system in front of us. So when you see the yellow 
light, you have got one more minute. And we will have a first 
round, and if there is a need for a second, we will do that 
too.
    Mr. Secretary, on the enrollment fees, last year you 
estimated that the proposal would cause almost 200,000 veterans 
to leave the VA. This year, you do not have an estimate as to 
the number of veterans who might leave the VA if the proposal 
is enacted and we start charging an enrollment fee in 2009.
    In addition, differently than last year, you deem any 
revenue that would be collected from an enrollment fee to be 
mandatory instead of discretionary revenue and subtracted, 
therefore, from the VA mandatory amounts.
    Do you have an estimate for how many veterans would leave 
the system if the enrollment fee was proposed? What is the 
policy that led you to change from the use of those fees from 
discretionary to mandatory?
    And I guess the same question enters all of our minds. 
Every year that you have been there, you have submitted an 
enrollment fee proposal. Each year, we reject it. Do you think 
this year will be any different, and why is it still in there? 
Why does it keep popping up like this?
    Secretary Nicholson. You are right, Mr. Chairman, we had 
had this discussion in the two previous times I have been up 
here on the budget. And I will tell you and the Members of the 
Committee that I support this system of a modest enrollment fee 
and co-payments.
    I think there is an equity there with retired military, for 
example, who go on TRICARE, and pay an enrollment fee and they 
pay a co-pay. These are people that may have served 30 or 35 
years in the active military. And to ask a person to whom the 
VA is providing full medical care, which are only people, by 
the way, who have no service-connected disabilities, and who 
are working and have jobs and have incomes, to pay these modest 
fees to participate in this great system, to me, makes sense. 
It makes sense because of the equity that I have described, and 
it allows the VA again to give better care, have a system that 
serves those that really need it better.
    And as to your question about why we did not have it in our 
proposal, again, it only applies to categories seven and eight. 
And the thing that is different about this year--there are two, 
I think, substantial differences.
    First, the approval of it is not assumed in this budget. So 
if you do not approve it, you the Congress, it will not work a 
deduction from this budget and the application of the funds in 
this budget. That is a change.
    Second, we have a progressive schedule in here. There would 
be no enrollment fee for anyone--and, again, we are only 
talking about people that have no service-connected injuries--
but there would be no enrollment fee for anyone making less 
than $50,000, and that is new. For those that are in the income 
of 50 to 75,000, it would be $250 a year and so forth.
    Because we are not showing it as a policy initiative with 
efficiencies that would help fund this budget, it would take 18 
months to implement and the funds would go to the Treasury in 
2009 and subsequent years. And for a 10-year period, it would 
accrue to $1.1 billion.
    The Chairman. Thank you. I agree it is better than last 
year's. If it does not go through the mandatory budget, 
somewhere in the budget it is affected. So it is not as if it 
is free money somewhere that the President has not counted on 
in his mandatory budget. But I think it is dead on arrival, and 
you can tell the President he is going to have to make it up 
somewhere else.
    Mr. Buyer, you have 5 minutes.
    Mr. Buyer. Mr. Secretary, that is the attitude that I said 
that is here in Congress. We erred, yet Congress never likes to 
live up to our error when it is our fault. We love to bash you. 
We love to bash other people, blame other people for our 
mistakes. But these management tools are necessary. And we did 
not put them in, and we should have.
    And I erred when I created TRICARE for Life. I should have 
given some more of these cost containment management 
utilization tools to the Secretary of Defense and asked for 
these annual increases. That did not happen. Congress is 
unwilling to do that and especially at a time of war.
    And so the political speeches that could be used against a 
Member are so easy. So they are frightened, Members are. And so 
they would rather then throw their arm around the veteran and 
say I am going to stand with you rather than effectively 
managing government programs that we created.
    Now, I do compliment you because you adapted the 
recommendations that I did on the tiered process with regard to 
enrollment fees. And I agree with you, Mr. Secretary. I am the 
first to apologize because when I created the TRICARE for Life, 
I created those enrollment fees and co-pays, and now you have 
got that military retiree that you described, 30-year military 
retiree paying those things sitting next to someone who served 
one tour of duty who does not have to.
    And then there are Members of Congress who would tell that 
person who had one tour of duty, oh, well, you are entitled to 
lifetime healthcare. And then there are veterans' groups out 
there that are advocating, well, that is the cost of national 
security. Socialism? I do not think so. We fight for freedom. 
And if these individuals can then gain access to government 
programs, they ought to be willing to pay for it.
    I compliment you because you are having to manage a ghost 
population that is ebbing and flowing in and out of this system 
and it is very, very challenging. It is very, very difficult. 
Yet, we are not going to give you any management tools.
    You know what I would suggest when you have got these fees? 
I wish Congress would adopt them. I would not do them for 
deficit reduction as recommended. You know what I would do with 
them since you have got them on the mandatory side of the 
House? I would apply it to DIC. I would take those dollars. I 
would eliminate the offset with the survivor benefit plan. I 
would take those and say I will stand with the widows and the 
orphans. I mean, there are some things that we can do with 
those dollars. But you had an idea. I have one. Everybody has a 
particular idea.
    For an example of how difficult, Mr. Secretary, your 
challenge is, you came to us and we went into the budget 
modeling and we found out the errors and the stale data, and 
you said to this Committee I have a $975 million shortfall. 
Then the Senate, playing one-upmanship with the House, put in 
1.5. Then a few months later, the carryover into the budget 
that you are to claim ownership over is $1.1 billion.
    Now, nobody ever even said anything about it. They said, 
oh, my gosh, you said $975 million. They gave you $1.5 billion. 
Your carryover was $1.1 billion. It is the challenge of trying 
to manage that system.
    And, Dr. Kussman, when you were on active duty, it was no 
different than managing TRICARE. When I chaired Personnel, guys 
would come over and you would testify on the military budgets 
and you would come up with shortfalls, and we would have to 
then come in in a military appropriations supplemental and plus 
it up because you are trying to manage the ghost population. 
And you are doing the very same thing in the ebbing and flowing 
of these people in and out of the systems.
    And you are absolutely right, Mr. Secretary, these are not 
the disabled. They are individuals who by choice are gaining 
access to that system. And why? A lot of them wanted access to 
the low-cost medications.
    So let me ask you this specific question. Mr. Secretary, I 
am sure you are aware in previous Congresses, in particular, 
the 102nd Congress back in the 1990, 1992 time frame, there 
were changes that were made to the Medicare, Medicaid programs 
to allow purchasing and gaining access to the Federal supply 
schedule. The Democratic controlled Congress immediately 
repealed it because it had an impact upon the price of drugs 
for veterans.
    What would the financial impact be on the VA of House 
Resolution 4 that just passed this House here in January when 
we said, alright, we are going to let Medicare Prescription 
Drug Purchasing Bill? What is the impact of that bill on VA 
drug pricing?
    Secretary Nicholson. Well, it is difficult for us to know 
that because we do not know whether we are going to be able to 
continue to access our pharmaceuticals in the same way and at 
the same prices that we have been, which has been very 
efficient. And we certainly hope that we can continue to do 
that.
    We have a very unique distribution of pharmaceuticals in 
the VA, and it is extremely efficient. And it is another area 
of innovation that the VA has created that a lot of people look 
at. We dispense most of our pharmaceuticals through the mail.
    And I would invite any of you on the Committee, and I will 
say this generally, to visit any of these unique facilities we 
have, polytrauma centers and so forth.
    But one other unique thing that we have is called CMOP, 
which is a consolidated mailing of pharmaceuticals. And if you 
want to think Home Depot for the minute and maybe a bigger 
version, mega store, you go in there and you see these little 
carts running around on ball-bearing driven things, all 
computer driven, we dispense in those things about 100,000 
prescriptions a day. And they go out UPS, FedEx, or through the 
mail, including registered and controlled substances in certain 
instances.
    So we have a very efficient system that allows us to serve 
so many patients. We dispensed over 200 million individual 
prescriptions last year. And I can only say I hope it does not 
affect us. I could not predict that.
    Mr. Buyer. Mr. Chairman, I note that the light is on. You 
provided information that it would cost between six to seven 
hundred million would be the maximum financial impact annually 
to the VA. Was that accurate?
    Secretary Nicholson. That this bill would?
    Mr. Buyer. Yes.
    Secretary Nicholson. I cannot verify that, Mr. Buyer.
    Mr. Buyer. Please do that.
    Secretary Nicholson. I will look and respond back.
    [The information was provided in the response to question 
one from Mr. Buyer's post-hearing questions for the record, 
which appears on p. 133.]
    Mr. Buyer. Thank you.
    The Chairman. Thank you, Mr. Buyer. I see your new slogan. 
We can do it, you can help.
    Mr. Buyer. We what?
    The Chairman. We can help. You can do it, we can help. It 
is Home Depot's slogan.
    [Laughter.]
    The Chairman. Alright. Mr. Michaud, you are recognized for 
5 minutes.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    Thanks once again, Mr. Secretary. A couple of questions.
    How much of the money that you are requesting in this 
budget dealing with minor construction will be allocated for 
the construction of the new CBOCs that are recommended under 
the CARES process, and how many of the 156 high-priority CBOCs 
recommended under CARES have been built and are fully 
operational?
    Secretary Nicholson. At the end of fiscal 2006, we had 717 
fully operational community-based outpatient clinics, CBOCs.
    Mr. Michaud. What is the number again?
    Secretary Nicholson. Seven hundred and seventeen.
    Mr. Michaud. Thank you.
    Secretary Nicholson. There was an addition of eight new 
CBOCs in fiscal 2006. We have approved 24 so far in fiscal year 
2007. For 2008, we have not yet finalized the total.
    Mr. Michaud. Okay. And how much of the money in the minor 
construction are for the--have you set a certain amount aside 
or is all that going for----
    Secretary Nicholson. Congressman Michaud, the CBOCs are not 
in the minor construction budgets. They are in the operating 
budgets of the VISNs.
    Mr. Michaud. Okay. Thank you.
    My next question dealing with PTSD. We have heard 
statistics that over 25 percent of the men and women coming 
back from Iraq or Afghanistan have some form of mental health 
issue or PTSD. I was reading an article the other day where the 
Minister of Defense of England figures that only 2 percent of 
their folks have a lasting form of PTSD.
    My question is, as it relates to PTSD, how does the VA, and 
how does the Department of Defense, determine or diagnose PTSD? 
Is there a difference in the diagnosis of PTSD?
    Secretary Nicholson. No, there is no difference. And I 
would maybe ask Dr. Kussman to expand on this very important 
subject. Let me give you an overview.
    Of those who have returned from OIF-OEF, which is over a 
million servicemembers, about 610,000 of them have returned to 
civilian life, either having been discharged or having come off 
active duty as a Reservist or Guardsman.
    Of that number, we have seen about a third. We have seen a 
little over 200,000, and we have screened each of them for any 
mental health problems, just as we do for physical health.
    And of that number, that 200,000, I think it is about 
206,000 we have seen, for about 60,000 of them we have 
identified some mental health issue; that is because they have 
noted that they are having sleeplessness or some other symptom.
    And of that number, about half of them we are treating for 
PTSD. It is actually a little over half. That is about 39,000. 
So, you know, each of them, individually it is an important 
case. But as a percentage, you can see that, of the 200,000, it 
is a little less than 20 percent.
    I would ask, Dr. Kussman, do you have anything to add?
    Dr. Kussman. Thank you, sir.
    The diagnosis and evaluation of PTSD is the same for DoD 
and the VHA. We have a joint clinical practice guideline that 
we do together. So I think it is pretty standard how you 
evaluate people.
    Furthermore, besides all the outreach that we have in 
reference to mental health and PTSD in particular, when anybody 
comes to us of the 205,000 that the Secretary mentioned, there 
is a drop-down menu, as he said, to ask people whether you have 
the symptoms.
    The Chairman. Dr. Kussman, is your microphone on?
    Dr. Kussman. I thought it was on. I was too far away.
    So I think that we have a very aggressive outreach both 
with our own system and in partnering with DoD for the post-
deployment health risk assessment programs that are 
aggressively done, particularly with National Guard and Reserve 
90 to 180 days after they come back, to ask them if they have 
any issues related to the things consistent with mental health 
and PTSD.
    The Chairman. Thank you.
    Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much.
    Mr. Secretary, thank you for joining us this morning.
    I recently had what I call a veterans' forum in one of my 
communities, and we had both the healthcare side of the VA and 
the benefits side of the VA. And it was evident that the 
healthcare side continues to receive more and more compliments 
all the time.
    In the time that I have been in Congress, it is clear to me 
that the VA has improved its delivery of healthcare, and 
veterans are appreciative, not that it is not without 
challenges and problems and individual circumstances. But on 
the benefit side, constant criticism of the time frame, the 
wait, the backlog.
    And I have a couple of questions, a specific question 
about, does this budget--how successfully will we be if we 
adopt the administration's budget in eliminating the backlog of 
cases on the benefit side?
    And also a second question. I would like to see an 
Administration budget that tells us how we eliminate the 
category seven and eight discrimination. I would like to see 
the categories eliminated. I believe you have the authority 
every year to make that determination. And my assumption is 
that, based upon priorities and resources, you make the 
determination that the category seven and eight will remain in 
place.
    What would it take for us to work with the Department of 
Veterans Affairs to eliminate that distinction?
    And, finally, I want to tell you that I am working very 
closely with the VISN Director in Denver. The eastern part of 
your State and the western part of my State are inadequately 
cared for when it comes to clinics, and I am pleased to know 
that the VISN Director is in the process of adding a CBOC in 
our region.
    As you know, the eastern part of Colorado, the western part 
of Kansas is sparsely populated and many veterans have a 4- or 
5-hour drive to either Wichita or to Denver in order to access 
even routine care. So I am thankful for the process as I see it 
occurring, and I am hopeful that you will encourage that a CBOC 
be located in western Kansas.
    And, finally, we are working on a veterans' cemetery, and 
this may be a question for Under Secretary Tuerk, near Fort 
Riley, a State veterans' cemetery. And I am interested in 
knowing whether the Administration's budget provides for money 
for construction in fiscal year 2008.
    Thank you, Mr. Secretary.
    Secretary Nicholson. Thank you, Mr. Moran. Let me address 
these issues in the order you did.
    I appreciate the kind remark about veterans' healthcare. 
Veterans' benefits is a very important part of what we do. It 
is a very important part of the predicate for the VA in the 
first place, which is to make whole a person who raises their 
hand, takes the oath, and goes off and is in some way 
diminished as a result of that service, either physically or 
mentally.
    And so while we take care of them on a contemporary basis 
in our healthcare, many of them need to be supported. So it is 
a very important activity, and we take it that way. And I 
wanted to compliment Chairman Filner and thank him because we 
are going to have a roundtable just on the subject of veterans' 
benefits because it is a very complicated, massive undertaking. 
And I think it would benefit those that could make it to really 
learn about the internal workings of the veterans benefits 
system.
    I do not want to sound overly defensive in my response 
because I do not mean it that way. One of the reasons for the 
current condition is that our outreach, which has been very 
robust, is really working because veterans are responding, and 
the outreach is unprecedented.
    For example, those people that are on active duty in the 
military today benefit from the presence of over 140 outreach 
VA counselors imbedded in these active military installations 
to get them tutored, if you will, on what they are entitled to 
before they come off active duty.
    Well, we are doing a good job in marketing ourselves 
because they are coming in in very big numbers. As I said, last 
year, 806,000 individuals presented themselves for benefits.
    But the other thing that is happening is that some of them 
are like me, they are getting longer in the tooth, and when you 
do that, you know, it is not just the arthritis in your knee, 
but it is the rotator in your shoulder and maybe it is 
something in your plumbing.
    And so the average of these now is about six different 
issues which means that they have to go to six different 
clinics for evaluations. And our system under the law is that 
we have to make some causal connection to that malady to their 
service, unless they are a Vietnam veteran where there are 
certain presumptions now due to their service in Vietnam, 
things like diabetes and leukemia. They do not have to make 
that verification if they served in Vietnam.
    And if we want to maintain the integrity of this system, 
you have to do it that way and you have to plumb for those 
records. And so that is kind of an overlay, and I hope this 
workshop, we can really get into it, maybe even walk you 
through a case and take a look at some of these files, some of 
which are two or three feet high for a 30-year member of the 
service.
    In this budget, we have a plan to bring this number down by 
18 percent. And I will say that when this Administration took 
over, the waiting time was well over 200 days. It is now at 171 
days, which is too long. It is longer than I want it to be and 
certainly longer than the veterans want it to be.
    If we get this funding, we will be able to pull it down to 
145 days. We are also going to employ additional technology to 
perfect this VETSNET System, which is really starting to kick 
in and help. That is the overlay on that.
    The question about category sevens and eights is an 
important one. Historically there was open enrollment until 
January of 2003 when eights were no longer enrollable. Eight is 
a person with no service-connection disability and have an 
income above a certain threshold. Priority seven veterans have 
lower incomes than priority eights.
    It is a matter of resources. We have a war going on. We 
have people coming back with a very high priority. We have a 
record number of veterans coming to us for care. If you want to 
accept the proposition that there are not unlimited resources 
for this, then it is a matter of priority and that that 
priority judgment is right now that they are not enrollable. 
Most of them, by the way, have health insurance.
    Mr. Moran. Mr. Secretary, what amount of money would it 
take to eliminate the distinction on seven and eight?
    Secretary Nicholson. My Chief Financial Officer just told 
me it would take $1.7 billion a year. But it is progressive and 
over 10 years, it would be an additional $33 billion.
    Quickly on your mention of rural health, that is another 
legitimate challenge that we have in trying to be available to 
all veterans wherever they decide to live in our country. And 
many of them decide to live in rural areas. As we just said, we 
have 717 clinics now, and 39 more in the pipeline. We are 
trying to get ourselves out there closer to where veterans are.
    We also are doing a lot more in our rural healthcare 
initiative for telehealth and telemedicine. At the end of the 
last Congress, the omnibus veterans bill mandated to us to put 
together an enhanced rural healthcare initiative, which we have 
now put a planning committee together to do that.
    The Chairman. Thank you, Mr. Moran. You brought up issues 
that I think we are going to take up as a Committee just 
focusing in on both those questions.
    Mr. Moran. I thank the Secretary and I look forward to 
attending your forum on benefits.
    The Chairman. Thank you.
    Ms. Herseth.
    Ms. Herseth. Thank you, Mr. Chairman. I would defer to any 
Member who was here prior to me.
    The Chairman. Okay. Mr. Hall, please. You have 5 minutes.
    Mr. Hall. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary.
    The VA announced yesterday that it will be opening a new 
veterans center in Middletown, New York, right on the edge of 
my district, but in a location that will serve many veterans 
who live in my district, and I am grateful for that.
    I want to thank you on their behalf and mine and thank the 
Department and say that I look forward to working with you to 
make sure that it is fully staffed. I cannot say enough good 
things about these regional vet centers.
    And the first question for you is, is the VA allocating 
enough resources to ensure that these vet centers are fully 
staffed and functioning?
    Secretary Nicholson. I suppose, sir, that would be a value 
judgment that someone could decide. We think we are, and they 
are growing. Currently there are 207 Vet Centers and through 
this budget, there would be 232 of them.
    And additionally, in these Vet Centers, we are imbedding a 
mental health specialist and we are trying to staff them with 
Global War on Terror veterans to the extent that we can, as 
long as they meet the qualifications.
    Mr. Hall. Thank you for that information. I guess time will 
tell, you know, as we see how well it is working.
    My second question is that I have heard feedback from 
veterans in my district and also from the management and staff 
at the Montrose and Castle Point VA facilities that they would 
be interested in a paperless outreach program so that veterans 
who are newly returning and maybe are shying away from getting 
involved in the system for various reasons can be spoken to by 
a staffer who visits them without having to fill out paperwork 
and at least have an offer of, you know, or a description of 
the services and benefits available to entice them to take that 
step of signing up.
    Have you considered such a thing?
    Secretary Nicholson. A paperless enrollment?
    Mr. Hall. Paperless outreach.
    Secretary Nicholson. Paperless outreach. Well, we do some 
of that. I mean, some of it is using technology such as e-mails 
and the Internet. I would have to consider it and, I guess, 
fully understand what you are envisioning there.
    Mr. Hall. Maybe at the round table, we can get into that. 
It may come up from other people, but I first heard that from 
vets and VA staff in my district.
    And as the Chair of the Subcommittee, which I am honored to 
be chairing, on Disability Assistance and Memorial Affairs, I 
wanted to ask you about the backlog. How many of those 600,000 
or whatever the actual number is, approximate number of backlog 
claims are due to--how much of the problem is due to a 
technology fix that is needed and how much of it is due to a 
personnel shortage to process the claims or is there a third 
factor that I am missing?
    Secretary Nicholson. The question is that waiting time to 
adjudicate a claim, how much is personnel and how much is 
technology? It is probably a little bit of both of those. And, 
again, I do not know how much time you want to spend on this.
    But this system, as soon as it is kicked off, when a 
veteran files a claim, then we start doing what they call 
developing the claim. And they have to write, call, fax the 
veteran for certain pieces of information to verify the 
incident that is the subject of the claim. They have 60 days to 
respond. By law, they have 60 days to respond to each request.
    And the truth is that they have more than that because we 
are lenient on that. If they did not make the 60 days, that is 
not an absolute. But it can stretch the time period out.
    The technology piece that we are implementing with VETSNET 
is going to help more on the back end after we finally get the 
claim developed and adjudicated, to get it processed and get 
the pay starting to flow because then that is not a judgmental 
issue anymore. We are going to pick up several days with that. 
That is overdue, that technology, because this is the 21st 
century, and it is high time we do that. But that is going to 
happen in this budget.
    Mr. Hall. Thank you, Mr. Secretary and Mr. Chairman.
    The Chairman. Thank you. We will resume with Mr. Baker 
after a 5-minute recess. We will return at eleven o'clock 
exactly.
    [Recess.]
    The Chairman. The Committee will resume. Thank you, Mr. 
Secretary, for spending this time with us. Mr. Baker from 
Louisiana is next for 5 minutes.
    Mr. Baker. Thank you, Mr. Chairman. I shall work very 
diligently to get my comments in within the 5-minute 
allocation.
    Mr. Secretary, I need to provide a short narrative for the 
record and for Members of the Committee to understand the 
particular frustration which I share, but wish to make clear at 
the outset my frustration is neither with you, the 
Administration, nor the agency which you are charged to 
operate.
    For the Members, I need to go through just a quick 
explanation of how I got to where I am so it will make sense as 
to the questions I finally offer.
    Pre Katrina, the New Orleans veterans hospital served about 
500,000 visits annually of veterans in the region. Post 
Katrina, we have no hospital. We have been working since that 
point a conclusion as to how to best address this healthcare 
need.
    Six months after the storm's land arrival, there was an MOU 
signed by the VA and State officials on February 23rd to 
evaluate the best and most advisable method of healthcare 
delivery. Only 2 months later, on April 30th, there was issued 
a collaborative opportunity study group report which set out a 
way in which the LSU healthcare facility and the veterans' 
healthcare needs could be jointly met.
    On page 30 of that report, Mr. Chairman, there was a time 
line established to set clear landmarks for the steps 
necessary. The LSU planning and programming was to have 
concluded by early 2007, VA planning and programming to have 
concluded by early 2007, with LSU land acquisition to have 
begun 2006, to be completed by 2007, with the ultimate 
completion of the facility, and opening by 2012.
    This plan was ultimately delivered to the Louisiana 
Recovery Authority, the entity created for resolution of post 
Katrina recovery. I would note as just some basic observations 
about very simple elements of the plan as outlined at that 
time, there were some concerns.
    First, the first 15 feet of elevation of the new structure 
would not be for patient occupancy. There would be a defend in 
place strategy adopted where people could stay within the 
facility for up to 8 days without external assistance. There 
would be consideration of an elevation of the perimeter of the 
site of post Katrina flood levels. I call that a levy in our 
terms.
    So what it means is that if we had a recurrence of the same 
circumstance, we would have an isolated facility capable of 
standing for 8 days surrounded by water that you could not get 
through by highway access.
    Whether or not an isolated island is appropriate for 
veterans' healthcare, I do not know. Those are certainly things 
that need to be considered. But when the Recovery Authority 
considered adoption of the plan requiring $300 million of State 
funding, they denied all elements of the plan save for three.
    The legislature reacted to that by, since they are not in 
session, by consideration of an interim emergency ballot, a 
mail ballot to force the LRA to spend $300 million on the 
completion of this plan.
    The trouble with that is the $300 million will actually 
come from the Department of HUD or CDBG money which the 
Secretary of HUD must approve, so we will have the State using 
Federal dollars to match Federal dollars.
    The further difficulty with the matter is to date, I am not 
aware of a plan that has been publicly submitted by any of the 
State officials for public discussion or consideration, and I 
do not know if there has been a demographic survey of patient 
distribution and where our veterans are, why there is necessity 
to insist on construction of a facility in urban New Orleans 
given the apparent concerns for patient safety, and whether or 
not there is a way to calculate the overall cost of the project 
without an operating plan in hand.
    Therefore, how could we possibly come up with a dollar cost 
figure for the State to match either on the Federal or State 
end without having such a business plan in the public domain?
    At the end of the day, I am only concerned about one thing 
from this perspective on this Committee, and that is getting 
healthcare restored for veterans in Louisiana at the earliest 
possible date. Given the time line in the well-conceived plan 
that I hope would be executed as it is outlined, it will be 
2012 before we would open doors on a facility.
    Now, given the State's inability, and this is my 
conclusion, given the State's clear inability to provide the 
agency with a business plan outlining what it is we choose to 
do and how the shared responsibilities will be designated, Mr. 
Secretary, the MOU provides only one methodology for 
cancelation of the contract, and that is by either party to 
unilaterally withdraw by written notice to the other. There is 
no other term for elimination of the MOU.
    Will you at some point take it as an important public 
policy matter to establish a clear-cut date by which the State 
of Louisiana must provide you with a clear operating plan that 
outlines financial terms, business operations, and 
relationships between VA and the LSU healthcare providers or, 
in the alternative, how long do I tell veterans in Louisiana 
they have got to wait for Louisiana to get its act together?
    Secretary Nicholson. Well, thank you for that question, 
Congressman. It has a lot of parts to it and it is important. 
We have been working that really since just after Katrina. We 
have a collaborative work group.
    And I had a meeting in my office several weeks ago and told 
the people that were up from Louisiana, the decisionmakers from 
both LSU and the Recovery Authority that we at the VA 
essentially are ready to start a hospital. We have even 
selected the architectural and engineering firm.
    And we have entered into that memorandum of understanding 
with LSU because we think it makes great sense.
    Mr. Baker. Mr. Secretary, if I may, because my time is 
limited, I want to commend you for your effort. As I said at 
the outset, this is not about your agency's failure. This is 
about Louisiana's failure to meet any reasonable time line.
    As I understand it, this was supposed to have been done and 
submitted to you and to Secretary Levitt, because this has a 
lot of moving parts, Mr. Chairman--this is also a general 
healthcare issue that must be considered with another agency--
but to have submitted to you in 2006 a plan for consideration 
and adoption.
    I am appreciative of the fact you are ready to move 
forward. The trouble is I do not know what we are ready to move 
forward with and where the State of Louisiana is going to get 
its money and by what time can I say either do it or do not. We 
are going to provide a healthcare facility in Louisiana one way 
or another. If they want to get their act together and be a 
participant, great.
    I think you are absolutely on target. This is a great plan 
if it can be better refined. But if they do not get to you, 
when? March, June, December? Is there any signal we can send 
back to folks in Louisiana and say let us get this thing done?
    Secretary Nicholson. There is a signal I think you can go 
back with, which is that our patience is wearing a little thin 
in that we want to get going.
    Mr. Baker. Mine is gone.
    Secretary Nicholson. You know, it is not so easy. The sites 
do not grow on trees around there. The site that we are sort of 
focused on with LSU, the site is five feet under sea level and 
it is----
    Mr. Baker. Mr. Secretary, that is why in the authorization 
language adopted by this Committee 6, 8 months ago, I insisted 
on the inclusion of in or near New Orleans. That was of some 
controversy. People thought I was trying to move it to my back 
yard in Baton Rouge. I am not. I am trying to get a facility 
that will not flood, that veterans can get to when they need 
it.
    Siting is not the big issue. The State has to come up with 
an operational agreement on who is going to do what and who is 
going to pay for what. They have not done that. That is 
unacceptable.
    Secretary Nicholson. Well, you are right. And as I started 
to say, we told them we are ready to go. You show us that you 
have the site confirmed and that you have the money to do your 
part.
    Mr. Baker. And they are going to get that from HUD.
    Secretary Nicholson. And when you have that, we are ready 
to be a partner and move out----
    Mr. Baker. Mr. Secretary, I do not----
    Secretary Nicholson. --because it makes good sense to----
    Mr. Baker. I do not want to harangue endlessly, but I will 
formally write to you asking for a date by which you expect the 
State to give you an answer. We have to have closure. And if 
the State cannot perform to your expectations in a reasonable 
time line, it is the veterans who have the expectation of being 
served here.
    And this is not Democrat, Republican. This is not anything 
but people who are still dealing with the aftermath of a storm 
which was devastating, and this is an essential component of 
our recovery and it is absolutely necessary that we get this 
project underway.
    I again state for the record I appreciate your diligence, 
your work, your agency's direction and motivation. This is not 
about you or your agency nor the Administration. This is about 
getting something done that is inexcusable if we do not move 
ahead.
    I thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Baker. And this is not just a 
problem for you. I think this is a national problem. And I just 
want to inform the Committee at Mr. Baker's request, this 
Committee will go to New Orleans and the surrounding area, have 
a tour, and have a hearing on this within a few months. And we 
can let Mr. Baker----
    Mr. Baker. And let me express my appreciation to you for 
that, Mr. Chairman.
    The Chairman. So we will be looking at this because it is 
part of a national necessity that we do this.
    Ms. Brown of Florida. Mr. Chairman, would you yield to me--
--
    The Chairman. I yield to Ms. Brown.
    Ms. Brown of Florida. --on that subject because I have 
already gone and taken a look at the facility and was involved 
in the negotiations with the House and the Senate to make sure 
that it was authorized, and now I understand that it is funded 
and it is moving forward.
    A lot of times, New Orleans gets bogged down in a lot of 
things. I do not want the veterans in that area to be like the 
veterans in Orlando, waiting 25 years for a facility.
    So I am pleased that it is moving forward, working with the 
ultimate kind of campus when you have the urban campus, a 
college, and the community working together. So I am pleased 
that it is moving forward.
    And I have already gone down and taken a look at it. And 
the people in that area, they have waited too long for 
assistance. And the government has reacted too slowly, and I am 
very pleased that you are moving forward with this facility.
    The Chairman. Thank you, Ms. Brown.
    Mr. Mitchell, you are recognized for 5 minutes. Mr. 
Mitchell.
    Mr. Mitchell. Thank you, Mr. Chairman.
    Mr. Secretary, I want to thank you and your staff for 
appearing before this Committee. I want you to know that I look 
forward to working with you. I believe that the best 
organizations are those that monitor their own performance and 
solve problems before they become too large and even more 
difficult to solve.
    I am proud to be the new Chairman of the Oversight and 
Investigations Subcommittee, and I look forward to working with 
you to find and correct small problems before they grow into 
large and costly catastrophic ones.
    As you know, since fiscal year 1999, the VA's Inspector 
General's Office has delivered a return on investment of over 
twenty-five to one for every dollar we have invested. This is 
accomplished in part through fines, penalties, restitution, 
savings, and cost avoidance.
    The Inspector General's contract reviews have returned 
millions of dollars to the VA, yet the VA's Inspector General's 
Office is the smallest relative to its parent agency from among 
all the statutory Inspector Generals. If the number of 
employees in the IG's Office were to grow to meet the ratio of 
the next smallest IG to parent agency ratio, the number of 
employees in the Office of the VA's Inspector General would 
double.
    In fiscal year 2007, the IG had a significant budget 
shortfall. And in the Administration's budget, the number of IG 
employees is cut even more. If the VA is to find and correct 
internal problems, find and implement best practices, and the 
Inspector General has a history of providing the VA with a 
significant and positive return on investment, shouldn't the 
size, and this is the question, shouldn't the size of the 
Inspector General's Office grow instead of shrink in this and 
future budgets? I think it should, and I am curious to find out 
why the Administration disagrees, and how can you explain the 
shortsightedness?
    Secretary Nicholson. First, let me say that I agree with 
your statement of the importance and cost effectiveness of the 
IG. In fact, since I have been in this job in 2 years, I really 
have come to respect the brilliance of the people that put this 
IG system into place in the government.
    I really welcome them and their services because this is a 
vast organization spread all over the world, including the 
Philippines and Guam, and it gives me some comfort that people 
are helping me watch these activities.
    And my impression based on discussions with our IG, who I 
consider a vital part of my management team, is that he is 
adequately staffed. They work very hard over there. And he 
would probably welcome your overture to expand, but he is a 
pretty forthcoming guy. And my impression is that he has got 
what he needs to do the job.
    Now, we did get an increase in this 2008 request right at 
the end so that he can hire some additional people.
    Mr. Mitchell. Mr. Secretary, you are saying then that the 
IG is satisfied with the number of people he has and he thinks 
he can do an adequate job with the people he has?
    Secretary Nicholson. Yes, sir.
    Mr. Mitchell. Thank you.
    The Chairman. I think you have a topic for one of your 
Subcommittee meetings.
    Mr. Mitchell. Yes, we do. Thank you.
    The Chairman. Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman.
    And, Mr. Secretary, thank you for coming today. And I have 
a broad question and a narrow question.
    First, my narrow question is, part of the length of time, 
and we are all concerned about how long it is taking for claims 
to be processed, is a mandatory 60-day waiting period on the 
part of the VA while the claimant is gathering material and 
information to substantiate his claim. And that is for the 
benefit of the claimant, the veteran, but has the consequence 
of prolonging this what, 170-day average period right now.
    So if we were as a Committee to take action to reduce that 
60 days to 50 or 40 days or something like that, and I know it 
is only procedural, it would have the effect of speeding up the 
whole process, but would require the veteran making a claim to 
speed up his or her activity. What would you feel about a 
proposal like that?
    Secretary Nicholson. It would speed it up, but it could 
work a hardship on some veterans because some of them use that 
time, either because they really need it to try to find a 
colleague that was in a unit to verify that they took a 
parachute jump that day and, you know, he did get hurt or he 
did land in a tree or he did serve here or there, which is the 
purpose of that. But if you narrowed that time period, it would 
speed it up. There is no question about it.
    Mr. Lamborn. Well, I know it is a waivable period right 
now, but maybe we should consider shortening that with 
extensions easily available.
    And then my second broader question is for you or the Under 
Secretary, Admiral Cooper. What does the budget propose for new 
technology or personnel to process claims and is that doing 
enough or at least can you tell us what you are proposing in 
the budget?
    Secretary Nicholson. I will comment and then ask Admiral 
Cooper if he would elaborate.
    We really need to be making better use of technology and we 
are now finally getting there. And Dan will comment on the 
VETSNET part of that. We could really highlight this in a 
workshop if we can have it and demonstrate to you that every 
veteran comes to us from the Department of Defense with a paper 
file.
    Now, this is parenthetical to your question, but we are now 
finally really starting to collaborate with DoD to get a common 
interconnected electronic medical record. We had a very good 
meeting and, in fact, announced this at a joint press 
conference the week before last.
    I had lunch this week with Deputy Secretary England of DoD 
with his key staff. This is finally starting to happen. But 
that is very prospective, and that will really help this down 
the road because those new veterans will come to us with 
electronic files. We do not have this paper chase that goes on. 
But we cannot do anything about it with the millions that are 
currently there. We have to deal with that.
    But I am going to ask Admiral Cooper if he would elaborate 
on the technology.
    Admiral Cooper. Yes, sir. Let me mention a couple of 
things. One, there is an increase in our budget this year for 
our primary resource, which is people. And we will have an 
increase with this budget of about 450 people.
    On top of that, the primary technology that we work with is 
a system called VETSNET. This system has had a rather tortuous 
past, but we have made a lot of progress in the last couple 
years.
    We have three of five components and we are fully utilizing 
those at every regional office today. Those are the components 
that help us to take in the claim and adjudicate the claim.
    The components we are working on now are those to help us 
pay the claim, pay it faster, pay it more effectively, and 
ensure the retroactive pay we send to a veteran is computed 
properly. It will also fight fraud.
    So it is the VETSNET System that we are working on 
wholeheartedly that will help us as far as technology goes.
    The Chairman. Thank you.
    Ms. Herseth, you are recognized for 5 minutes.
    Ms. Herseth. Thank you, Mr. Chairman.
    And, Mr. Secretary, thank you for your testimony.
    As you may know, I am the Chair of the Economic 
Opportunities Subcommittee, continuing to work with my friend, 
Mr. Boozman from Arkansas, as we focus on the myriad of issues 
under our jurisdiction I want to pose a question specifically 
with regard to the VA Education Service in a moment.
    But some of the questions raised have already dealt with 
access to healthcare for rural veterans. And in South Dakota, 
we have some CBOCs and others that have been proposed, and I 
just need to clarify with you a couple of things.
    First, you had mentioned in response to Mr. Michaud's 
question about the minor construction projects that the CBOCs, 
actually, come out of the operating budget of the VISNs, but my 
understanding is that the VISNs submit business proposals for 
these clinics to the CARES Program, that the actual 
construction of the clinics comes under the minor construction 
projects and then the operation of the clinics does come out of 
the operating budget.
    So could you just clarify how that has worked in the past 
and then I do want to ask a parochial question about where you 
are with the fiscal year 2008 list that has yet to be 
finalized.
    Secretary Nicholson. I am pondering whether there are any 
exceptions because I know we are building almost a 100,000 
square foot clinic in Columbus, Ohio, a non-inpatient clinic. 
So I reserve that question.
    But generally, the CBOCs do not fall into the minor 
construction budgets. They are funded out of the operating 
budgets of the VISNs and they are consequent to the CARES 
analysis that has gone on using a lot of demographic 
information. And the plans should be compliant with that master 
plan.
    As I said, we have 717. We did eight in 2006 and for 2007, 
we have approved 24 so far. And in 2008, can somebody help me? 
I do not think we know that, what that number is going to be. 
We are working on those business plans.
    Ms. Herseth. I appreciate that, but as you determine that 
number, I assume you are analyzing what number you are going to 
finalize and propose for fiscal year 2008 based on the budget. 
And so which budget line item would you direct me to evaluate 
as it relates to how many new CBOCs would be approved and 
operational in fiscal year 2008?
    Secretary Nicholson. Well, for you, probably the best path 
would be to go take a look at the VERA allocation that would be 
for your VISN and what the CARES study has said about the needs 
of that VISN.
    I was just handed a note saying that our planning predicate 
in that number for 2008 is 29 new CBOCs.
    Ms. Herseth. Twenty-nine additional?
    Secretary Nicholson. Yes.
    Ms. Herseth. Okay. We will follow up on others, but let me 
just ask a question particular to the jurisdiction of the 
Economic Opportunities Subcommittee.
    For fiscal year 2006, as well as fiscal year 2007, the VA's 
Education Service was allocated $19 million from the 
readjustment benefits account to enter into contracts with 
State Approving Agencies for purposes of approving courses for 
education under the Montgomery GI Bill and other related 
activities.
    Now, under Section 301 of Public Law 103-330, at the end of 
fiscal year 2007, the SAA funding would decrease to $13 
million. Is the VA planning to, or are you requesting within 
what has been submitted already, resources to maintain funding 
levels at the 2007 level?
    Secretary Nicholson. I am going to ask Admiral Cooper to 
answer that, if you would.
    Admiral Cooper. No, ma'am. We have not requested that. That 
money, as you know, goes to the States who then hire the SAAs. 
It is my understanding that about 5 years ago it was increased 
to 19 million, and it was stated that at this time, it would be 
reduced to 13 million.
    We are meeting next week or the following week with the SAA 
group as they come in to determine just what we will have to do 
with that.
    Ms. Herseth. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Bilirakis.
    Thank you, Ms. Herseth.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
    I have a specific question with regard to my district. The 
James Hailey VA Medical Center in Tampa, Florida, is one of the 
busiest, if not the busiest, medical centers in the country. 
Parking is a critical issue at the facility. Veterans complain 
about having to drive for long periods of time to find a 
parking space.
    As part of the fiscal year 2007 budget submission, the 
Department included a project to, ``improve patient parking at 
the Tampa VA Center, as a potential site for future 
construction.''
    What is the status of this proposed project and--well, if 
you can answer that question first, please.
    Secretary Nicholson. You are right, Congressman. We have 
had a real parking problem down there and we have taken steps 
to improve it. We have gotten and have applied about two and a 
half million dollars to that problem and acquired, I want to 
say--I remember looking at this yesterday--I think it is 2.6 
acres of land that we have been able to acquire for additional 
parking on. And that is well underway, which will go a long way 
to alleviate the parking problem that does exist there.
    Mr. Bilirakis. Okay. I appreciate it. One additional 
question.
    An issue that I am particularly interested in is helping 
our servicemembers--I think John talked about this--returning 
from Operation Iraqi Freedom and Operation Enduring Freedom 
transition back into civilian life.
    Your testimony highlights the VA's Coming Home to Work 
Initiative. How many veterans have taken advantage of this 
program?
    Secretary Nicholson. I will have to see if someone can help 
me with that number. One hundred and eighty-eight, I'm told.
    Mr. Bilirakis. One hundred and eighty-eight. What can we do 
to enhance or improve the program?
    Secretary Nicholson. That is a good question and is one 
that concerns me when I first came into this job and looked at 
those unemployment numbers of that age cohort of 20 to 25, 
which was then about three times the national rate for people 
that age. It has gone down now. It is about one and a half 
times more than the national rate. So it is still too high.
    I have made a lot of presentations to trade groups, 
National Governors Association trying to get people to reach 
out to hire veterans. The lead on this in the government is 
really at the Department of Labor, and so we are now 
collaborating with them.
    It is a combined effort that is needed to get the employees 
of this country to realize what outstanding prospects for 
employment these veterans are, and certainly to include the 
injured veterans or the seriously injured veterans. We are 
doing that. We are trying to model that ourselves, and we have 
twenty-some people working in our headquarters now, some still 
as interns from Walter Reed and Bethesda.
    We have one boy that I would like to talk about so much 
because he came back in a coma, was in a coma for weeks. He had 
a spinal cord injury. They did not think he would ever walk. 
The system really performed miracles on him. He now works for 
us full time and came into my office recently with a smile on 
his face telling me he was going to run a 5K race.
    But his real satisfaction in the restoration--he is still 
handicapped some--but is the fact that he is working. He has a 
job. He has value. And that is the best thing we could do for 
these veterans.
    And so we are trying to leave no stone unturned. The lead 
with Federal resources for that is really DoL.
    Mr. Bilirakis. Thank you, Mr. Secretary.
    The Chairman. If I had not assumed this position, I would 
be tempted to say something like it seems like the coma is a 
good background for some people.
    Ms. Brown.
    Ms. Brown of Florida. Thank you.
    Mr. Secretary, first of all, I always like to start out 
with the words of the first President of the United States, 
George Washington. The willingness with which our young people 
are likely to serve in any war, no matter how justified, shall 
be directly proportional as to how they perceive the veterans 
of earlier wars were treated and appreciated by their country.
    And with that, I want to thank you. The veterans in central 
Florida have been waiting 20 years in Orlando for a hospital 
and it is going to be announced soon, and that thank you for 
the cemetery in Jacksonville. And last, I understand yesterday 
a new vet center will be built in Gainesville.
    But coming to the overall issues that I am concerned with, 
every year, you all come forward and put up increasing co-
payments and enrollment fees that the Congress rejects. And in 
your own estimate, it discourages veterans from enrolling, at 
least 200,000. And you still are not allowing new priority 
eight veterans into the system.
    And I was just doing a quick analysis. To fund that entire 
program, how much did you say it was, sir, $1.7 billion? Is 
that what you said?
    Secretary Nicholson. One point seven billion dollars for 
2008 and $33 billion over the next 10 years.
    Ms. Brown of Florida. Well, you know, I was just looking at 
the news and most people up here cannot visualize a billion. 
But it's my understanding, about $12 billion in Iraq that is 
unaccounted for. $12 billion.
    So we could entirely fund the veterans if we could just 
identify $1.7 billion, and that is one point--how many millions 
of veterans that we could fund, over a million veterans that we 
could fund if we could identify those funds. So I think it is 
important that Members on both sides figure out where that 
money is.
    But another area. You all issued cuts to research that will 
come up with innovative ways to help people who have lost limbs 
because of this recent war. I do not understand that. Why would 
we be cutting research in that area?
    And lastly, we have had round-table discussions, lengthy 
discussions on security. And recently in Alabama, a portable 
computer hard drive containing personal information on veterans 
was reported missing from a VA facility in Birmingham, Alabama. 
I mean, I do not understand how that could happen after all of 
our discussions.
    So, thank you for your investment in Florida. Please 
address those issues that I pointed out.
    Secretary Nicholson. Yes, ma'am. Prosthetics, our 
prosthetics budget is up in this budget by 9 percent, up $1.3 
billion in prosthetics.
    Ms. Brown of Florida. Yes. I was asking about research 
because that is coming up with the newest technology to assist 
them. Is there a cut in the research? I guess that is what I am 
asking.
    Secretary Nicholson. The research budget, the overall VA 
portion of it is about level because we get grants both from 
Federal and non-Federal sources each year. So our overall 
research budget will be up in 2008 if it is approved. And the 
total amount would be about almost $1.4 billion, and that 
includes just under 2,100 different research projects which 
includes prosthetic research. And it is at 114 different 
locations around the United States.
    Ms. Brown of Florida. And the question about the computer?
    Secretary Nicholson. I am sorry?
    Ms. Brown of Florida. The computer, the computer that is 
missing from Birmingham, Alabama.
    Secretary Nicholson. Yes, ma'am. That is a data breach. It 
does not make you happy and it does not make me happy.
    Ms. Brown of Florida. Did we fire anybody?
    Secretary Nicholson. Pardon?
    Ms. Brown of Florida. Did we dismiss anyone, terminate?
    Secretary Nicholson. Well, no, we have not yet because it 
is still under a very active investigation by our Inspector 
General. And we do not have all of the facts in yet on it. We 
do not know yet the magnitude of it and we do not know yet what 
has happened in our chain of command. But those are under 
active investigation and, believe me, it has my attention and 
focus.
    And I will say about that, we have made a lot of progress. 
We are transforming that system. We have moved thousands of 
people that were decentralized into this IT sector, and they 
now work under an identified commander, if you will, and 
Assistant Secretary Howard.
    But I was asked this question a few weeks ago up here. At a 
press conference, somebody said can you guarantee me that there 
will be no more data breaches at the VA, and I said I cannot. 
And I cannot at this time.
    If I thought, you know, I had such a good team that we were 
going to win the pennant, but I could not guarantee we would 
not make any errors during the season, I cannot sit here today 
and tell you we are even ready to win the pennant, let alone 
make any errors.
    But we have made tremendous progress. But we have a lot 
more to go because the system, this was a research--one of 
these 114 research sites. People need to get disciplined in the 
way they handle this data. In this case, this person alleges 
that his hard drive was lost. We do not know if it was lost. We 
do not know yet what was on it.
    Ms. Brown of Florida. Mr. Secretary, how can we help you? 
Because when this happened, it compromises the veterans, their 
families, the entire system. I mean, because they could take 
that and they could--identity theft is so rampant. What can we 
do?
    Secretary Nicholson. I appreciate that question, maybe more 
than you realize.
    Ms. Brown of Florida. I am sincere about this question.
    Secretary Nicholson. First and foremost, it is the 
violation of the privacy of the people that are involved, but 
it also sort of damps out all the other great work that we are 
doing here in this really great agency. And it gets a lot of 
attention and it pains me.
    I think you can help, A, by understanding it and as B, we 
may need some help in dealing with personnel, as far as ability 
to discipline them, because that is what it is going to take in 
the end is to have some examples, to have people realize that 
this is serious business, that we are serious, that they need 
to deal with encrypted information, they need to open that 
password protected device every time they go back on it instead 
of leaving it open. They need to deal with other people's 
information as they would deal with their own privacy. And we 
are not there yet, but we have made a lot of progress.
    Ms. Brown of Florida. Thank you, Mr. Secretary.
    The Chairman. Thank you.
    Mr. Brown.
    Mr. Brown of South Carolina. Thank you, Mr. Chairman, and 
thank you, Mr. Secretary for being here today and bringing your 
team along.
    My question is centered around the Charleston model that we 
have been working on for a goodly number of years. We are 
grateful for you and Dr. Perlin and others from the VA that 
have been down to try to work out some kind of a solution that 
will be able to unite some services between the VA and the 
Medical University of South Carolina.
    We are grateful for Mr. Michaud for coming down, who is now 
the Chairman of the Health Committee, and certainly the 
Chairman at that time, Mr. Buyer, for his interest and for all 
the consolidation and concerted efforts that have been put 
forth up to this time.
    I know last year as we passed the Construction Bill through 
the House and then finally to the Senate, there was a lot of 
debate about where we would go with it and finally, at the last 
moment, with the help of a lot of people--I am glad Ms. Brown 
was in the room as we debated with the Senate--finally come up 
with a resolve. And I think at that time, they included some 
$36 million for the Charleston plan.
    And I am just wondering, in this budget, with moving 
forward the plan that you have for construction for the VA, 
where does the Charleston model fit into that?
    Secretary Nicholson. Thank you, Mr. Brown.
    As you know, I think we have an agreement with the Medical 
University of South Carolina to create a new model, a prototype 
of sharing medical equipment to avoid the redundancies when we 
are essentially collocated. And we expect a final contract for 
that, for implementation to be signed by the end of this month.
    Thirty-six point eight million dollars has been authorized 
for the continued planning and design of a collocated facility 
in Charleston, but it has not been appropriated. And we have 
not in this budget asked for an appropriation of that money. We 
support very much the collaboration. I think it makes a lot of 
sense avoiding redundancies, efficiencies and better care by 
having more acute care offerings in one location.
    But, again, we have to take a look at the whole panoply of 
issues and we have a CARES process also that guides us in 
prioritizing where new hospitals should go. And our estimate 
for the cost of this project would be about $550 million and on 
our priority list right now it is not on there.
    Mr. Brown of South Carolina. As we listened, you know, 
intently to Mr. Baker and his concern with New Orleans, and I 
did have the privilege to go there with you to look at the 
situation in New Orleans, Mr. Secretary, what we were hoping to 
do is be proactive in this location. We recognize that 
Charleston is in the same hurricane plain as New Orleans and we 
would be devastated with the current VA facilities if, in fact, 
we had a similar tide rise as we had in New Orleans.
    What we were hoping to do, particularly with the 
construction process now at the Medical University, is somehow 
or another coordinate some of those construction savings by 
including the VA hospital under this same time line. It seemed 
like by being proactive, it would save the taxpayers money, not 
just from the Federal level, but also from the State level in 
order to be able to work in a coordinated method now rather 
than try to duplicate the VA hospital at some later date once 
the whole plan has been implemented through the Medical 
University.
    I would hope, Mr. Secretary, that you would be more 
proactive in trying to implement some process now to try to get 
the process moving along.
    Secretary Nicholson. Well, I think, Congressman Brown, that 
this opportunity steering group that we have underway would be 
a good first step. And if we do some shared facilities, shared 
acquisitions, expensive diagnostic equipment and so forth, it 
would help demonstrate the value of that kind of collaboration.
    We also have a CMOP there in Charleston and we have that 
hospital which is generally in pretty good shape. Those that 
are new to the Committee may not know. We have 154 of these 
hospitals around the United States existing and the average age 
is 56 years old. The average age of the hospital in the 
civilian economy today is about 14 years. So we have some 
hospitals, some Members in the room know, that were built right 
after the Civil War. So it is a matter of prioritization. But 
we will continue to work it.
    Mr. Brown of South Carolina. Okay. And I appreciate that. I 
know this hospital is probably in the high 40s itself. And I 
know with the planning, as it moves along, you know, will add 
another 10 to 12 years to that.
    But I am saying there are some economics of scale that we 
can all benefit for the taxpayers if we can move that project 
forward now, and at least I would hope that we would commit 
some kind of design or engineering funding in this 
appropriation so we can at least, you know, do something 
besides just talk about it.
    Secretary Nicholson. Well, if, as I said, it is authorized 
and if it is appropriated, we will go to work. That is our job.
    Mr. Brown of South Carolina. Thank you very much.
    Mr. Boozman, I appreciate you yielding your time for me to 
make those questions. Thank you so much.
    The Chairman. Thank you, Mr. Brown.
    Mr. Snyder.
    Mr. Snyder. That is ``Boze'' not ``Booze,'' Mr. Brown, 
Boozman. If we start calling him ``Boozeman'' he loses like 11 
percent of his vote.
    [Laughter.]
    Mr. Brown of South Carolina. Yeah. But this is South 
Carolina talk.
    Mr. Snyder. At least 11 percent.
    Mr. Secretary, I appreciate the work that you do on behalf 
of veterans. You have been at this long enough now that when 
you come before us, you probably can predict what Members are 
going to ask certain questions. And I want to follow up on what 
Ms. Brown was asking about, which is the research budget. We 
have talked about this in past years.
    The President's request is for a fiscal year 2008 level of 
$411 million out of the VA budget. In fiscal year 2004, that 
was $405 million. And so if you just look at the biomedical 
inflation rate alone, we are down. That means we are down by 
almost $60 million.
    And so you can look at this two ways. One of them is that 
is $60 million, that is in real dollars, that is real money. 
And so I hope you are talking to your researchers about the 
level of their morale and what things, you know, could be being 
done and what you call the high-priority research projects if 
you had the real dollars.
    Now, what you all will say is, well, you leverage other 
dollars, but there is two aspects to that. Number one is you 
expect help from other parts of the Federal budget. You expect 
help from NIH because you do not fund properly in your VA line 
item for research and have not for several years.
    Number two is if you would fund that at a level at least 
commensurate with the biomedical inflation rate, you would be 
able to leverage more dollars. I will accept your argument that 
you leverage moneys.
    And so I do not understand why we go through this each 
year, that we are not looking to at least keep up with the 
biomedical inflation rate.
    By the way, you are not alone in this. The Defense budget 
came out at our hearing a couple days ago or yesterday with 
Secretary Gates that the President's budget and the Defense 
budget cuts basic research by 9 percent and applied research by 
18 percent. And Secretary Gates was very concerned when he 
heard that because he did not--I mean, I do not expect him to 
know. I do not expect you to know all these numbers. He did not 
know that that was what was being done. He was going to 
readdress that.
    So, again, please address this issue. Why do you all not 
feel a responsibility to at least have the President's number, 
your number, keep pace with biomedical inflation, and it has 
not done that for several years now?
    Secretary Nicholson. Congressman, we look a lot at the 
total number and we have been pretty adroit at getting grants 
and matching. And if the research budget for 2006 was $1.29 
billion, this research budget is up $1.38 billion in 2 years. 
So the overall budget----
    Mr. Snyder. You mean your prediction of what you will be 
able to leverage from other parts of the Federal budget at a 
time when we are under great fiscal stress in this country, you 
are betting on the ability of pulling dollars from other parts 
of the budget?
    Why not step forward and say you are right, fiscal year 
2004, we have not kept pace with inflation, we are going to 
make our budget this year $469 million coming from the VA and 
we are going to leverage even more projects? I mean, how many 
more beyond the 2,100 high-priority projects could you be 
funding if you would do what I have suggested?
    Secretary Nicholson. Well, I am going to point out to you, 
Congressman Snyder, that we also get money from the private 
sector. In fact, in----
    Mr. Snyder. I am aware of that.
    Secretary Nicholson. It is over $200 million. So it will 
not all be dependent on other parts of the Federal----
    Mr. Snyder. I did not say it all would. But substantial 
portions of it, you are counting on other parts of the Federal 
budget.
    Secretary Nicholson. I would also like to add that we 
analyzed the application of this and 60 percent of this 
research contemplated under this, and I think what is true of 
that is that what we are spending currently is applicable to 
OIF and OEF combatants.
    Mr. Snyder. I appreciate what you are saying and I 
appreciate your chasing after the dollars from both private and 
public funds. But it still does not make sense to me why your 
number for medical research and what I think is one of the 
great medical research institutions in the world, in the 
world----
    Secretary Nicholson. Thank you.
    Mr. Snyder [continuing]. Does not even keep pace with the 
rate of biomedical inflation. It just does not make sense to 
me. On another topic, you mentioned the seamless transition 
with regard to medical records. Where are we at with regard to 
the single exit exam?
    Secretary Nicholson. I have a good report for that. That is 
working extremely well and expanding and allowing us to be very 
timely in the decisions that are coming out of those BDD sites. 
We now have that enterprise going at over 140 locations; most 
of those being DoD sites pre-
separation mode. We are very pleased with that.
    Mr. Snyder. Thank you, Mr. Secretary. Thank you for your wor
k.
    The Chairman. Thank you.
    Mr. Boozman.
    Mr. Boozman. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, and your staff for being here. I 
appreciate your hard work.
    We had the opportunity to go to Iraq together and I really 
enjoyed that. And, you know, when you were there, you were 
there not as the former ambassador to the Vatican or, you know, 
as the Secretary of the VA, but I was really impressed that 
when you, you know, talked with the men and women that were 
over there, it was as an old Marine. So I really understand 
that you----
    Secretary Nicholson. Excuse me. I am not a Marine. I am an 
Army Ranger.
    Mr. Boozman. Okay. I am sorry. I am sorry for insulting 
you.
    [Laughter.]
    Mr. Boozman. My dad did 20----
    Secretary Nicholson. No disrespect to the Marines.
    Mr. Boozman. Well, again, as a guy that understands. My dad 
did 20 years in the Air Force, so we look down on all of you.
    [Laughter.]
    Mr. Boozman. But I appreciate the fact that you brought out 
that when you look at the record over the past 6 years, the VA 
spending has gone up dramatically. And in looking at the fiscal 
2007 request when you were here and really got beat up pretty 
good about veterans' health and things, the reality is and the 
continued resolution, the numbers are the same, 
$25,512,000,000, on the total fiscal year 2007 request, 
$34,000,000,986. The House actually passed last year 
$35,024,000,000 and then we wound up in the continued 
resolution with $35 billion.
    So I appreciate your leadership on that. We also had the 
opportunity of getting a vet center and we are very pleased 
with that. And that is much needed. And, you know, there was 
some comment and some concern, and I share the concern about 
the staffing, that we are able to do that.
    But the reality is that staffing is not dependent on you. 
It is dependent on whether or not Congress gives you the funds 
to staff the center. Is that not right, if we are really----
    Secretary Nicholson. Yes, sir. We would have to----
    Mr. Boozman. So, again, you know, we cannot have it both 
ways, you know.
    I have got just a quick question for Admiral Cooper about 
the expert education system, the TEES Program. What level of 
funding is proposed? And I guess again, what are the milestones 
that you hope to accomplish with that? Is that something that 
you need to get back with me on or----
    Admiral Cooper. I can get back to you with a full answer. 
The fact is that the TEES system is one that we are looking 
forward to, but it is in really an embryo stage. We are in the 
development part of it.
    We have the different education programs and the goal is to 
be able to settle 90 percent of the claims without any hands-
on. But we have a good ways to go, so let me get back to you 
with a more developed answer.
    Mr. Boozman. Very good. One other thing real quick, 
Admiral. The Independent Living Program. Right now, I guess my 
question is, if Congress removed the 2,500 limitation on the 
new entrance into the program in the Independent Living, how 
many additional FTEs would you require? What would be the cost 
involved in doing that?
    Admiral Cooper. The limitation is strictly on the number of 
people we can bring into the program per year. I do not think I 
would need more FTE in order to allow more people to come in, 
but it does present a problem over each year when more than 
2,500 come in. So the limitation, I think, should be lifted, 
but I do not require, as I see it now, more FTE to execute 
that.
    Mr. Boozman. So that is something that you feel also that 
we ought to look at lifting the limitation?
    Admiral Cooper. I think it is very important today to lift 
that, yes, sir.
    Mr. Boozman. Okay. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Ms. Brown-Waite.
    Ms. Brown-Waite. I apologize for responding to an e-mail, 
and I want to thank the Secretary for being here.
    You know, as we look at the backlog of cases that are 
waiting a decision, I wonder how you can justify awarding five-
figure bonuses to senior executives in VBA when there is such a 
rising backlog of cases.
    Secretary Nicholson. Well, let me review the numbers a bit. 
I said that we had 806,000 new claimants in 2006, the highest 
number of claimants in 15 years. And that is an extraordinarily 
large amount of claims, especially once you know what is 
involved in dealing with each one of these. And they did almost 
800,000 claims. They completed almost 800,000 claims. So they 
did pretty good yeoman work.
    We are requesting another 500 people in anticipation of the 
continued growth in claims. We are going to make better use of 
the VETSNET technology and with that, we will drive that time 
down. But that is going to take constant command attention and 
a lot of work by trained people.
    So I do not think it has been a shortcoming of theirs. It 
is not, I do not think, lack of diligence. It is just that it 
is a market phenomenon that people have really come in and we 
have worked outreach.
    I was in San Antonio 2 weekends ago for the dedication of 
the new Center for the Intrepid and I did not know they were 
going to be here, but there was a very nice display of VA 
benefits with several VA employees there handing out materials 
to the thousands of servicemembers who will become veterans, 
acquainting them with what they are entitled to. They are the 
same people that work in our regional office in Houston.
    So, you know, they are outreaching as well as processing. 
And it is just a matter of the dynamics of supply and demand 
and handling the demand, and we are driving down. And we will 
have it down to 145 days. So I would defend the compensation 
that we gave to those people.
    Ms. Brown-Waite. Just a quick question on that. Is the 
criteria for the bonuses public information or is it arbitrary?
    Secretary Nicholson. I guess I would refer to counsel. I am 
sure it is public. It is not secret.
    Ms. Brown-Waite. Because you cannot find out what the 
bonuses are throughout the system unless you do a Freedom of 
Information request. So I just wanted to know if the 
information is available, what the criteria actually are for 
the bonuses.
    Mr. Hutter. Yes, ma'am. The criteria are what we call the 
executive core qualifications, and all bonuses are measured 
against an evaluation by a senior manager, most of whom are at 
this table, of how an executive has met these executive core 
qualifications. They measure how well they lead change, how 
well they lead, are they results driven, and so forth. And 
those are public.
    Ms. Brown-Waite. Okay. If you would make sure that my 
office gets a copy of that. I have another question. I want to 
make sure that my time is not all used up.
    The Chairman. If the gentle lady would yield. On behalf of 
the Committee, we want to ask for that information to get to 
Ms. Brown-Waite. The criteria and the amount of the bonuses----
    Ms. Brown-Waite. Correct.
    The Chairman [continuing]. All that information, please if 
you would get that to Ms. Brown-Waite.
    [The information has been provided to Ms. Brown-Waite and 
the Subcommittee on Oversight and Investigations in preparation 
for a hearing on this subject being held on June 12, 2007.]
    Ms. Brown-Waite [continuing]. The people who are enrolled 
in VA research. How long did it take to notify Congress? Was 
the data encrypted and was it password protected? And, you 
know, when did you find out because I know last year when we 
were here, it took so long for you to find out. I certainly 
hope you found out in an expedited manner. And I would like to 
know how soon Congress was notified.
    Secretary Nicholson. First let me say that incident is 
still under active investigation, and I do not know the 
magnitude of it. And it may be larger than that. We just do not 
know at this point.
    But I will say that the system that we put in place after 
the May incident worked and that the response was immediate. I 
found out immediately. The IG and FBI were brought into it 
immediately. Our team that we have organized for this went into 
effect.
    Again, the IG is working with the subject and there is some 
sensitivity about how public they really wanted this to be 
because of the investigation. But virtually everybody knew this 
the next day that we----
    Ms. Brown-Waite. Who is everybody?
    Secretary Nicholson. Well, that is a good----
    Ms. Brown-Waite. Who was everybody, sir?
    Secretary Nicholson. That is a fair question. Everybody did 
not know. We did not want everybody to know it. We notified the 
Chairman. We called the four corners, the Chairman of this 
Authorizing Committee, the Appropriating Committee in the House 
and similarly in the Senate, both Majority and Ranking Members. 
I, of course, notified the White House that this had occurred. 
So the response to the notifications, I think, were timely this 
time.
    Again, the whole thing is still under analysis, including 
forensic analysis of the devices. It appears it was not all 
encrypted. Some of it was. All this is still under 
investigation. I would be happy to talk to you about it, I 
guess privately or in camera. But the IG has asked us to try to 
limit all we know.
    The Chairman. Ms. Brown-Waite, I do want to say that the 
Secretary tracked me down right away, gave me that information, 
I believe in full public disclosure, not just to one person.
    But the Secretary did convince me that a short time should 
be granted where the investigation could take place, and 
publication would harm that investigation. I took his advice on 
that, although the information eventually, you know, got out 
beyond that.
    And then at that point, the Secretary did do a press 
release and availability on that. But he notified all the 
people. We talked to each other and agreed that he ought to 
have that time.
    And I think the information through Birmingham got out 
faster than they would have wanted it, but we accepted the 
Secretary's judgment that some more time--I mean, it was not a 
matter of months or weeks. It was a matter of days or hours 
that they wanted more time.
    We do need to get on to the second panel. Mr. Buyer, you 
asked for hopefully one question.
    Mr. Buyer. Well, I have got a couple here briefly.
    Mr. Hutter, as General Counsel, I want to thank you for the 
positive actions you took in the Regional Counsel's Office in 
Indianapolis following the security breaches, so thank you very 
much for getting hold of that one.
    Next is to Under Secretary Tuerk. I would like for you to 
tell us about the National Shrine Program, where we stand with 
that.
    With regard to General Howard, our CIO, Mr. Secretary, 
thank you for bringing him.
    I note that for the IT account, you list $1.3 billion in 
nonpayroll and then $555 million in payroll because you now own 
these people. You have the personnel tail now. Does this 
include contractors? That is one of my questions.
    The other is, there is an inclusion of $231.9 million for 
information security in accordance with section 902 of Public 
Law 109-461. What exactly is that number? What are you buying 
to become compliant?
    And the last comment I had really is to you, Mr. Secretary. 
So as soon as I finish this comment, Mr. Secretary, if you can 
answer those questions.
    Mr. Secretary, I want to thank you for a couple of your 
initiatives. One is your innovative Coming Home to Work Program 
whereby you reach out to the disabled veterans and you get them 
into work as they are doing their rehabilitation, tapping into 
hope. Thank you very much.
    The other is the National Rehabilitative Special Events, 
your partnership with the United States Olympic Committee. Your 
contacts and your ties with the Olympic Committee have paid 
great dividends. You are giving great hope to a lot of disabled 
veterans and senior veterans as they participate in your 
events.
    Now, with this partnership, it helps not only in the 
rehabilitation, but it allows them now to aspire to levels 
within those sports that they never ever dreamed would be 
possible. So I want to thank you for your innovation in both of 
those.
    Mr. Howard. Sir, your first question regarding the money to 
pay for contractors, that money is in the nonpay area. The 555 
pays for full-time equivalent of VA employees, but all of the 
pay of people, so to speak, as well as material and what have 
you is in the nonpay portion for contractors.
    Mr. Buyer. I do not understand what that means.
    Mr. Howard. In other words, we have many, many contracts, 
you know, throughout all of our facilities and some of them are 
for equipment. Some of them are for services. Some of them are 
for both.
    Mr. Buyer. But you have control of that now?
    Mr. Howard. Yes, sir.
    Mr. Buyer. All right. Thank you.
    Mr. Tuerk. Thank you, Mr. Buyer. I am glad to speak to you 
about our National Shrine Commitment.
    Through 2006, we had expended $99 million on projects with 
money that was discretely fenced off for National Shrine 
projects. In 2007, we intend to spend another approximately $16 
million on National Shrine projects which will bring us up to 
$115 million.
    Since the consultant's report came out in 2002, which 
identified some 928 projects that needed to be done with an 
estimated cost of some $280 million, through 2006, we had 
completed 269 of those projects.
    In this budget request, we are requesting $9.1 million to 
be fenced in our operations and maintenance account for 
National Shrine projects, and an additional two million to be 
expended from our minor construction account for National 
Shrine projects.
    I would also add, though, Mr. Buyer, that beyond the 
projects that are financed with National Shrine money 
specifically, everything we are doing in our maintenance 
activities, outside of money specifically fenced for National 
Shrine purposes, is geared toward improving the excellence of 
our cemeteries' appearance.
    Furthermore, many of our other construction projects fold 
in National Shrine upgrades as part of a larger major or minor 
construction project. So the money that is fenced off 
specifically for National Shrine projects only tells part of 
the story of the progress we are making.
    A number that we look at that tells us how we are doing 
relates to feedback from the public. And in 2006, 97 percent of 
the people we asked in a survey rated the appearance of our 
National cemeteries as excellent. We have now set a goal to 
achieve a 99 percent response of excellent to that question. 
But that summarizes where we have been and where we are headed 
and where we are right now.
    Mr. Buyer. All right. Thank you, Mr. Chairman.
    The Chairman. I thank the panel. And, Mr. Secretary, just 
one more followup to Ms. Brown-Waite's issue that she raised. I 
wanted to thank you for getting our relationship off to the 
kind of start that we talked about by your quick notification 
of us.
    Again, we may not always agree on what should be public and 
what should not, but that communication is vital and I thank 
you. It turns out we were all at the same place, so the people 
you talked to were able to talk about it. But we appreciate the 
real rapid response.
    You mentioned round tables. Several other people mentioned 
them. We are going to try on the Committee to have problem-
solving sessions as opposed to hearings in which all the 
Members of the Committee, the stakeholders such as Veterans 
Service Organizations and, of course, the experts from your 
Administration would be around the same table trying to say, 
well, how do we solve the 600,000 claim backlog, how do we get 
to where we all want to be. And I hope that we can try that and 
it becomes productive.
    Just lastly, as an introduction to the next panel also, 
just so the people who put together the Independent Budget and 
saw me waving it around for the last 5, 6 years or 8 years or 
10 years, I am going to still wave it around even in this seat.
    They asked, I think, for a reasonable amount of additional 
funding, and I think this Committee when we have to formalize 
our own budget submissions will be closer to this figure than 
the Administration's figure.
    I know that does not pain you to get more money and I know 
you have to back the President's budget, but there were some 
questions raised, whether it is research or other areas that we 
think should be increased, and we will be getting our 
submission to the Budget Committee shortly.
    Thank you again for being here all morning.
    Secretary Nicholson. Thank you, Mr. Chairman.
    The Chairman. The next panel may join us. I promised in the 
past that the VSOs would come first and let the VA wait for 
that, but we will do that in the future.
    We want to thank the four groups that took the lead in 
putting together the Independent Budget for being here, 
Paralyzed Veterans of American, Disabled American Veterans, the 
Veterans of Foreign Wars, and AMVETS. Of course, we have The 
American Legion to give its thoughts on the budget and also the 
Vietnam Veterans of America will also do that.
    Again, I thank you for your efforts. We have looked at the 
Independent Budget for years and years and it has been closer 
to the mark than other budget recommendations. And I think the 
Committee's advice to the Budget Committee that we have to do 
soon will be much closer to yours. I hope we endorse the 
Independent Budget.
    I have Mr. Blake from Paralyzed Veterans as first, but 
however you have decided to do that.

    STATEMENT OF CARL BLAKE, NATIONAL LEGISLATIVE DIRECTOR, 
                 PARALYZED VETERANS OF AMERICA

    Mr. Blake. Thank you, Mr. Chairman. Mr. Chairman, Members 
of the Committee, on behalf of the four organizations who co-
authored the Independent Budget, I would like to thank you for 
the opportunity to testify today on the healthcare 
recommendations for fiscal year 2008.
    Before I begin, I would just like to mention that in the 
spirit of openness and cooperation, the IB VSOs extended an 
invitation last week to all the Committee staff and to all of 
the LAs for the Members of the Committee to come to a briefing 
where we could lay out the recommendations for the Independent 
Budget in advance of the President's budget release.
    I feel like by doing that, it fosters more cooperation 
among us all. I feel like the only way we can really get to 
where we need to go is for us to work together to get there.
    Unfortunately, even as we testify today, the Appropriations 
Bill for fiscal year 2007 has not been completed. Despite a 
positive outlook outlined in House Joint Resolution 20, the VA 
has been placed in a critical situation where it is 
cannibalizing dollars for other accounts to continue to provide 
medical services, jeopardizing not only the VA healthcare 
system but the actual healthcare of veterans.
    For fiscal year 2008, the Administration has requested 
$34.2 billion for veterans' healthcare, about a $1.9 billion 
increase over the levels established in House Joint Resolution 
20. Although we recognize this as another step forward, it 
still does not meet the recommendations of the Independent 
Budget.
    For fiscal year 2008, we recommend approximately $36.3 
billion, an increase of $4 billion over the 2007 level 
established in House Joint Resolution 20 and approximately $2.1 
billion over the Administration's request.
    For fiscal year 2008, the IB recommends approximately $29 
billion for medical services. Our medical services' 
recommendation includes $26.3 billion for current services, 
$1.4 billion for the increase in patient workload, 105 million 
for additional FTE, and a $1.1 billion increase for policy 
initiatives.
    For medical administration, the Independent Budget 
recommends approximately $3.4 billion and, finally, for medical 
facilities, the IB recommends approximately $4 billion.
    This recommendation also includes an additional $250 
million above the fiscal year 2008 baseline in order to begin 
to address the nonrecurring maintenance needs of the VA.
    Although the Independent Budget healthcare recommendation 
does not include additional funding to provide for the 
healthcare needs of category eight veterans now being denied 
enrollment into the system, we believe that adequate resources 
should be provided to overturn this policy decision.
    VA estimates that more than one and a half million category 
eight veterans will have been denied enrollment into the system 
by fiscal year 2008. Assuming a utilization rate of about 20 
percent in order to reopen the system to these deserving 
veterans, the IB estimates that the VA will require about 366 
million discretionary dollars.
    Although not proposed to have a direct impact on veterans' 
healthcare, we are deeply disappointed that the Administration 
chose to once again recommend an increase in prescription drug 
co-payments from eight to fifteen dollars and an index 
enrollment fee based on veterans' incomes.
    Although the VA does not overtly explain the impact of 
these proposals, similar proposals in the past have estimated 
that nearly 200,000 veterans will leave the system and more 
than one million veterans will choose not to enroll.
    It is astounding that this Administration would continue to 
recommend policies that would push veterans away from the best 
healthcare system in the world. Congress has soundly rejected 
these proposals in the past and we urge you to do so once 
again.
    For medical and prosthetic research, the Independent Budget 
is recommending $480 million. This represents a $66 million 
increase over the 2007 level in the continuing resolution and 
$69 million over the administration's request for fiscal year 
2008.
    We are very concerned that the medical and prosthetic 
research account continues to face a virtual flat line in its 
funding level. Research is a vital part of veterans' healthcare 
and an essential mission for our National healthcare system.
    In closing, to address the problem of adequate resources 
provided in a timely manner, the Independent Budget has 
proposed funding for veterans' healthcare be removed from the 
discretionary process and be made mandatory.
    The budget and appropriations process over the last number 
of years demonstrates conclusively how the VA labors under the 
uncertainty of how much money it is going to get and equally 
important when it is going to get that money.
    In the end, it is easy to forget that the people who are 
ultimately affected by wrangling over the budget are the men 
and women who have served and continue to serve in harm's way.
    Mr. Chairman and Members of the Committee, I would like to 
thank you again for the opportunity to testify, and I would be 
happy to answer any questions that you might have.
    [The prepared statement of Mr. Blake appears on p. 97.]
    The Chairman. Thank you, Mr. Blake.
    Commander Morin of The American Legion needs to get a 
plane, so we will hear from you next. Thank you, sir.

                   STATEMENT OF PAUL A. MORIN

            NATIONAL COMMANDER, THE AMERICAN LEGION

    Mr. Morin. Thank you, Mr. Chairman and Members of the 
Committee. Thank you for allowing me to testify before you 
today on the President's fiscal year 2008 budget request on 
behalf of The American Legion.
    I will summarize and respectfully request that my complete 
statement be placed in the record.
    I trust each of you share the frustration of the veterans 
community over the imperfect budget process that is currently 
in place. Today we are here to discuss the fiscal year 2008 VA 
budget. At the same time, Congress is still considering the 
fiscal year 2007 budget 4 months after the start of the fiscal 
year.
    Operating on a continuing resolution makes it very 
difficult for the Department of Veterans Affairs to serve 
veterans in an optimal manner.
    Praise of the VA healthcare delivery system continues to be 
expressed by medical experts and prestigious journals. However, 
across the country, VA officials are encouraged to try to 
outwit, outplay, and outlast the Federal budget process.
    Who will get how much and when is hardly the best business 
practice for an industry leader in providing healthcare and 
conducting research.
    The President's budget request for fiscal year 2008 calls 
for medical care funding at $36.6 billion, which is about $1.8 
billion less than The American Legion's recommendation of $38.4 
billion.
    As the leader of America's largest veterans' organization, 
I want to express The American Legion's thanks to the President 
for recommending a level of funding similar to that of which we 
proposed for medical care. The major difference is that the 
President's budget request continues to offset the 
discretionary appropriations, its medical care collection fund 
goal of $2.4 billion, whereas The American Legion considers 
these funds as a supplement since they are for treatment of 
nonservice-connected medical conditions.
    Mr. Chairman, as you are aware, the President's fiscal year 
2008 budget has proposed enrollment fees which would require 
some veterans to pay from $250 to $750 each year for VA 
healthcare. The proposal would also increase co-payments for 
prescription drugs to $15.00. Congress rejected similar 
proposals last year and The American Legion urges you to do the 
same this year.
    With respect to another issue of importance, The American 
Legion remains steadfastly in support of achieving adjudication 
of VA disability claims. As a nation at war, the expectation of 
increasing the number of new disability claims is obvious. The 
newest generation of wartime veterans rightly deserve timely 
adjudication of their claims.
    Again, the Secretary, Congress, and the veterans community 
must work toward meaningful solutions to the ever-increasing 
backlog of veterans' disability claims. Increased funding and 
additional staffing is a solid first step toward change, and 
The American Legion appreciates the proposed increases in 
funding and additional personnel included in the President's 
budget.
    The purpose of my being here is to discuss the President's 
budget, reaffirm The American Legion's budget recommendations, 
and continue to urge you and your colleagues to adequately fund 
the Nation's best healthcare delivery system, 7-year CARES 
construction plan, medical and prosthesis research, State 
Extended Care Grant Program, State Veteran Cemetery Grant 
Program, VA claims and adjudication process, and a national 
Cemetery Administration.
    Each of these important areas is discussed in detail in our 
full statement. We are a Nation at war. Each of these budgetary 
concerns is clearly a part of the ongoing cost of war.
    Since becoming The American Legion's National Commander in 
August, I have traveled across the Nation and overseas visiting 
with active-duty servicemembers, Reserve, and National Guard 
troops, veterans and their family. I am pleased to report that 
they all continue to do what this Nation expects of them. The 
men and women of the Armed Forces are truly dedicated 
professionals.
    Veterans also continue to serve this Nation. You see them 
at burial details providing honors for their fallen comrades. 
You see them in the VA hospitals as volunteers. You see them 
responding to natural disasters to lend a helping hand. And you 
see them running programs that benefit children and youth of 
our country.
    Mr. Chairman, we must never forget that the families also 
continue to serve. In many ways, their service is far more 
demanding both emotionally and physically. Many survive those 
who have made or will be making the ultimate sacrifice in 
uniform of this Nation.
    The American Legion budget recommendations that I presented 
in September 2006 are based in large part on the findings of 
boots on the ground, visits to medical facilities. We have 
found that the quality of treatment and service remains 
impressive. But the timely access to care is inconsistent at 
best.
    In addition, there are many deserving veterans locked out 
of the system because of the means test. They are categorized 
as priority eight veterans. These honorably discharged 
veterans, most, if not all, with the means of providing third-
party reimbursement are prohibited from enrolling in the VA 
healthcare system. This includes, among others, military 
retirees and wartime veterans.
    Welcoming the newest generation of wartime veterans into 
the VA healthcare system is the right thing to do, and The 
American Legion supports the legislation that will extend VA 
healthcare from 2 years to 5 years for returning servicemembers 
in the current Global War on Terrorism. However, denying this 
group of eligible veterans access to the system is wrong.
    Mr. Chairman and Members of the Committee, I know you may 
question how would we pay for reopening access to all eligible 
veterans. One way is quite simple. It is widely reported that 
the cost of VA medical care is approximately $2,000 less per 
patient than that of Medicare. If so, VA could be annually 
saving Medicare approximately four billion in mandatory 
funding. Should additional Medicare eligible veterans be 
enrolled, the potential savings to Medicare would be increased 
as well.
    Clearly allowing the VA to collect third-party 
reimbursements from Medicare is not only a cost savings 
measure, it is the right thing to do. The American Legion urges 
this Committee to explore the concept of Medicare 
reimbursement.
    Mr. Chairman, as I mentioned at the beginning of my 
statement, the budget process is not working as it should. The 
American Legion strongly believes changing VA medical care 
funding from discretionary to mandatory funding would go a long 
way toward healing the currently crippled budget process. And 
as we submit to members the booklet put out by a majority of 
the Veterans Service Organizations on assured funding.
    President Lincoln's words, to care for him who shall borne 
the battle, guided the efforts of more than 218,000 VA 
employees who are committed to providing the best possible 
medical care, benefits, social support, and lasting memorials 
to veterans and their dependents and recognition of honorable 
service to this Nation.
    The American Legion looks forward to working with this 
Committee to ensure that these dedicated VA employees have the 
resources they need to carry out their important mission.
    Thank you, Mr. Chairman, for this opportunity to comment on 
the President's fiscal year 2008 budget request for the 
Department of Veterans Affairs.
    [The prepared statement of Mr. Morin appears on p. 82.]
    The Chairman. Thank you, Commander, and thank you for what 
you do for your membership and our Nation's veterans.
    Mr. Brian Lawrence from the DAV.

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

    Mr. Lawrence. Mr. Chairman, Members of the Committee, on 
behalf of the 1.3 million members of the Disabled American 
Veterans, thank you for the opportunity to present the 
recommendations of the 2008 Independent Budget and compare them 
to the President's proposed budget for veterans' programs.
    As you know, the IB is a budget and policy document that 
sets forth the collective views of the DAV, AMVETS, Paralyzed 
Veterans of America, and the Veterans of Foreign Wars. Each 
organization has a principal responsibility for a major 
component of the budget. My testimony focuses on the Veterans 
Benefits Administration.
    The President recommends that funding for VBA be increased 
by approximately $30 million. Obviously we are quite pleased 
that the President shares our perspective that increased 
funding is needed. Our recommendations for increases exceed the 
Administration's both in overall dollar amounts and numbers of 
employees. However, our differences are relatively minor 
compared with other areas of the Federal budget.
    We hope that such minor differences can be resolved during 
the upcoming budget cycle in favor of disabled veterans who 
will rely on the services that VBA provides.
    The IB recommendation for overall VBA funding is $1.9 
billion as compared to the President's recommendation of $1.2. 
Differences in our recommendations are primarily due to the 
following reasons:
    One, the IB anticipates a continuation of a high number of 
disability claims. We based these estimates on two factors, 
ongoing hostilities in Iraq and Afghanistan and an aging 
veterans population. The Administration also expects an 
inclined rate in the number of claims, but does not expect it 
to be as sharp as in past years.
    The other reason for differences between the IB and the 
Administration's numbers is that we believe VA Rating Board 
personnel should concentrate more on making accurate decisions 
and less on producing high numbers. Therefore, our ratio of 
workers to claims is larger than the Administration's, 
resulting in a higher number of full-time employees.
    Along with recommendations for funding levels, the IB makes 
several suggestions for policy improvements. Since I am running 
short on time, I am going to focus on just the recent enactment 
of the provision allowing attorneys into the claims process. We 
are deeply concerned about the negative impact this might have.
    The VA claims system was designed to be open, informal, and 
helpful to veterans. It is reasonable to expect that the 
involvement of fee-charging lawyers and agents will impede 
productivity in the claims process and further bog down the 
system and eventually lead to the need for even more increases 
in staffing.
    For example, VA will have the responsibility of oversight 
and administration of fee agreements under which the Secretary 
is to pay the attorney directly from past-due benefits awarded 
to the veter- an. 
Added costs to do so are likely to be substantial without commen
- surate added advantages or benefits for either the VA or 
veterans.
      
    We hope that such unintended consequences will be 
considered by the Committee and this provision would be 
repealed. Once again, we appreciate the Committee's interest in 
these issues and we appreciate the opportunity to testify 
today.
    Thank you.
    [The prepared statement of Mr. Lawrence appears on p. 93.]
    The Chairman. Thank you. And the full statements of all 
will be entered into the record.
    Mr. Cullinan.

                STATEMENT OF DENNIS M. CULLINAN

             DIRECTOR, NATIONAL LEGISLATIVE SERVICE

         VETERANS OF FOREIGN WARS OF THE UNITED STATES

    Mr. Cullinan. Thank you very much, Mr. Chairman and 
distinguished Members of the Committee. On behalf of the men 
and women of the Veterans of Foreign Wars and the constitute 
Members of the Independent Budget, I thank you for holding 
today's most important hearing. This is truly an essential 
component in doing the right thing by America's veterans.
    Before I go into the construction budget, Mr. Chairman, I 
would like to again publicly thank you for restoring our joint 
hearings. We communicate with you and the various Members of 
this Committee and the Congress, all of us, the VFW, all of us 
do in a variety of ways directly, indirectly through hearings, 
through a lot of staff interaction, our grass roots. But these 
joint hearings are about more than just communication. They are 
very important, symbolic events for our membership to see their 
nationally elected leader present to you, the Congress.
    And I think that this event is also emblematic of the 
special relationship that the veterans community has with 
Congress, so it reflects well on all of us. So, again, I just 
want to thank you for that.
    I have a little aside on that matter too. The VFW's 
national commanders have been presenting over in the Senate for 
the past 3 years, and they have done a terrific job over there 
helping us out. But the truth be known, they do not have a room 
big enough for all of our people to fit into. So the prospect 
of being back in the caucus room again is again heartening. So 
I just thought I would mention that too.
    Getting to the construction programs, the Department of 
Veterans Affairs construction budget for the past year has been 
dominated by the capital asset for enhanced services, CARES. 
Through the CARES process, the IB VSOs were greatly concerned 
with the underfunding of the construction budget.
    Congress and the Administration did not devote many 
resources to VA's infrastructure, preferring to wait for the 
final result of CARES. In past IBs, we warned against this, 
pointing out that there was a number of legitimate construction 
needs identified by local managers of VA facilities. A number 
of facilities were authorized, including the House passage of 
the ``Veterans Hospital Emergency Repair Act,'' but funding was 
never appropriated, with the ongoing CARES review being used as 
a justification.
    Within this context, while pointing to the fact that this 
is generally a very good budget, the President's budget, for 
VA, unfortunately, the construction portion is far from 
adequate.
    Mr. Chairman, in constructing the IB, we looked to our in-
house resources. We talked to experts outside of the veterans 
community. We use industry standards, things like the 
PricewaterhouseCoopers study. The Presidential Task Force's 
report on construction has been extremely important in helping 
us formulate our calculations on how much funding should be 
increased.
    When we are looking at the condition of VA properties, the 
infrastructure, we will look at things like the facility 
construction assessment to come up with our general assessment 
of what needs to get done for VA. And I think our projections 
have been not only good but actually quite moderate through the 
years.
    The PTF recommends a recapitalization rate about 5 to 8 
percent. We are only asking for 4 percent. And, again, in this 
context, I think VA has been recapitalizing at something like 
half a percent a year, which means the average VA facility 
would have to stay functioning for 155 years. And that is just 
not going to happen.
    So I would argue that our recommendations are indeed 
moderate. When I reflect back to 2004, when then Secretary 
Anthony Principi testified before this Committee, he said it 
would take a billion dollars a year to fund CARES, which was 
then just an element of the construction planning process, $1 
billion a year.
    Since that time, in 2004, they got about 750 million and 
every year after that, they have only gotten about half that 
much. So there is a real deficit there. There is a real 
problem.
    The President's budget for medical care, not the entire, 
but the medical care portion of the construction is $511 
million. The IB is asking for $1.4 billion. Again, that is 
about 4 percent of the capital value.
    Clearly the President's recommendation, especially with 
everything that is going on now and the need to not only 
recapitalize, but there are urgent needs. We heard Mr. Baker 
speak earlier of what is going down in New Orleans. There is a 
lot of need for construction out there, and we have a lot of 
buildings that need help.
    For example, last year, in the 2007 capital plan, only 
eight of the partially funded projects out of the top twenty 
got any consideration whatsoever. The cost of these, by the 
way, would have been about $700 million. That is eight out of 
twenty only got any kind of consideration at all.
    In 2008, the $511 million that the President calls for in 
his budget would only fund six projects of the twelve partially 
funded projects. Six others are not funded at all. And that 
plan for 2008 for the scored projects--scored projects are 
those projects that have some degree of priority in the VA's 
overall scheme of things of what does and does not need to get 
built or done--none of the 27 would get any funding at all.
    So the short form of what I am saying here is there is no 
funding for any new construction in this particular budget, and 
clearly that just will not do.
    With respect to minor construction, the need for some 300 
projects has been identified. I see I am going over my time 
here. I am sorry, sir. Has been identified. The IB is calling 
for a funding level of $450 million. The President's budget 
would only provide for about $180 million for VHA. It is not 
enough money.
    The last point I will make, and it is an urgent one, with 
the initial planning process of CARES, they identified the need 
for $2 billion alone for minor construction.
    With that, I will conclude. Thank you, Mr. Chairman. Sorry 
I went over.
    [The prepared statement of Mr. Cullinan appears on p. 99.]
    The Chairman. Thank you, sir.
    And, Mr. Greineder, from AMVETS.

 STATEMENT OF DAVID G. GREINEDER, DEPUTY NATIONAL LEGISLATIVE 
              DIRECTOR, AMERICAN VETERANS (AMVETS)

    Mr. Greineder. Thank you. Mr. Chairman, Members of the 
Committee, thank you for the opportunity to be here today.
    As a co-author of the Independent Budget, AMVETS is pleased 
to give you our best estimates on the resources necessary to 
carry out a responsible National Cemetery Administration budget 
for fiscal year 2008.
    I would first like to commend the committed NCA staff who 
provide the highest qualify of service to veterans and their 
families in times of tremendous grief. The devoted staff 
provides aid and comfort to hurting families in very difficult 
times, and we thank them for that.
    The Administration requests approximately $166.8 million in 
discretionary funding for operations and maintenance of NCA, as 
well as $32 million for the State Cemetery Grants Program.
    The Members of the Independent Budget recommend Congress 
provide $218.3 million for the operational requirements of the 
NCA, a figure that includes our national Shrine initiative. In 
total, our funding recommendation represents a $51.5 million 
increase over the Administration request.
    The National Cemetery system continues to be seriously 
challenged. Though there has been noteworthy progress made over 
the years, the NCA is still struggling to remove decades of 
blemishes and scars from military burial grounds across the 
country. Therefore, we again recommend Congress establish a 5-
year, $250 million National Shrine initiative to restore and 
improve the condition and character of NCA cemeteries. We 
recommend $50 million in fiscal year 2008 to begin this 
important initiative.
    By enacting a 5-year program with dedicated funds and an 
ambitious schedule, the National Cemetery system can fully 
serve all veterans and their families with most dignity, 
respect, and compassion.
    For funding the State Cemetery Grants Program, the 
Independent Budget recommends $37 million for fiscal year 2008. 
The State Cemetery Grants Program is an important component of 
the NCA. It has greatly assisted States to increase burial 
services to veterans, especially those living in less densely 
populated areas not currently served by a national veterans 
cemetery.
    Many States have difficulty meeting the 170,000 veterans 
within 75 miles requirement for a national cemetery, which is 
why the State Grant Program is so important. Since 1978, the VA 
has more than doubled the acreage available and accommodated 
more than 100 percent increase in burials through these grants.
    The Independent Budget also strongly recommends Congress 
review a series of burial benefits that have seriously eroded 
in value over the years. While these benefits were never 
intended to cover the full cost of burial, they now only pay 
for just 6 percent of what they covered when the program 
started in 1973.
    These recommendations are contained in my written 
testimony, but I would like to say our recommendations which 
represent a modest increase would restore the allowance to its 
original proportion of burial expense about 22 percent, and 
tell veterans that their sacrifice is given the appreciation it 
so well deserves.
    The NCA honors veterans with a final resting place that 
commemorates their service to this Nation. More than 2.7 
million soldiers who died in every war and conflict are honored 
by a burial in a national cemetery. Each Memorial Day and 
Veterans Day, we honor the last full measure of devotion they 
gave for this country. Our national cemeteries are more than a 
final resting place; they are hallowed grounds to those who 
died in our defense and a memorial to those who served.
    Mr. Chairman, this concludes my statement.
    [The prepared statement of Mr. Greineder appears on p. 79.]
    The Chairman. Thank you.
    And, finally, the National President of the Vietnam 
Veterans of America, Mr. John Rowan.

                    STATEMENT OF JOHN ROWAN

        NATIONAL PRESIDENT, VIETNAM VETERANS OF AMERICA

    Mr. Rowan. Thank you, Mr. Chairman, Mr. Buyer, and the rest 
of the Members of the Committee.
    VVA, of course, is interested, and we have seen you swap 
chairs. One of you moved over to the left, left to the right. 
But we hope that the Committee as always will continue to work 
on behalf of veterans, and I believe that in a bipartisan, 
nonpartisan, whatever you want to call it, we have hope that 
you will work together to help us do the best we can.
    You have my statement, which will be added. I would also 
appreciate it if you could add into our official statement a 
report that was put out by Ms. Linda Bilmes from the Harvard 
University School, John F. Kennedy School of Government called 
``Soldiers Returning from Iraq and Afghanistan, the Long-Term 
Cost of Providing Veterans Medical Care and Disability 
Benefits.'' If we could have that added into the record as part 
of our statement----
    The Chairman. Without objection, that will occur.
    [The report by Linda Bilmes appears on p. 285.]
    Mr. Rowan. It is very clear from looking at that study of 
the new veterans that we also need to go back and get Congress 
to reauthorize, or it has been authorized, to get the VA to 
finally complete the Vietnam veterans longitudinal study 
because that, too, we believe, will show the problems of the VA 
long term in their fiscal needs to deal with the problems of 
veterans long after the war has been over.
    It is within that regard that we talk about some of the--it 
is interesting. My five colleagues, one of them had to leave, 
we really appreciate a lot of the work done by the Independent 
Budget and group and go along with a lot of what they are 
saying. We just think we need a little bit more than what, 
frankly, they are asking for.
    And we are looking particularly in the medical services 
alone almost seven billion extra, and we believe it is needed 
for many different reasons, not the least of which is that we 
do not believe that the increase in demand that the VA was even 
considering when the VA developed their budgets in the last 
several years and including even the new one.
    And it is not just the demand of the OIF or OEF new 
veterans coming out. It is the demand of the Vietnam veterans 
who are now coming to deal with the terms that they have 
received for having been exposed to Agent Orange, in my case 40 
years ago. Many of us now are coming down with all of these 
conditions that are related to our service in Vietnam that are 
now causing us to go to the VA.
    I would be very interested to see that 800,000 claim number 
broken down into who actually reported new claims. Who are 
they? Obviously I think the number that was mentioned was 200 
and something thousand of the new vets coming in by the 
Secretary. That means there has got to be about another 500,000 
older veterans, coming into the system for the first time many 
of them. And we are coming in with our diabetes and our 
prostate cancer and all of these other issues.
    And to get back to the priority eights question, many of 
those people would be seven and eights because they have never 
had any problems until now all of a sudden they face these 
problems as they get them again in their later years.
    And even in the sevens, the zero percent disability people, 
it is interesting how many of them get a hundred percent, for 
example, prostate cancer and then drop back down to zero when 
they go through treatment. But they have to be monitored for 
the rest of their lives. They should be monitored in the VA 
system and not be forced to go out to the outside system if 
they have their own healthcare.
    So that is part of it. Again, part of our assessment of why 
we need additional money, in the budget, supposed budget 
savings the last time around, the so-called management 
efficiencies, they were not management efficiencies. They were 
staff deficiencies, because often when you go out to the VISN 
levels, you found that these people were cutting staff to 
accommodate their budget.
    And that is one of the reasons why we see a lot of places 
where they are having difficulty finding enough doctors, enough 
nurses, getting the people to get into those clinics, why we 
are seeing times being dragged on again with people not getting 
clinic appointments in reasonable time frames.
    And there are a whole bunch of other things that we think 
is just medical inflation. They do not keep up with it. We also 
think they use wrong formulations in the fact that they do not 
take into consideration we are not like the general population.
    Again, going back to the Vietnam veterans issues and even 
to some of the newer veterans, we have more healthcare issues 
than the general public does and we are coming down with them 
as we get older and, unfortunately, because of our exposures, 
either in Vietnam or in the Gulf War, to whatever was out 
there.
    And one of the things on a smaller note, we would like to 
see the 300 million go back in to restore the services for 
Agent Orange exposed veterans. We want to bring these veterans 
into the system, many of them for the first time. They have 
just never gone there. Some of them, you know, just again what 
is a disabled veteran?
    If you got out of the war and you managed to walk away from 
Vietnam and you did not get shot and you did not get hurt and 
you figure I am safe, I am good to go, you come home and 30 
years later, you have got prostate cancer or you have got 
diabetes and you have got neuropathy and all of these other 
things are hitting you, and you read in the paper, well, it is 
because everybody has got diabetes or prostate cancer is now on 
television, everybody has got it, I am just getting old. No. 
You got it probably because you stepped foot in Vietnam 40 
years ago and that is why you got it.
    We have a presumption of it. You are entitled to 
compensation for it. And if you are not in the system and you 
are not getting treated by the VA and even sometimes when you 
are treated by the VA, the doctors there do not know that you 
are entitled to compensation for some of these things.
    So we would urge you to take a look at all of that and 
particularly to deal with these newer veterans with some of 
their mental issues too. We do not believe anywhere near enough 
money is going to the mental health questions, to dealing with 
their PTSD problems or other problems when they come home.
    And, again, I just look forward to working with the new 
Committee and its new reconstruction, but, really old friends 
on the Committee on both sides of the aisle. And as we go 
forward, we are looking forward to seeing your working groups 
that you are talking about having.
    Thank you.
    [The prepared statement of Mr. Rowan appears on p. 105.]
    The Chairman. Thank you. Thank all of you.
    John, you used the phrase ``step foot in Vietnam.'' Did you 
do that explicitly because there is some concern over those who 
were in the Navy that maybe have been affected and did not step 
foot and, therefore, are not entitled to----
    Mr. Rowan. Well, there is a lot of discussion about 
stepping foot in a lot of places. Unfortunately, the law says 
now you had to step into the place.
    And there is an issue with regards to the Navy. There is 
also an issue with regards to people in other places. We are 
finally seeing more and more recognition of Korea, for example. 
We are finding out about all kinds of other exposures even in 
the stateside places.
    There is a real question somebody brought up to me one 
time. I forget what islands it was now. It was either 
Marshall's or some place where again they stored this stuff 
while it was in transit and some of them are saying that they 
have been exposed to it there.
    The key question I believe is in the Vietnam veterans 
longitudinal studies. If we went back to that study and 
completed that study, we may find out a lot more information. 
If we look at our colleagues in Australia who have done a 
tremendous amount of work on this stuff, we would see that, not 
only for the Vietnam veterans but for their family members.
    One of the things that still bothers us is that, you know, 
we only have spina bifida as the only example of an issue of 
secondary problems with relation to exposure to Agent Orange. 
Talking to a lot of our Vietnam veterans, we believe there is a 
lot more out there in that regard for a lot of other child 
illnesses that ought to be covered.
    The Chairman. Thank you.
    I would yield to Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    A question for anyone from the Independent Budget. Looking 
at the number the Secretary gave us this morning of the $1.7 
billion to restore priority eights compared to what the 
Independent Budget gives for a number, why such a disparity in 
the numbers?
    Mr. Blake. The $1.7 billion, I assume, includes the total 
amount for collections that would be received from that group 
of veterans that come in. The $366 million that we project is 
actual discretionary dollars.
    We have done some analysis to determine what we believe the 
total cost would be if the amount that would be received in 
collections from those veterans were brought into the system. 
We projected about $1.1 or $1.2 billion, but for real 
discretionary dollars for that group of veterans, we estimate 
about $366.
    Mr. Michaud. A question for Mr. Blake. You had mentioned 
that the enrollment fees will drive veterans out of the system. 
These enrollment fees and co-pays are different than what were 
presented in previous budgets.
    Do you really think that if someone is making $200,000, if 
they have to pay a $750 enrollment fee, it is going to drive 
them out of the system?
    Mr. Blake. Well, I would probably say that if somebody is 
making $200,000, I would believe that they probably have other 
healthcare to begin with. But that is not necessarily the case. 
To be perfectly honest with you, I believe this is a question 
that we are going to have to address this year.
    Kind of addressing what Mr. Buyer had brought up about this 
earlier, I think this is a case of where the Independent Budget 
just principally disagrees with the idea that these fees and 
co-pays should be increased or added. I would say that our 
response to the idea that it is an equalization with the 
retirees, 20- and 30-year retirees, that that question--our 
answer to that would be, well, if you want to equalize it, then 
remove the fees for those 20- and 30-year retirees, and then 
they are still equal. It is just a different way to accomplish, 
I guess, the same thing.
    And I am not certain that I believe the idea that it is 
strictly for a government management tool. I mean, I still 
believe that there is obvious budget implications that go along 
with these. So we recognize that this is an issue that is going 
to have to be addressed.
    I have to say from my perspective I find it not amusing, 
but quite interesting that the VA chose the method that they 
did to--they made it easy for Congress to reject these co-pays 
and fees because they do not have any immediate impact on the 
discretionary budget of the VA healthcare system.
    So I think they recognize the will of Congress with this 
issue and, yet, they continue to push the issue, and it 
concerns us that ultimately it would still force people to 
leave the system. I do not believe they have factored into that 
200,000 who would leave the 
system, that does not necessarily include the higher-
income veterans.
    There are a lot of veterans who are on the margin who would 
probably fall into that category of veterans that would leave 
the system. But we do not have an exact analysis of how that 
would impact it. It would be kind of interesting to see maybe 
how that would play out over time.
    Mr. Michaud. And if we could, Mr. Chairman, request from 
the VA, I would be interested in finding out, since they did 
break it out to under $50,000, between $50,000 and $74,999, the 
number of veterans falling in those categories because I do not 
believe it is going to drive them out, if they are making 
$200,000, of the system.
    My next question is, and I know Mr. Lawrence brought it up, 
on attorney fees, and I know the VSOs are split on allowing 
attorneys to get involved into the system, how often do you 
think attorneys will get involved in the system? Do you think 
there is going to be a huge influx of attorneys or do you think 
it might be on an occasional basis?
    I guess I will ask those who are against them, and I guess 
the veterans who are in favor of the attorneys being involved 
in the system exactly how do you think the attorneys will be 
involved in the system?
    Mr. Lawrence. Well, their money, their funding comes from 
retroactive payments that the veteran would get, and there are 
some sizable retroactive benefits. And some of them, I mean, 
they would cherry pick. That is one of our concerns. You know, 
an attorney is not going to represent somebody that they do not 
see, you know, a payout at the end.
    We represent everybody and, you know, we provide a service. 
And I can see attorneys not doing that, cherry picking through 
the system, abusing the system, maybe even delaying claims 
longer so that the retroactive amount is larger.
    And, you know, it is conceivable that it would come to the 
point where people would feel they needed an attorney to 
accomplish something that should not require an attorney. As I 
stated, it is an open and simple system. And I just do not see 
how adding attorneys to that process would improve it.
    Mr. Cullinan. Mr. Michaud, the VFW is also in the against 
them camp, so I would like to speak to that next. I mean, along 
with the prospect of individual abuse, the concern, of course, 
is what effect will the introduction of attorneys have on the 
system. Will it make it more adversarial? Will it compel our 
service officers to play a more litigious approach to, you 
know, pursuing veterans' claims.
    The other thing I would like to talk about, though, is the 
prospect of an underlining irony. You know, in tort claims 
actions, you will have firms that are set up and they will come 
in representing various individuals in the courts, and 
oftentimes they have their own boards of expert witnesses. And 
I know there are a couple of examples of this where they are 
actually getting involved with veterans' law. I think it is in 
Missouri that Joe was talking about.
    And what they are doing is they will bring on--its 
tinnitus. There is a type of severe tinnitus. This firm, I 
think it is in Nebraska, has their own audiologist on board. 
And they are representing veterans with a severe form of 
tinnitus and, sure enough, their allowance rate is 
extraordinarily high.
    Now, by extension, I could see this applying to all sorts 
of other things. Take individual unemployability. For example, 
you could suddenly have attorneys getting very successful at 
representing lots of veterans before VA where suddenly I, you 
who might not have--and it costs the government then. And the 
consequences that could have for the survival of the system are 
a little bit daunting.
    Mr. Greineder. Mr. Michaud, AMVETS is also against the 
attorney bill that passed back in December. We join our 
colleagues at the DAV and VFW against it. And we actually 
passed a national resolution at our convention in August 
against the bill.
    One of our concerns is that any good lawyer entering the VA 
system will use the system to their advantage and, you know, 
causing more delays. We are already at a 600,000 backlog, so we 
are concerned about entrance of lawyers, what that will do to 
the system.
    Mr. Rowan. We take the exact opposite opinion, I guess, 
from my colleagues. We have been always in favor of Vietnam 
Veterans of America bringing lawyers into the system. We think 
that veterans are entitled to legal representation like anybody 
else.
    And one only has to look at the Social Security system 
where lawyers have been brought in and nothing disastrous has 
occurred, and we have not seen people running amuck. In fact, 
what we have seen is people finally getting their due.
    Having been service rep and done claims work, anybody who 
says that system is not adversarial, boy, I tell you, it seemed 
to be very adversarial.
    And the other thing is, when you are filing claims and 
doing all that claims work, anything beyond the simplest claim 
and the most presumptive claims, for example, you are getting 
into some very interesting areas where you are writing briefs. 
Really good service reps who have been out there are 
practically parallels. They have to read law. They have to read 
sections of Title 38. They have got to quote things all over 
the place.
    We are really looking at, when we get into the appeals 
level of things, when you are up to the Board of Veterans 
Appeals, you are talking to attorneys all the time. In the 
Court of Veterans Appeals, you have got to be an attorney. I 
mean, who are we kidding here? I mean, attorneys are all over 
this place. They are all over the VA. They are the ones who are 
writing half the Title 38 in the first place. So attorneys are 
everywhere in the system except on our side of the table most 
of the time.
    The other thing is, you know, the gentleman just said what 
happens if we get all of these unemployability claims. Well, 
they are not going to get accepted unless they have got some 
legitimacy. Just because a lawyer goes in and brings the claim 
does not mean we are going to win.
    And if they are winning all these claims that they deserve, 
then that only means the system undeservedly kept veterans out 
from getting their due.
    So, you know, I think it needs to be watched, monitored 
very clearly. The Bar Association has to get involved, and 
these lawyers cannot just be any lawyer. They need to go 
through some kind of training. We think that they ought to have 
that. But they would 
end up having some sort of practicality like Social Security law
yers.
    I had to go unfortunately through a process with my son who 
had a problem when he crushed his foot in a motorcycle accident 
and had to go on Social Security Disability, and we had to 
bring the lawyers into the system because there is no other way 
to beat 
that system. They just beat you down with all the legal aspects 
of it.
    And so, you know, unfortunately, the adversarial manner of 
the VA at certain levels, when you get into certain types of 
claims, you may very well have to have somebody able to write a 
really good legal brief to get past them. And so we are in 
favor of it. We do not think it is going to clog the system or 
make it any worse than it already is.
    The Chairman. Thank you. This is a subject we have not 
exhausted yet.
    Mr. Buyer.
    Mr. Buyer. Thank you.
    It is unfortunate The American Legion Commander had to 
leave to catch a plane. I think this was the first time in 15 
years that I have been on this Committee that an American 
Legion Commander has testified at a budget hearing, and so I 
want to thank The American Legion Commander for coming.
    Up until the last Congress, Mr. Rowan, is the first time 
VVA had ever been invited to sit at the table. And therein lies 
part of the challenge this Committee has had. You have got the 
Independent Budget. We try to go through this budgetary 
process, but there are many Military Service Organizations and 
other organizations that get excluded and they do not get to 
this table.
    So, Mr. Cullinan, therein lies the huge difference between 
a philosophical approach. You choose theater over substance. 
Now, I understand as a military man the importance of a 
military parade. I am going to put on my uniform here in about 
10 days, so I understand what a military parade can do, 
discipline, command and control, all those things are 
important.
    But to this Committee, the most important thing is for us 
to get timely input. And if you think that your input is the 
only input--actually, I do not think you believe that. But 
right now that is all we get. We just get the Independent 
Budget, The American Legion, and yours. And there is a whole 
bunch of other input that we need.
    But, yet, what is going to happen? We do not get that input 
until much later and it is going to be done in theater whereby 
the Commander then plays to his audience, i.e., the Members. We 
sit there and listen as the Commander plays to his audience, 
and then they give us input. But the input is now after the 
budget process has already been done, so now you have been 
relegated to the back bench and all you can do is play the part 
of the critic.
    And you cheer that. You say that is wonderful. That is 
great. I get my theater. I get to be a critic. No. I want you 
to participate substantively in the process, not just you, but 
the 20 VSOs and MSOs. The Military Service Organizations have 
been excluded from this process. And I am stunned now. I put 
together a process to bring them in and now they are being 
silenced.
    I mean, let me just say this. In the 2 years that I chaired 
this Committee, here are the individuals that actually came 
into my office to work with me. It was not anyone from the big 
four. It was not anyone sitting at this table. It was not your 
organizations. It was General Matz with NAUS. It was Admiral 
Ryan with MOAA. It was Mr. Rowan with VVA. It was Rolling 
Thunder and the Patriot Guard Riders. That is who would come 
into my office and see me.
    The only time the commanders of the big four ever came in 
to see me is because they wanted to have their joint hearings 
back. No one even picked up the phone. No one even came to see 
me personally on any substantive issue in the 2 years which I 
chaired this Committee. I think that is stunning. I think 
America needs to know that.
    And so what did I have to do? I had to then put together a 
process on how to get their timely input. The best of all 
worlds, Mr. Cullinan, would have been to have done joint 
hearings prior to our budget views and estimates. I proposed 
that. That does not work because you want to do them at a time 
when you do your spring conferences when you bring all your 
Members out. So I understand all that, and we just could not 
get it worked out.
    Mr. Lawrence, I need some help. Where did you come up with 
FTE productivity being 100 claims per year? Where do you get 
that, because that is nine fewer than VBA? So where do you get 
that?
    Mr. Lawrence. That is just the formula that the IB has 
used.
    Mr. Buyer. Say again.
    Mr. Lawrence. We want claims workers to be able to 
concentrate more on quality rather than numbers. So logically 
that is going to require them to have a fewer number of claims, 
and the estimate that the IB has traditionally used is 100 per 
worker, 100 claims per worker.
    Mr. Buyer. So it is an arbitrary number?
    Mr. Lawrence. No more arbitrary than 109 for the VA. Sir, I 
would also like to add--maybe I did not make a great impact on 
you when we did meet--but I personally met with you in a 
handful of meetings over the course of the last year.
    Mr. Buyer. I am referring to commanders. I am referring to 
commanders.
    Mr. Lawrence. You said nobody at this table.
    Mr. Buyer. Nobody at this table who represents national 
organizations.
    Mr. Lawrence. All right.
    Mr. Buyer. I apologize. Thank you for correcting me.
    Let me ask a question on burial details. Are your 
organizations getting the resources they need for burial 
details, ammunition necessary, upgrading of weapons? Can 
anybody answer that question?
    Mr. Cullinan. I know that it has gotten better. There was a 
real problem for a while. For one thing, there was a type of 
per diem which was not made available unless certain uniform 
members. And that has been corrected, so that has helped quite 
a bit.
    You know, we would really have to poll our membership, 
though, to find out how well it is actually going. We are not 
getting a lot of complaints about it, and I know that that 
change in law really made a difference for our people. And a 
lot of our people who volunteer for these assignments, they are 
not wealthy by any stretch of the imagination. This money was 
coming out of their own pockets. So that change helped a lot.
    Mr. Buyer. All right. Please go back and look at that a 
little bit further. If there are things that we need to do from 
our standpoint or communicate with the Armed Services Committee 
because for this increase the Secretary talked about with 
regard to burials, we are going to be responsive to you. Okay?
    Thank you.
    Mr. Blake. Mr. Buyer, can I make one statement real quick?
    Mr. Buyer. Yes, sir.
    Mr. Blake. I think I made clear last year that if I know I 
am not the subject matter expert on a particular issue, I will 
be glad to forward the question along or bring that person with 
me the next time.
    With regards to your question about the 100 claims per FTE, 
I would suggest maybe submit that question to us in writing 
because if you look inside the IB, there are a number of people 
involved in the writing. And I know who the individual is. I am 
pretty certain who the individual is who is responsible for 
that section and I am sure he would be glad to give you a 
better explanation of your question there.
    Mr. Buyer. Gentlemen, your answers, I think, coincide with 
the task force, that we want to make sure we get the best 
qualified people to adjudicate these claims. And I do not even 
know what the number would be if I were an adjudicator. But 
thank you.
    The Chairman. I want to thank you all. I want to personally 
thank everyone at the table for helping educate me over the 
last decade about your organizations. I think the Independent 
Budget is a tremendous job. As I said, I am going to recommend 
that we follow it in our own budget deliberations.
    I also want to make sure, everybody, again, thank you for 
agreeing to participate. On Monday, at one o'clock, all the 
Members of the Committee, Mr. Buyer, are invited to participate 
in what I am calling a summit, not a round table, but a square 
table, to, in fact, put in writing the agenda that we are going 
to pursue as a Committee over the next year.
    And we look forward to your participation in that, and we 
look forward to working with you. I love commanders, but I love 
you all too. And I appreciate that you all will be helping us 
as we progress.
    Mr. Buyer. Will the gentleman yield?
    The Chairman. I yield to Mr. Buyer.
    Mr. Buyer. As a gentleman from California, you recognize 
the challenges for Members to get back for those votes at 6:30, 
so as we do these round tables, I think it is a great idea to 
just recognize that Members are returning on these Mondays. So 
it makes it challenging for attendance.
    The Chairman. I appreciate hearing that, and I complained 
about that as a Californian for a long time. So we will make 
sure that that is taken into account.
    This meeting is adjourned, and we thank you all for 
participating.
    [Whereupon, at 1:30 p.m., the Committee was adjourned.]



                            A P P E N D I X

                              ----------                              

                 Prepared Statement of Hon. Bob Filner
             Chairman, Full Committee on Veterans' Affairs
    Welcome everyone to the hearing on the Fiscal Year 2008 Budget 
Submission of the Department of Veterans Affairs.
    Secretary Nicholson on Monday characterized the VA's FY 2008 budget 
as a ``landmark'' budget.
    I applaud the VA for submitting a budget that calls for an increase 
for veterans' medical care, unlike the budget it submitted 2 years ago, 
and I believe it presents us a framework from which to begin our 
analysis as to whether the VA's budget submission will meet the needs 
of veterans in the coming fiscal year. Our job as a Committee is to 
make sure that as we follow this ``landmark'' we are not led off course 
and lose our way.
    The VA has requested an increase for VA medical care of $1.9 
billion over the level provided for in the joint funding resolution. 
This represents a 6 percent increase. The amount we provided this 
fiscal year is 12 percent more than we provided in FY 2006. The 
Independent Budget and The American Legion both recommend more than a 
12 percent increase for FY 2008. The Vietnam Veterans of America 
recommend substantially more. I look forward to your explanations as to 
why you believe your 6 percent increase will suffice.
    Your budget submission states that $1.4 billion of your increase 
for medical care is attributable to inflation. Once this is factored 
in, your recommended increase leaves precious few dollars to meet the 
increasing needs of veterans.
    Although the waiting list for new enrollees has indeed declined, 
and I applaud you for that, I believe that no veteran should have to 
wait for a healthcare appointment simply because the VA does not have 
the resources to care for that veteran. Can you assure this Committee 
that your budget request has the dollars you need to address this 
problem?
    Last year, your budget request claimed an additional $197 million 
in ``efficiencies'' for FY 2007, for a total of $1.1 billion. This 
year's budget submission also claims clinical and pharmacy ``cost 
avoidance.'' This Committee would like to know whether you believe you 
will achieve these ``efficiencies'' for FY 2007, and what exactly are 
your dollar estimates as to your ``efficiencies'' in these two areas 
for FY 2008.
    In the area of mental health, I see that you are requesting an 
additional $56 million for a total of $360 million for your Mental 
Health Initiative. Your budget submission also claims that the VA plans 
to spend $3 billion for mental health services. The GAO has reported in 
November that you failed to fully allocate the resources you pledged in 
FY 2005 and FY 2006 for your Mental Health Initiative.
    In light of this report, will the VA fully allocate the $306 
million for this initiative in FY 2007, and the $360 million for FY 
2008? Does the VA currently have the resources it needs to address the 
mental healthcare needs of our veterans, especially our veterans 
returning from Iraq and Afghanistan?
    I must note that I am disappointed that you have once again brought 
forward legislative proposals as part of your FY 2008 submission. 
Instituting enrollment fees and increasing pharmacy co-payments have 
been rejected year after year by Congress. Last year you claimed that 
enactment of these proposals would reduce your need for discretionary 
healthcare dollars. This year, your proposals are deemed ``mandatory'' 
spending and are taken out of your overall mandatory spending.
    I would like you to explain to this Committee why you have offered 
these proposals again, and the policy reasons for deeming the proposed 
receipts from these proposals mandatory dollars.
    The VA is facing an ever-greater claims processing crisis. In light 
of this I would expect your FY 2008 budget submission to aggressively 
request additional dollars to address this growing problem. But I see 
that your request for General Operating Expenses, which funds claims 
processors, is close to $9 million less than the amount provided for in 
the joint funding resolution. What steps are you taking to meet this 
challenge, and why has the VA not requested a sizable increase in this 
account in order to address the claims processing backlog?
    Your VA research request seeks less than you will receive under the 
joint funding resolution. You should be requesting at least an $18 
million increase just to keep pace with inflation. This is especially 
true when once again you are seeking more resources from other Federal 
sources and the budget for the National Institutes for Health promises 
to be static.
    I look forward to a full explanation of your Information Technology 
request, including transfers from other accounts. We must ensure that 
the VA is moving in the right direction in IT and that the funding 
level you receive in FY 2008 will lead to better security, more 
innovation, and fewer incidences like the one that occurred in 
Birmingham, Alabama last week.
    I note that you seek increases in both Major and Minor 
construction. I know this Committee will be interested in learning how 
the VA selected the projects included in the FY 2008 request.
    There is much work to be done to ensure that the VA has the funding 
it needs in the coming fiscal year, and to ensure that the VA spends 
the resources it receives diligently. Mr. Secretary, we look forward to 
hearing from you this morning, and to working closely with you to make 
sure that the needs of our veterans, those returning from Iraq and 
Afghanistan, and the veterans from our previous conflicts, are met.
                                 
                 Prepared Statement of Hon. Steve Buyer
     Ranking Republican Member, Full Committee on Veterans' Affairs
    Thank you. Mr. Chairman, good morning. I'd also like to welcome 
everyone to our first hearing of the 1st Session of the 
110th Congress.
    Mr. Secretary, I am glad you can be with us today to share with the 
Committee the President's proposed budget for 2008. I commend you for 
yet again embracing the challenge of improving the VA's budgeting 
process. Building on last year's progress, it appears that improving 
the integrity of the process has borne fruit with this budget.
    Mr. Secretary, as you observe your second anniversary as chief 
steward of our nation's veterans we can look back and note that it has 
been a year of challenges and successes. I thank you for your 
willingness to squarely meet the challenges and commend you on those 
successes.
    Since this time last year, we passed a major legislative 
initiative--Public Law 109-461--the Veterans Benefits, Health Care, and 
Information Technology Improvement Act of 2006. This bill was the 
result of a bipartisan effort led by this Committee in concert with our 
colleagues in the Senate. We listened to 20 VSOs and MSOs and 
incorporated many of their suggestions. We authorized 24 major 
construction projects in 15 states, approved continued leasing of 8 
medical facilities and required VA to explore options for construction 
of a new medical facility in San Juan, Puerto Rico. With regard to our 
returning Iraq and Afghanistan veterans, we added $65M to increase the 
number of clinicians treating post traumatic stress disorder and 
improve their training. It further authorizes spending for 
collaboration in PTSD diagnosis and treatment between VA and DoD. We 
authorized more funding for additional blind rehabilitation specialists 
and increased the number of facilities where these specialists will be 
located. We expanded eligibility for Dependents Education Assistance to 
the spouse or child of a servicemember hospitalized or receiving 
outpatient care before the servicemember's discharge for a total and 
permanent service-connected disability. The intent here was to help 
enhance the spouse's earning power as early as possible before 
discharge of the servicemember.
    We made chapter 35 more flexible for spouses and dependents, we 
restored the entitlements for members of the National Guard and 
Reserves who are called to active duty during the school year, we 
extended work study provisions to ensure a veteran didn't lose a job 
during the school year, and we required VA to report ways 
to streamline administration of the GI Bill to shorten the time to get t
hat first check.
    Some expressed concerns about veterans ability to afford a home so 
we authorized VA to guarantee co-op housing units which are often the 
most affordable housing in many areas.
    Many asked us to help veteran, especially service-disabled veteran-
owned businesses, so we gave VA the tools to increase the amount of 
business they do with veterans by giving service-disabled veteran-owned 
businesses preference over all other set-aside groups and ensuring the 
survivors of veteran businessowners who acquire ownership continue 
their veteran-owned status with VA.
    Service organizations also expressed the need to revitalize the 
veterans employment programs at the Veterans Employment and Training 
Service. So, we made several changes to strengthen mandatory training 
for DVOPs and LVERs, revised the incentive program to make it more 
effective, and established a pilot licensing and credentialing program. 
And VVA especially, noted that DOL needed to develop regulations to 
implement the Jobs for Veterans Act. We did that too.
    Since this time last year, we have seen the Department embrace the 
idea of centralizing its IT under the VA's CIO. I believe that this 
innovation will be seen as part of your legacy to the Department of 
Veterans Affairs. As part of our work on IT, we engaged in a bipartisan 
fashion to increase data security in order to protect our nation's 
veterans. We have also worked through the complexities of the Charles- 
ton model, forging an exciting new way to approach hospital design and c
onstruction.
    It is our job to preserve those arenas of excellence and to work 
together in a bipartisan fashion to ensure every service the Department 
provides meets the highest standards.
    One of the most important services remains the determination and 
awarding of benefits. As you know, Mr. Secretary, the claims backlog 
has reached an all-time high. To help lead the way ahead, I organized a 
Compensation and Benefits Accountability Task Force in December 2005. 
After almost 1 year, they provided me a powerful work product with 
numerous recommendations. I want to commend those who spent many hours 
working on this valuable product--Blake Ortman, the Associate 
Legislative Director of PVA, James Doran, the National Service Director 
for AMVETS, Rick Weidman the National Legislative Director for Vietnam 
Veterans of America, John Lopez, the Chairman for the Association of 
Service Disabled Veterans, and Steve Smithson the Assistant Director, 
National Veterans Affairs and Rehabilitation Commission, the American 
Legion. Gentlemen, thank you for your good work. Mr. Secretary, I look 
forward to sharing this with you, as well as the Members of this 
Committee as we tackle this serious problem.
    It's worth noting that again this year, the President has proposed 
substantial increases in the budgets of agencies focused on fighting 
the war on terror--the Department of Defense and the Department of 
Homeland Security. I am pleased that again this year, the Department of 
Veterans Affairs--an agency focused on caring for those who have borne 
the battle--has also received a substantial increase of approximately 8 
percent over the level contained in H.J. Res. 20. At a time when much 
of the rest of government received a 2.2 percent increase, I believe 
this reflects the commitment of this Administration to care for our 
nation's veterans during time of war.
    As you know Mr. Secretary, a budget is much more than numbers. In 
the end, it must translate into real actions on the ground that has a 
positive affect on America's veterans. As I look at this budget, I view 
it in light of my top three priorities, which remain:

      Caring for veterans who have service-connected 
disabilities, those with special needs, and the indigent.
      Ensuring a seamless transition from military service to 
the VA.
      And providing veterans every opportunity to live full, 
healthy lives.

    We have an obligation to those who bear the burdens of war and of 
military service--and to their survivors. Our work must move us toward 
the fulfillment of that obligation.
    Therefore I want to judge this budget not just by the numbers, but 
for what it does for America's veterans. When you send us a budget of 
this magnitude, Mr. Secretary, I expect to also find those outcomes you 
seek for success. The Congress is not a blank check. We will be looking 
for accountability. Generally, I think this is a good budget. But as we 
look at desired outcomes, I want to review what we learned from the 20 
VSOs and MSOs at last September's ``look back, look ahead hearing.'' At 
that time, the issues most frequently cited as concerns were: (1) VBA 
and the claims backlog, (2) seamless transition, mental healthcare, and 
healthcare funding, and (3) improving the GI Bill. Mr. Secretary, I'd 
ask you to explain how this budget addresses each of these issues and 
improves the lives of our veterans.
    Mr. Secretary, I applaud you for the direct and forthright 
budgeting process that you have used in developing this year's budget. 
There appear to be none of the gimmicks that were used in years past.
    That said, there are some concerns in the budget before us today: 
Mr. Secretary, last year you brought us a similar request for 
enrollment fees and increased co-pays. I personally agree that it is 
appropriate to ask for cost-sharing of veterans without service-
connected disabilities. I applaud the fact that these legislative 
proposals do not reduce the discretionary medical care appropriations. 
However, I am concerned that this year, any funds collected under these 
proposals go directly to the U.S. Treasury.
    Further, VA's projects nearly 2.8 billion dollars in collections, 7 
percent above last year's projected collections. Given the agency's 
track record, this appears to be overly optimistic.
    I am also concerned with your answer to the claims backlog. Simply 
throwing more money at the problem, is not the answer. I am troubled by 
what I would characterize as an insufficient use of technology and 
instead, the status quo--throw more people at the problem. We'll 
continue this discussion throughout the year, Mr. Secretary, but I want 
you to know up front, I am not pleased.
    Budgets, systems, and programs are, after all, about service to 
veterans. As you mentioned in your opening remarks Mr. Secretary, you 
and I, along with Dr. Boozman and Mr. Salazar, traveled last year to 
Iraq and traced the path of wounded military personnel back through 
Germany to state-side military treatment facilities and ultimately to 
the VA hospitals. For me, this experience brought into sharp focus the 
issues facing today's veterans. These brave men and women have 
sacrificed everything for this nation and we owe them our energy and 
diligence in making them whole again.
    Mr. Secretary, I thank you for appearing here today and look 
forward to your testimony. I also look forward to hearing from our 
second panel--those VSOs representing the Independent Budget and the 
American Legion.
    Mr. Chairman, I yield back.

                                 
             Prepared Statement of Hon. Henry E. Brown, Jr.
    Mr. Chairman and Ranking Member Buyer, thank you for calling this 
hearing to examine the Administration's budget request for Fiscal Year 
2008. I look forward to hearing from Secretary Nicholson on our first 
panel and from representatives from many of our nation's veterans 
service organizations later in the day.
    As past chair of both the Health and former Benefits Subcommittees, 
I am pleased that this budget continues the hard work our Committee and 
the Administration embarked upon just a few short years ago. In 2001, 
we had a VA that was receiving just over $20 billion for medical care. 
In the budget proposal we are discussing today, VA is in line to 
receive upward of $36 billion for veterans' medical care. This 
accomplishment would not have been possible had it not been for the 
commitment made by this Committee, the Administration, and so many 
others in and out of Congress to our nation's veterans.
    As the Congress and this Committee looks at the Administration's 
current budget proposal, I am hopeful that we will do so in a way that 
focuses on the bipartisan concern we all have for the wellbeing of our 
nation's veterans. The work done in our VA medical centers is of such 
importance, not only to veterans, but also for our entire nation. From 
developing new treatments to leading the world in the use of electronic 
medical records, the work of the VA truly is world class.
    That said, as with any organization, especially one as large as the 
VA, there is room for improvement. I am especially glad to see that 
this budget includes something that this Committee has called for the 
VA to do for a very long time. The centralized management of 
information technology (IT) systems and security contained in this 
budget will lead to improved security for the personal information of 
our nation's veterans as well as provide the VA with the ability to 
improve service from the top down.
    In addition, I want to praise Secretary Nicholson and the 
Department of Defense for coming together under the banner of common 
sense to develop a joint medical records system for our service 
personnel and veterans. This will go a long way toward achieving the 
goal of seamless transition that this Committee has so actively 
pursued.
    In closing, Mr. Chairman, while I certainly have concerns with this 
budget and some of the funding decisions made by the Administration 
within certain accounts, overall I believe it sets a very solid 
starting point for Congress to build upon. I look forward to that 
process in the coming months. Again, Mr. Chairman, thank you for the 
time, which I now yield back.

                                 
                 Prepared Statement of Hon. Jeff Miller
    Thank you, Mr. Chairman for holding this hearing to discuss the 
fiscal year 2008 funding for the Department of Veterans Affairs.
    I am committed to our responsibility to ensure that the budget we 
adopt will continue to meet both the complex needs of our new 
generation of younger veterans as well as maintain and improve the 
quality of services for our older veterans.
    I want to thank the Secretary for his appearance before the 
Committee today and I thank you for your leadership. I also want to 
commend the manner in which you and your staff have responded to the 
emergent challenges in taking care of our veterans.
    I also appreciate the Veterans Service Organization representatives 
for participating in our hearing today. Your outlook on funding 
recommendations for veterans programs and input into the budget is of 
great value to me in this process.
    It is satisfying to see that after this Committee uncovered 
weaknesses in the process VA used to develop its healthcare budget in 
2005, the budget request for fiscal year 2008 is more transparent. The 
Department proposes $36.6 billion for VA healthcare--the largest amount 
ever requested by any Administration.
    However, I would be remiss in not expressing my concern about the 
inclusion of legislative proposals to establish fees and increases in 
pharmacy co-payments for certain veterans without service-connected 
conditions similar to requests that Congress has rejected year after 
year.
    Having chaired the Subcommittee on Disabilities and Memorial 
Affairs last year, I am cautiously encouraged that the budget includes 
increased funding to reduce compensation processing time and improve 
accuracy.
    In the State of Florida, the VA patient workload is among the 
highest in the Nation and the demand for VA healthcare continues to 
grow, especially in Okaloosa County, the center of my Congressional 
District.
    Three years ago, the Capital Asset Realignment for Enhanced 
Services (CARES) Commission identified this Florida Panhandle region as 
underserved for inpatient 
care. In fact, it is the only market area in the VISN, VISN 16, without 
a medical center.
    The absence of a VA inpatient facility continues to be one of the 
biggest concerns of veterans who live in this area. Currently, many of 
these veterans have to drive to Mississippi to receive inpatient care.
    Bringing a full service VA hospital to the first district is 
something I have been fighting for. I look forward to working with the 
Department in support of VA's overall capital construction program to 
address the issue of providing timely access to inpatient healthcare 
for veterans living in and around Okaloosa County.
    Collectively, we share the same goal of providing exceptional 
service to those who have served in our Armed Forces and sacrificed so 
much for our freedom.
    I hope that our hearing this morning will point the way toward 
close cooperation among all of us as advocates of our Nation's veterans 
to respond to their evolving needs and those of their families.

                                 
              Prepared Statement of Hon. Gus M. Bilirakis
    Mr. Chairman, I want to commend you for scheduling this timely 
hearing on the Administration's Fiscal Year 2008 budget request for the 
Department of Veterans Affairs. I would also like to take a moment to 
welcome VA Secretary, Jim Nicholson, and our other witnesses to the 
Committee this morning.
    As a new Member of the Committee, I am anxious to hear directly 
from Secretary Nicholson on the Administration's overall budget request 
for the upcoming fiscal year and how it addresses the needs of our 
nations' veterans. I am also looking forward to hearing the 
recommendations of the authors of the Independent Budget as well as 
those of the other veterans' service organizations (VSOs) testifying 
today. The VSOs often provide us with valuable insight into the day-to-
day operations of the VA and its needs.
    There are a number of issues in the budget which are of specific 
interest to me, but rather than spending time to raise them now, I will 
wait until the question and answer period to discuss them. However, I 
do have some concerns regarding the legislative proposals that were 
included in the Administration's budget request.
    As I understand these proposals, they would implement annual 
enrollment fees and increased prescription drug co-payments for 
Priority 7 and 8 veterans. I know that the Administration has made 
similar proposals in the past which Congress has rejected. I am very 
concerned about the impact these proposals would have on our nation's 
veterans. As the Representative of a district with a large veterans' 
population, I strongly believe that we must do everything we can to 
repay the great debt that we owe the men and women who answered the 
call to duty, and I hope that 
the Committee will carefully review these proposals before taking any ac
tion on them.
    Mr. Chairman, I look forward to working with you and the other 
Members of our Committee to ensure that our veterans receive the 
benefits they earned through their service to our country.

                                 
              Prepared Statement of Hon. Ginny Brown-Waite
    Thank you, Mr. Chairman,
    First, I would like to thank Secretary Nicholson for testifying 
before the Committee today. I have a great deal of respect for the work 
you have done since taking office, and am confident that you will 
continue to serve our nation's veterans well.
    I am pleased that the President's budget request would provide 
$86.75 billion for the Department of Veterans Affairs--a nearly 8 
percent increase from the previous year. Having said that, I do have 
concerns about this budget. Once again, the President has included a 
proposal establishing an enrollment fee and increased prescription drug 
co-payments for category 7 and 8 veterans. I have always said that 
Congress should not impose any new fees without expanding access to 
care. In fact, I recently introduced legislation, H.R. 92, to ensure 
that veterans receive timely access to healthcare. Too many veterans 
are waiting too long for care, or worse, shut out of the VA's system 
altogether. The President submits this proposal year after year, and 
every time I vehemently oppose it. This year will be no different.
    Some are saying that this budget does not provide adequate funding 
to the VA. I want to make certain that this budget will adequately meet 
the needs of those veterans seeking benefits and medical care. With 
increasing numbers of our brave men and women returning from Iraq and 
Afghanistan, the VA will face a significant strain for the near future. 
As Members of Congress, we have an obligation to ensure that those who 
served are receiving the care they need. Therefore, it is essential 
that Congress continue to direct funds and resources to areas in need, 
while bringing greater efficiency to the VA.
    Once again, thank you to all of today's witnesses. I look forward 
to working with my colleagues in the 110th Congress to 
ensure that our nation's veterans receive the care and support to which 
they are entitled.

                                 
               Prepared Statement of Hon. John T. Salazar
    Mr. Chairman, Monday I visited with four soldiers from Colorado at 
the Walter Reed Army Medical Center. Monday also happens to be the day 
the President released his budget proposal for 2008.
    While at Walter Reed, I sat with a young man who took a shot gun 
blast at point blank range.
    Then I spent some time with a 25-year-old double amputee.
    The third soldier, a native of the Colorado plains, was recently 
fitted with a prosthetic left leg.
    And the fourth is a Lt. Col recovering from a bullet shattered 
right leg.
    These brave soldiers are representatives of the thousands of 
injured men and women of the U.S. Armed Forces that have returned from 
Afghanistan and Iraq.
    Over 50,000 troops have sustained serious injuries in this war. Yet 
the President is proposing an increase in VA health funding that fails 
to adequately fund the basic necessities of our future generation of 
war veterans.
    The President says his budget meets the growing healthcare needs of 
our Nation's Veterans, yet fails to adequately fund medical care for 
Colorado's 400,000 veterans, and troops returning from Iraq and 
Afghanistan.
    The President claims he's expanding the Department's ability to 
provide mental healthcare, yet this proposed budget fails the thousands 
of servicemembers returning from war with PTSD and other psychological 
traumas of war.
    With the President's proposed budget, the Veteran's Administration 
will be forced to shift resources from the care of our aging veteran 
population to address the needs of our most severely injured veterans 
returning from combat today.
    Mr. Chairman, the cost of this war must not be shouldered solely by 
the brave men and women who have fought for our freedoms. It is our 
responsibility to guarantee that our veterans get the benefits that 
they were promised the day they signed up for service.

                                 
                Prepared Statement of Hon. Doug Lamborn
    Thank you, Mr. Chairman.
    It is an honor to be here in my first Veterans' Committee hearing 
among veterans and their families, and those who have, in turn, 
dedicated themselves to serving these great patriots who have secured 
our nation's very freedoms.
    Mr. Buyer, thank you for your service as Ranking Member of this 
Committee and for your confidence in this freshman. I assure you that 
my service will be marked by energy, and a focus to ensure our 
veterans, their families, and their survivors that we have a system 
that makes timely and accurate decisions and efficiently delivers 
benefits to deserving beneficiaries.
    Admiral Cooper, I was glad to have been able to visit with you 
briefly; this is a complex area and has profound impact on our veterans 
and their families.
    These beneficiaries, we would all agree, shouldn't have to grapple 
with the complexities, laws, regulations, and pressures generated from 
one side of Washington to another. They are already grappling with the 
pressures of illness, injury, the need for a pension, some college 
tuition, perhaps a life insurance policy or a home loan.
    No veteran should wait 6 months for a claims decision or years for 
an appeals decision. We must--and we will--work together in a 
bipartisan fashion and with you in the Administration to solve this 
problem.
    We will welcome fresh ideas, make room for promising partnerships, 
and keep the end goal in mind: veterans who are well-served by their 
government.
    Secretary Tuerk, I look forward to working with you. Your 
Administration has a reputation for efficiency and customer 
satisfaction. More must be done so that all of our national cemeteries 
meet shrine commitment standards.
    As we expand the number of national and state cemeteries, we should 
preserve if not accelerate our progress toward this vital commitment, 
which has enjoyed the Committee's enduring support.
    Much must also be done before we can offer our veterans a burial 
option in a national or state cemetery within a reasonable drive from 
their residence.
    I look forward to the opportunity today to hear more on these and 
other issues of importance to our veterans and their families.
    Mr. Chairman, I yield back my time.

                                 
               Prepared Statement of Hon. Timothy J. Walz
    Mr. Chairman, Members of the Committee and guests, let me express 
what a true honor it is for me to serve on this distinguished 
Committee. Having served 24 years in the Army National Guard and having 
deployed to Europe in support of Operation Enduring Freedom, I 
understand the need to keep our promise to America's veterans. These 
brave men and women have admirably served their country with 
unflinching courage and valor. Crafting policy that serves their best 
interests is this Committee's chief goal, and so I sincerely express my 
eagerness to work with each of you to meet that important goal.
    Today we turn our attention to the President's Fiscal Year 2008 
budget requests for the Department of Veterans Affairs and I want to 
thank the Secretary and other Department officials for joining us here 
today. I also want to thank the leaders of the various veterans service 
organizations that are here today. Thank you for the work that you do 
on behalf of all of our nation's veterans.
    I am eager to listen to today's testimony on the President's budget 
request. While I am pleased to see a 6 percent increase in requested 
funding for VA medical care, a significant jump from the .4 percent 
increase requested for FY2006, I am concerned with some of the 
President's proposals. The President's request to increase 
pharmaceutical co-payments and to impose an enrollment fee on priority 
7 and 8 veterans presents serious concerns. Furthermore, the President 
has proposed a cut to VA Medical and Prosthetic Research, a far cry 
from increases drastically needed by NIH and requested by the 
Independent Budget. Finally, while the size and increasing workload of 
the Department of Veterans Affairs would seem to require considerable 
funding increases for the Office of the Inspector General, the 
President's budget has instead proposed only slight increases for 
oversight.
    In conclusion, this budget request leaves me with important 
questions and concerns. I look forward to today's testimony and to the 
opportunity to work with each of the Members of this Committee on the 
problems facing America's veterans.
    Thank you.

                                 
                Prepared Statement of Hon. Corrine Brown
    Chairman Filner, thank you for holding this hearing and inviting 
the Secretary to discuss the budget of the Department of Veterans 
Affairs.
    I would like to thank all the groups here today to speak on the VA 
budget. The groups that authored the Independent Budget: AMVETS, DAV, 
PVA and VFW; you have continued to serve your country with this budget. 
Showing the inadequacies of veterans funding, whether Democrat or 
Republican, is important to the advancement of veterans rights.
    Mr. Secretary, thank you for coming today to discuss this budget. I 
do not agree with most of it, and there is much that I would change.
    First, I would like to thank you for all the building that will be 
going on in my district. I see there is money for the Orlando VA 
Medical Center and the Jacksonville cemetery. And yesterday the 
announcement of a new vet center to be built in Gainesville.
    Next, however, are the proposals that hurt individual veterans, the 
men and women who have served their country and have paid into THEIR 
system with their blood and sweat.
    Every year you include drug co-pays and enrollment fees. Every 
year, you do what you can to drive veterans out of the VA system. By 
your own estimate, enrollment fees would drive out over 200,000 
veterans from the healthcare system they built and deserve. You still 
do not allow new Priority 8 veterans into the system.
    Every year, the Congress, Members of both the Republican and 
Democratic parties, reject co-pays and enrollment fees.
    And this year, you are balancing the budget on the backs of 
veterans even more blatantly than ever. The money raised with this tax 
on veterans' health would go directly into the U.S. Treasury.
    How dare you use budget gimmicks and tricks to fund tax cuts for 
the wealthy?
    I cannot believe you are cutting VA medical and prosthetic research 
when ever more young men and women are coming back from Afghanistan and 
Iraq without limbs. We are doing remarkable things for these soldiers 
and to cut funding at this time says to current and future soldiers to 
not get hurt, because you will be on your own.
    And what about information security? Recently a portable computer 
hard drive, potentially containing personal information on veterans, 
was reported missing from a VA facility in Birmingham, AL. We held 
hearing after hearing last year about the loss of veterans' data, 
obviously to no effect.
    Tell me, Mr. Secretary, what is going on with the data security 
promises you gave last year?
    Once again I am reminded of the words of the first President of the 
United States, George Washington:
    ``The willingness with which our young people are likely to serve 
in any war, no matter how justified, shall be directly proportional as 
to how they perceive the veterans of earlier wars were treated and 
appreciated by their country.''

                                 
                Prepared Statement of Hon. Cliff Stearns
    Mr. Chairman, thank you for holding this hearing today on the 
Fiscal Year 2008 budget for the Department of Veterans Affairs, and I 
thank Secretary Nicholson and our Veterans Service Organizations for 
being here.
    First I would like to take a moment to compliment the Secretary for 
the Department's handling last year of the data breach incident. The 
Department responded quickly and effectively to the crisis to protect 
the identities of many veterans, averting what could have been an even 
greater breach of privacy.
    I would also like to say that we have worked well in the past with 
the Secretary on issues that are critical to veterans, increasing the 
number of clinics and working to bring a new veteran's cemetery to the 
Jacksonville area. I am very pleased that one of your three highest 
priorities you have mentioned previously is to ``ensure the burial 
needs of veterans and their eligible family members are met, and 
maintain veterans' cemeteries as national shrines.'' I was very pleased 
that the President authorized six new VA cemeteries Veterans' Day 2004, 
including my over-a-decade-old bill for a VA cemetery in North Central 
Florida.
    I am pleased with the progress we have made on these issues, and 
look forward to more opportunities for collaboration. Florida is a 
premier retirement area for our nation's veterans, with one of the 
highest numbers of veterans in its population, so naturally I am very 
interested in hearing suggestions for improvements from Secretary 
Nicholson.
    Mr. Secretary, I am greatly concerned about the claims backlog that 
is inhibiting the ability of veterans to receive benefits. It is an 
issue that we have worked on in the past, and it is my hope that we 
will accomplish much in this area through close collaboration with your 
Department in the coming year.
    I stand firmly behind the President in his strengthening of the VA 
for today's veterans. Taking care of veterans disabled by their 
service, and without other means, is a national commitment we must 
honor.
    I appreciate our veterans that are here today. I know that many of 
you travel great distances to come before us, and we are grateful to 
see you.
    Thank you again, Chairman Filner for the opportunity to hear our 
panelists, and examine the budget.

                                 
             Prepared Statement of Hon. R. James Nicholson
             Secretary, U.S. Department of Veterans Affairs
    Mr. Chairman and Members of the Committee, good morning. I am 
pleased to be here today to present the President's 2008 budget 
proposal for the Department of Veterans Affairs (VA). The request 
totals $86.75 billion--$44.98 billion for entitlement programs and 
$41.77 billion for discretionary programs. The total request is $37.80 
billion, or 77 percent, above the funding level in effect when the 
President took office.
    The President's requested funding level will allow VA to continue 
to improve the delivery of benefits and services to veterans and their 
families in three primary areas that are critical to the achievement of 
our mission:

      to provide timely, high-quality healthcare to a growing 
number of patients who count on VA the most--veterans returning from 
service in Operation Iraqi Freedom and Operation Enduring Freedom, 
veterans with service-connected disabilities, those with lower incomes, 
and veterans with special healthcare needs;
      to improve the delivery of benefits through the 
timeliness and accuracy of claims processing; and
      to increase veterans' access to a burial option in a 
national or state veterans' cemetery.

Ensuring a Seamless Transition from Active Military Service to Civilian 
                                  Life

    The President's 2008 budget request provides the resources 
necessary to ensure that service members' transition from active duty 
military status to civilian life continues to be as smooth and seamless 
as possible. We will continue to ensure that every seriously injured or 
ill serviceman or woman returning from combat in Operation Iraqi 
Freedom and Operation Enduring Freedom receives the treatment they need 
in a timely way.
    Earlier this week I announced plans to create a special Advisory 
Committee on Operation Iraqi Freedom/Operation Enduring Freedom 
Veterans and Families. The panel, with membership including veterans, 
spouses, and parents of the latest generation of combat veterans, will 
report directly to me. Under its charter, the Committee will focus on 
the concerns of all men and women with active military service in 
Operation Iraqi Freedom or Operation Enduring Freedom, but will pay 
particular attention to severely disabled veterans and their families.
    We will expand our ``Coming Home to Work'' initiative to help 
disabled service members more easily make the transition from military 
service to civilian life. This is a comprehensive intergovernmental and 
public-private alliance that will provide separating service members 
from Operation Iraqi Freedom and Operation Enduring Freedom with 
employment opportunities when they return home from their military 
service. This project focuses on making sure service members have 
access to existing resources through local and regional job markets, 
regardless of where they separate from their military service, where 
they return, or the career or education they pursue.
    VA launched an ambitious outreach initiative to ensure separating 
combat veterans know about the benefits and services available to them. 
During 2006 VA conducted over 8,500 briefings attended by more than 
393,000 separating service members and returning reservists and 
National Guard members. The number of attendees was 20 percent higher 
in 2006 than it was in 2005 attesting to our improved outreach effort.
    Additional pamphlet mailings following separation and briefings 
conducted at town hall meetings are sources of important information 
for returning National Guard members and reservists. VA has made a 
special effort to work with National Guard and reserve units to reach 
transitioning service members at demobilization sites and has trained 
recently discharged veterans to serve as National Guard Bureau liaisons 
in every state to assist their fellow combat veterans.
    Each VA medical center and regional office has a designated point 
of contact to coordinate activities locally and to ensure the 
healthcare and benefits needs of returning service members and veterans 
are fully met. VA has distributed specific guidance to field staff to 
make sure the roles and functions of the points of contact and case 
managers are fully understood and that proper coordination of benefits 
and services occurs at the local level.
    For combat veterans returning from Iraq and Afghanistan, their 
contact with VA often begins with priority scheduling for healthcare, 
and for the most seriously wounded, VA counselors visit their bedside 
in military wards before separation to assist them with their 
disability claims and ensure timely compensation payments when they 
leave active duty.
    In an effort to assist wounded military members and their families, 
VA has placed workers at key military hospitals where severely injured 
service members from Iraq and Afghanistan are frequently sent for care. 
These include benefit counselors who help service members obtain VA 
services as well as social workers who facilitate healthcare 
coordination and discharge planning as service members transition from 
military to VA healthcare. Under this program, VA staff provide 
assistance at 10 military treatment facilities around the country, 
including Walter Reed Army Medical Center, the National Naval Medical 
Center Bethesda, the Naval Medical Center San Diego, and Womack Army 
Medical Center at Ft. Bragg.
    To further meet the need for specialized medical care for patients 
with service in Operation Iraqi Freedom and Operation Enduring Freedom, 
VA has expanded its four polytrauma centers in Minneapolis, Palo Alto, 
Richmond, and Tampa to encompass additional specialties to treat 
patients for multiple complex injuries. Our efforts are being expanded 
to 21 polytrauma network sites and clinic support teams around the 
country providing state-of-the-art treatment closer to injured 
veterans' homes. We have made training mandatory for all physicians and 
other key healthcare personnel on the most current approaches and 
treatment protocols for effective care of patients afflicted with brain 
injuries. Furthermore, we established a polytrauma call center in 
February 2006 to assist the families of our most seriously injured 
combat veterans and service members. This call center operates 24 hours 
a day, 7 days a week to answer clinical, administrative, and benefit 
inquiries from polytrauma patients and family members.
    In addition, VA has significantly expanded its counseling and other 
medical care services for recently discharged veterans suffering from 
mental health disorders, including post-traumatic stress disorder. We 
have launched new programs, including dozens of new mental health teams 
based in VA medical facilities focused on early identification and 
management of stress-related disorders, as well as the recruitment of 
about 100 combat veterans as counselors to provide briefings to 
transitioning service members regarding military-related readjustment 
needs.

                              Medical Care

    We are requesting $36.6 billion for medical care in 2008, a total 
more than 83 percent higher than the funding available at the beginning 
of the Bush Administration. Our total medical care request is comprised 
of funding for medical services ($27.2 billion), medical administration 
($3.4 billion), medical facilities ($3.6 billion), and resources from 
medical care collections ($2.4 billion).
Legislative Proposals
    The President's 2008 budget request identifies three legislative 
proposals which ask veterans with comparatively greater means and no 
compensable service-connected disabilities to assume a small share of 
the cost of their healthcare.
    The first proposal would assess Priority 7 and 8 veterans with an 
annual enrollment fee based on their family income:


------------------------------------------------------------------------
                                                Annual Enrollment Fee
------------------------------------------------------------------------
Under $50,000                                                      None
------------------------------------------------------------------------
$50,000-$74,999                                                    $250
------------------------------------------------------------------------
$75,000-$99,999                                                    $500
------------------------------------------------------------------------
$100,000 and above                                                 $750
------------------------------------------------------------------------


    The second legislative proposal would increase the pharmacy co-
payment for Priority 7 and 8 veterans from $8 to $15 for a 30-day 
supply of drugs. And the last provision would eliminate the practice of 
offsetting or reducing VA first-party co-payment debts with collection 
recoveries from third-party health plans.
    While our budget requests in recent years have included legislative 
proposals similar to these, the provisions identified in the 
President's 2008 budget are markedly different in that they have no 
impact on the resources we are requesting for VA medical care. Our 
budget request includes the total funding needed for the Department to 
continue to provide veterans with timely, high-quality medical services 
that set the national standard of excellence in the healthcare 
industry. Unlike previous budgets, these legislative proposals do not 
reduce our discretionary medical care appropriations. Instead, these 
three provisions, if enacted, would generate an estimated $2.3 billion 
in mandatory receipts to the Treasury from 2008 through 2012.
Workload
    During 2008, we expect to treat about 5,819,000 patients. This 
total is more than 134,000 (or 2.4 percent) above the 2007 estimate. 
Patients in Priorities 1-6--veterans with service-connected conditions, 
lower incomes, special healthcare needs, and service in Iraq or 
Afghanistan--will comprise 68 percent of the total patient population 
in 2008, but they will account for 85 percent of our healthcare costs. 
The number of patients in Priorities 1-6 will grow by 3.3 percent from 
2007 to 2008.
    We expect to treat about 263,000 veterans in 2008 who served in 
Operation Iraqi Freedom and Operation Enduring Freedom. This is an 
increase of 54,000 (or 26 percent) above the number of veterans from 
these two campaigns that we anticipate will come to VA for healthcare 
in 2007, and 108,000 (or 70 percent) more than the number we treated in 
2006.
Funding Drivers
    Our 2008 request for $36.6 billion in support of our medical care 
program was largely determined by three key cost drivers in the 
actuarial model we use to project veteran enrollment in VA's healthcare 
system as well as the utilization of healthcare services of those 
enrolled:

      inflation;
      trends in the overall healthcare industry; and
      trends in VA healthcare.

    The impact of the composite rate of inflation of 4.45 percent 
within the actuarial model will increase our resource requirements for 
acute inpatient and outpatient care by nearly $2.1 billion. This 
includes the effect of additional funds ($690 million) needed to meet 
higher payroll costs as well as the influence of growing costs ($1.4 
billion) for supplies, as measured in part by the Medical Consumer 
Price Index. However, inflationary trends have slowed during the last 
year.
    There are several trends in the U.S. healthcare industry that 
continue to increase the cost of providing medical services. These 
trends expand VA's cost of doing business regardless of any changes in 
enrollment, number of patients treated, or program initiatives. The two 
most significant trends are the rising utilization and intensity of 
healthcare services. In general, patients are using medical care 
services more frequently and the intensity of the services they receive 
continues to grow. For example, sophisticated diagnostic tests, such as 
magnetic resonance imaging (MRI), are now more frequently used either 
in place of, or in addition to, less costly diagnostic tools such as x-
rays. As another illustration, advances in cancer screening 
technologies have led to earlier diagnosis and prolonged treatment 
which may include increased use of costly pharmaceuticals to combat 
this disease. These types of medical services have resulted in improved 
patient outcomes and higher quality healthcare. However, they have also 
increased the cost of providing care.
    The cost of providing timely, high-quality healthcare to our 
Nation's veterans is also growing as a result of several factors that 
are unique to VA's healthcare system. We expect to see changes in the 
demographic characteristics of our patient population. Our patients as 
a group will be older, will seek care for more complex medical 
conditions, and will be more heavily concentrated in the higher cost 
priority groups. Furthermore, veterans are submitting disability 
compensation claims for an increasing number of medical conditions, 
which are also increasing in complexity. This results in the need for 
disability compensation medical examinations, the majority of which are 
conducted by our Veterans Health Administration, that are more complex, 
costly, and time consuming. These projected changes in the case mix of 
our patient population and the growing complexity of our disability 
claims process will result in greater resource needs.
Quality of Care
    The resources we are requesting for VA's medical care program will 
allow us to strengthen our position as the Nation's leader in providing 
high-quality healthcare. VA has received numerous accolades from 
external organizations documenting the Department's leadership position 
in providing world-class healthcare to veterans. For example, our 
record of success in healthcare delivery is substantiated by the 
results of the 2006 American Customer Satisfaction Index (ACSI) survey. 
Conducted by the National Quality Research Center at the University of 
Michigan Business School, the ACSI survey found that customer 
satisfaction with VA's healthcare system increased last year and was 
higher than the private sector for the seventh consecutive year. The 
data revealed that inpatients at VA medical centers recorded a 
satisfaction level of 84 out of a possible 100 points, or 10 points 
higher than the rating for inpatient care provided by the private-
sector healthcare industry. VA's rating of 82 for outpatient care was 8 
points better than the private sector.
    Citing VA's leadership role in transforming healthcare in America, 
Harvard University recognized the Department's computerized patient 
records system by awarding VA the prestigious ``Innovations in American 
Government Award'' in 2006. Our electronic health records have been an 
important element in making VA healthcare the benchmark for 294 
measures of disease prevention and treatment in the U.S. The value of 
this system was clearly demonstrated when every patient medical record 
from the areas devastated by Hurricane Katrina was made available to 
all VA healthcare providers throughout the Nation within 100 hours of 
the time the storm made landfall. Veterans were able to quickly resume 
their treatments, refill their prescriptions, and get the care they 
needed because of the electronic health records system--a real, 
functioning health information exchange that has been a proven success 
resulting in improved quality of care. It can serve as a model for the 
healthcare industry as the Nation moves forward with the public/private 
effort to develop a National Health Information Network.
    The Department also received an award from the American Council for 
Technology for our collaboration with the Department of Defense on the 
Bidirectional Health Information Exchange program. This innovation 
permits the secure, real-time exchange of medical record data between 
the two departments, thereby avoiding duplicate testing and surgical 
procedures. It is an important step forward in making the transition 
from active duty to civilian life as smooth and seamless as possible.
    In its July 17, 2006, edition, Business Week featured an article 
about VA healthcare titled ``The Best Medical Care in the U.S.'' This 
article outlines many of the Department's accomplishments that have 
helped us achieve our position as the leading provider of healthcare in 
the country, such as higher quality of care than the private sector, 
our nearly perfect rate of prescription accuracy, and the most advanced 
computerized medical records system in the Nation. Similar high praise 
for VA's healthcare system was documented in the September 4, 2006, 
edition of Time Magazine in an article titled ``How VA Hospitals Became 
the Best.'' In addition, a study conducted by Harvard Medical School 
concluded that Federal hospitals, including those managed by VA, 
provide the best care available for some of the most common life-
threatening illnesses such as congestive heart failure, heart attack, 
and pneumonia. Their research results were published in the December 
11, 2006, edition of the Annals of Internal Medicine.
    These external acknowledgments of the superior quality of VA 
healthcare reinforce the Department's own findings. We use two primary 
measures of healthcare 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 the 
medical literature has proven to be directly linked to improved health 
outcomes for patients. Our performance on the clinical practice 
guidelines index, which focuses on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to grow to 85 percent in 2008, or a 1 percentage 
point rise over the level we expect to achieve this year. As an 
indicator aimed at primary prevention and early detection 
recommendations dealing with immunizations and screenings, the 
prevention index will be maintained at our existing high level of 
performance of 88 percent.
Access to Care
    With the resources requested for medical care in 2008, the 
Department will be able to continue our exceptional performance dealing 
with access to healthcare--96 percent of primary care appointments will 
be scheduled within 30 days of patients' desired date, and 95 percent 
of specialty care appointments will be scheduled within 30 days of 
patients' desired date. We will minimize the number of new enrollees 
waiting for their first appointment. We reduced this number by 94 
percent from May 2006 to January 2007, to a little more than 1,400, and 
we will continue to place strong emphasis on lowering, and then 
holding, the waiting list to as low a level as possible.
    An important component of our overall strategy to improve access 
and timeliness of service is the implementation on a national scale of 
Advanced Clinic Access, an initiative that promotes the efficient flow 
of patients by predicting and anticipating patient needs at the time of 
their appointment. This involves assuring that specific medical 
equipment is available, arranging for tests that should be completed 
either prior to, or at the time of, the patient's visit, and ensuring 
all necessary health information is available. This program optimizes 
clinical scheduling so that each appointment or inpatient service is 
most productive. In addition, this reduces unnecessary appointments, 
allowing for relatively greater workload and increased patient-directed 
scheduling.
Funding for Major Healthcare Programs and Initiatives
    Our request includes $4.6 billion for extended care services, 90 
percent of which will be devoted to institutional long-term care and 10 
percent to non-institutional care. By continuing to enhance veterans' 
access to non-institutional long-term 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. This includes 
adult day healthcare, home-based primary care, purchased skilled home 
healthcare, homemaker/home health aide services, home respite and 
hospice care, and community residential care. During 2008 we will 
increase the number of patients receiving non-institutional long-term 
care, as measured by the average daily census, to over 44,000. This 
represents a 19.1 percent increase above the level we expect to reach 
in 2007 and a 50.3 percent rise over the 2006 average daily census.
    The President's request includes nearly $3 billion to continue our 
effort to improve access to mental health services across the country. 
These funds will help ensure VA provides standardized and equitable 
access throughout the Nation to a full continuum of care for veterans 
with mental health disorders. The resources will support both inpatient 
and outpatient psychiatric treatment programs as well as psychiatric 
residential rehabilitation treatment services. We estimate that about 
80 percent of the funding for mental health will be for the treatment 
of seriously mentally ill veterans, including those suffering from 
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 ongoing outreach to 
veterans of Operation Iraqi Freedom and Operation Enduring Freedom, as 
well as increased readjustment and PTSD services.
    In 2008 we are requesting $752 million to meet the needs of the 
263,000 veterans with service in Operation Iraqi Freedom and Operation 
Enduring Freedom whom we expect will come to VA for medical care. 
Veterans with service in Iraq and Afghanistan continue to account for a 
rising proportion of our total veteran patient population. In 2008 they 
will comprise 5 percent of all veterans receiving VA healthcare 
compared to the 2006 figure of 3.1 percent. Veterans deployed to combat 
zones are entitled to 2 years of eligibility for VA healthcare services 
following their separation from active duty even if they are not 
otherwise immediately eligible to enroll for our medical services.
Medical Collections
    The Department expects to receive nearly $2.4 billion from medical 
collections in 2008, which is $154 million, or 7.0 percent, above our 
projected collections for 2007. As a result of increased workload and 
process improvements in 2008, we will collect an additional $82 million 
from third-party insurance payers and an extra $72 million resulting 
from increased pharmacy workload.
    We have several initiatives underway to strengthen our collections 
processes:

      The Department has established a private-sector based 
business model pilot tailored for our revenue operations to increase 
collections and improve our operational performance. The pilot 
Consolidated Patient Account Center (CPAC) is addressing all 
operational areas contributing to the establishment and management of 
patient accounts and related billing and collections processes. The 
CPAC currently serves revenue operations for medical centers and 
clinics in one of our Veterans Integrated Service Networks but this 
program will be expanded to serve other networks.
      VA continues to work with the Centers for Medicare and 
Medicaid Services contractors to provide a Medicare-equivalent 
remittance advice for veterans who are covered by Medicare and are 
using VA healthcare services. We are working to include additional 
types of claims that will result in more accurate payments and better 
accounting for receivables through use of more reliable data for claims 
adjudication.
      We are conducting a phased implementation of electronic, 
real-time outpatient pharmacy claims processing to facilitate faster 
receipt of pharmacy payments from insurers.
      The Department has initiated a campaign that has resulted 
in an increasing number of payers now accepting electronic coordination 
of benefits claims. This is a major advancement toward a fully 
integrated, interoperable electronic claims process.

                            Medical Research

    The President's 2008 budget includes $411 million to support VA's 
medical and prosthetic research program. This amount will fund nearly 
2,100 high-priority research projects to expand knowledge in areas 
critical to veterans' healthcare needs, most notably research in the 
areas of mental illness ($49 million), aging ($42 million), health 
services delivery improvement ($36 million), cancer ($35 million), and 
heart disease ($31 million).
    VA's medical research program has a long track record of success in 
conducting research projects that lead to clinically useful 
interventions that improve the health and quality of life for veterans 
as well as the general population. Recent examples of VA research 
results that are now being applied to clinical care include the 
discovery that vaccination against varicella-zoster (the same virus 
that causes chickenpox) decreases the incidence and/or severity of 
shingles, development of a system that decodes brain waves and 
translates them into computer commands that allow quadriplegics to 
perform simple tasks like turning on lights and opening e-mail using 
only their minds, improvements in the treatment of post-traumatic 
stress disorder that significantly reduce trauma nightmares and other 
sleep disturbances, and discovery of a drug that significantly improves 
mental abilities and behavior of certain schizophrenics.
    In addition to VA appropriations, the Department's researchers 
compete for and receive funds from other Federal and non-Federal 
sources. Funding from external sources is expected to continue to 
increase in 2008. Through a combination of VA resources and funds from 
outside sources, the total research budget in 2008 will be almost $1.4 
billion.

                       General Operating Expenses

    The Department's 2008 resource request for General Operating 
Expenses (GOE) is $1.472 billion. This is $617 million, or 72.2 
percent, above the funding level in place when the President took 
office. Within this total GOE funding request, $1.198 billion is for 
the administration of non-medical benefits by the Veterans Benefits 
Administration (VBA) and $274 million will be used to support General 
Administration activities.
Compensation and Pensions Workload and Performance Management
    VA's primary focus within the administration of non-medical 
benefits remains unchanged--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. The volume 
of claims applications has grown substantially during the last few 
years and is now the highest it has been in the last 15 years. The 
number of claims we received was more than 806,000 in 2006. We expect 
this high volume of claims filed to continue, as we are projecting the 
receipt of about 800,000 claims a year in both 2007 and 2008.
    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 is one of the 
key drivers of new claims activity. This has contributed to an increase 
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. We have 
an obligation to extend our reach as far as possible and to spread the 
word to veterans about the benefits and services VA stands ready to 
provide.
    Disability compensation claims from veterans who have previously 
filed a claim comprise about 55 percent of the disability claims 
received by the Department each year. 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. For example, the number of original 
compensation cases with eight or more disabilities claimed nearly 
doubled during the last 4 years, reaching more than 51,000 claims in 
2006. Almost one in every four original compensation claims received 
last year contained eight or more disability issues. In addition, we 
expect to continue to receive a growing number of complex disability 
claims resulting from PTSD, 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 VA receives and 
adjudicates more claims, this results in a larger number of appeals 
from veterans and survivors, which also increases workload in other 
parts of the Department, including the Board of Veterans' Appeals.
    The Veterans Claims Assistance Act of 2000 has significantly 
increased both the length and complexity of claims development. VA's 
notification and development duties have grown, adding more steps to 
the claims process and lengthening the time it takes to develop and 
decide a claim. Also, we are now required to review the claims at more 
points in the adjudication process.
    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, from 98 in 2006 to 
101 in 2008. Second, we will continue to move work among regional 
offices in order to maximize our resources and enhance our performance. 
Third, we will further advance staff training and other efforts to 
improve the consistency and quality of claims processing across 
regional offices. And fourth, we will 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 
further simplify and clarify benefit regulations.
    Through a combination of management/productivity improvements and 
an increase in resources in 2008 to support 457 additional staff above 
the 2007 level, we will improve our performance in the area most 
critical to veterans--the timeliness of processing rating-related 
compensation and pension claims. We expect to improve the timeliness of 
processing these claims to 145 days in 2008. This level of performance 
is 15 days better than our projected timeliness for 2007 and a 32-day 
improvement from the average processing time we achieved last year. In 
addition, we anticipate that our pending inventory of disability claims 
will fall to about 330,000 by the end of 2008, a reduction of more than 
40,000 (or 10.9 percent) from the level we project for the end of 2007, 
and nearly 49,000 (or 12.9 percent) lower than the inventory at the 
close of 2006. At the same time we are improving timeliness, we will 
also increase the accuracy of our decisions on claims from 88 percent 
in 2006 to 90 percent in 2008.
Education and Vocational Rehabilitation and Employment Performance
    With the resources we are requesting in 2008, 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 15 days during the next 2 
years, falling from 40 days in 2006 to 25 days in 2008. During this 
period, the average time it takes to process supplemental claims will 
improve from 20 days to just 12 days. These performance improvements 
will be achieved despite an increase in workload. The number of 
education claims we expect to receive will reach about 1,432,000 in 
2008, or 4.8 percent higher than last year. In addition, the 
rehabilitation rate for the vocational rehabilitation and employment 
program will climb to 75 percent in 2008, a gain of 2 percentage points 
over the 2006 performance level. The number of program participants 
will rise to about 94,500 in 2008, or 5.3 percent higher than the 
number of participants in 2006.
    Our 2008 request includes $6.3 million for a Contact Management 
Support Center for our education program. These funds will be used 
during peak enrollment periods for contract customer service 
representatives who will handle all education calls placed through our 
toll-free telephone line. We currently receive about 2.5 million phone 
inquiries per year. This initiative will allow us to significantly 
improve performance for both the blocked call rate and the abandoned 
call rate.
    The 2008 resource request for VBA includes about $4.3 million to 
enhance our educational and vocational counseling provided to disabled 
service members through the Disabled Transition Assistance Program. 
Funds for this initiative will ensure that briefings are conducted by 
experts in the field of vocational rehabilitation, including 
contracting for these services in localities where VA professional 
staff are not available. The contractors would be trained by VA staff 
to ensure consistent, quality information is provided. Also in support 
of the vocational rehabilitation and employment program, we are seeking 
$1.5 million as part of an ongoing project to retire over 650,000 
counseling, evaluation, and rehabilitation folders stored in regional 
offices throughout the country. All of these folders pertain to cases 
that have been inactive for at least 3 years and retention of these 
files poses major space problems.
    In addition, our 2008 request includes $2.4 million to continue a 
major effort to centralize finance functions throughout VBA, an 
initiative that will positively impact operations for all of our 
benefits programs. The funds to support this effort will be used to 
begin the consolidation and centralization of voucher audit, agent 
cashier, purchase card, and payroll operations currently performed by 
all regional offices.

                    National Cemetery Administration

    The President's 2008 budget request includes $166.8 million in 
operations and maintenance funding for the National Cemetery 
Administration (NCA). These resources will allow us to meet the growing 
workload at existing cemeteries by increasing staffing and funding for 
contract maintenance, supplies, and equipment. We expect to perform 
nearly 105,000 interments in 2008, or 8.4 percent higher than the 
number of interments we performed in 2006. The number of developed 
acres (over 7,800) that must be maintained in 2008 will be 7.3 percent 
greater than last year.
    Our budget request includes $3.7 million to prepare for the 
activation of interment operations at six new national cemeteries--
Bakersfield, California; Birmingham, Alabama; Columbia-Greenville, 
South Carolina; Jacksonville, Florida; southeastern Pennsylvania; and 
Sarasota County, Florida. Establishment of these six new national 
cemeteries is directed by the National Cemetery Expansion Act of 2003.
    The 2008 budget has $9.1 million to address gravesite renovations 
as well as headstone and marker realignment. 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.
    With the resources requested to support NCA activities, we will 
expand access to our burial program by increasing the percent of 
veterans served by a burial option within 75 miles of their residence 
to 84.6 percent in 2008, which is 4.4 percentage points above our 
performance level at the close of 2006. In addition, we will continue 
to increase the percent of respondents who rate the quality of service 
provided by national cemeteries as excellent to 98 percent in 2008, or 
4 percentage points higher than the level of performance we reached 
last year.

          Capital Programs (Construction and Grants to States)

    VA's 2008 request includes $1.078 billion in appropriated funding 
for our capital programs. Our request includes $727.4 million for major 
construction projects, $233.4 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 2008 request for construction funding for our healthcare 
programs is $750 million--$570 million for major construction and $180 
million for minor construction. All of these resources will be devoted 
to continuation of the Capital Asset Realignment for Enhanced Services 
(CARES) program, total funding for which comes to $3.7 billion over the 
last 5 years. CARES will renovate and modernize VA's healthcare 
infrastructure, provide greater access to high-quality care for more 
veterans, closer to where they live, and help resolve patient safety 
issues. Within our request for major construction are resources to 
continue six medical facility projects already underway:

      Denver, Colorado ($61.3 million)--parking structure and 
energy development for this replacement hospital
      Las Vegas, Nevada ($341.4 million)--complete construction 
of the hospital, nursing home, and outpatient facilities
      Lee County, Florida ($9.9 million)--design of an 
outpatient clinic (land acquisition is complete)
      Orlando, Florida ($35.0 million)--land acquisition for 
this replacement hospital
      Pittsburgh, Pennsylvania ($40.0 million)--continue 
consolidation of a 3-division to a 2-division hospital
      Syracuse, New York ($23.8 million)--complete construction 
of a spinal cord injury center.

    Minor construction is an integral component of our overall capital 
program. In support of the medical care and medical research programs, 
minor construction funds permit VA to address space and functional 
changes to efficiently shift treatment of patients from hospital-based 
to outpatient care settings; realign critical services; improve 
management of space, including vacant and underutilized space; improve 
facility conditions; and undertake other actions critical to CARES 
implementation. Our 2008 request for minor construction funds for 
medical care and research will provide the resources necessary for us 
to address critical needs in improving access to healthcare, enhancing 
patient privacy, strengthening patient safety, enhancing research 
capability, correcting seismic deficiencies, facilitating realignments, 
increasing capacity for dental services, and improving treatment in 
special emphasis programs.
    We are requesting $191.8 million in construction funding to support 
the Department's burial program--$167.4 million for major construction 
and $24.4 million for minor construction. Within the funding we are 
requesting for major construction are resources to establish six new 
cemeteries mandated by the National Cemetery Expansion Act of 2003. As 
previously mentioned, these will be in Bakersfield ($19.5 million), 
Birmingham ($18.5 million), Columbia-Greenville ($19.2 million), 
Jacksonville ($22.4 million), Sarasota ($27.8 million), and 
southeastern Pennsylvania ($29.6 million). The major construction 
request in support of our burial program also includes $29.4 million 
for a gravesite development project at Fort Sam Houston National 
Cemetery.

                         Information Technology

    VA's 2008 budget request for information technology (IT) is $1.859 
billion. This budget reflects the first phase of our reorganization of 
IT functions in the Department which will establish a new IT management 
structure in VA. The total funding for IT in 2008 includes $555 million 
for more than 5,500 staff who have been moved to support operations and 
maintenance activities. Prior to 2008, the funding and staff supporting 
these IT activities were reflected in other accounts throughout the 
Department.
    Later in 2007 we will implement the second phase of our IT 
reorganization strategy by moving funding and staff devoted to 
development projects and activities. As a result of the second stage of 
the IT reorganization, the Chief Information Officer will be 
responsible for all operations and maintenance as well as development 
activities, including oversight of, and accountability for, all IT 
resources within VA. This reorganization will make the most efficient 
use of our IT resources while improving operational effectiveness, 
providing standardization, and eliminating duplication.
    This major transformation of IT will bring our program under more 
centralized control and will play a significant role in ensuring we 
fulfill my promise to make VA the gold standard for data security 
within the Federal Government. We have taken very aggressive steps 
during the last several months to ensure the safety of veterans' 
personal information, including training and educating our employees on 
the critical responsibility they have to protect personal and health 
information, launching an initiative to expeditiously upgrade all VA 
computers with enhanced data security and encryption, entering into an 
agreement with an outside firm to provide free data breach analysis 
services, initiating any needed background investigations of employees 
to ensure consistency with their level of authority and 
responsibilities in the Department, and beginning a campaign at all of 
our healthcare facilities to replace old veteran identification cards 
with new cards that reduce veterans' vulnerability to identify theft. 
These steps are part of our broader commitment to improve our IT and 
cyber security policies and procedures.
    Within our total IT request of $1.859 billion, $1.304 billion (70 
percent) will be for non-payroll costs and $555 million (30 percent) 
will be for payroll costs. Of the non-payroll funding, $461 million 
will support projects for our medical care and medical research 
programs, $66 million will be devoted to projects for our benefits 
programs, and $446 million will be needed for IT infrastructure 
projects. The remaining $331 million of our non-payroll IT resources in 
2008 will fund centrally managed projects, such as VA's cyber security 
program, as well as management projects that support department-wide 
initiatives and operations like the replacement of our aging financial 
management system and the development and implementation of a new human 
resources management system.
    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 $131.9 million for 
ongoing development and implementation of HealtheVet-VistA (Veterans 
Health Information Systems and Technology Architecture). This 
initiative will incorporate new technology, new or reengineered 
applications, and data standardization to improve the sharing of, and 
access to, health information, which in turn, will improve the status 
of veterans' health through more informed clinical care. This system 
will make use of standards accepted by the Secretary of Health and 
Human Services 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 them and to all those authorized 
to provide 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 $129.4 million in 2008 for the VistA 
legacy system. Funding for the legacy system will decline as we advance 
our development and implementation of HealtheVet-VistA.
    In veterans benefits programs, we are requesting $31.7 million in 
2008 to support our IT systems that ensure compensation and pension 
claims are properly processed and tracked, and that payments to 
veterans and eligible family members are made on a timely basis. Our 
2008 request includes $3.5 million to continue the development of The 
Education Expert System. This will replace the existing benefit payment 
system with one that will, when fully deployed, receive application and 
enrollment information and process that information electronically, 
reducing the need for human intervention.
    VA is requesting $446 million in 2008 for IT infrastructure 
projects to support our healthcare, benefits, and burial programs 
through implementation and ongoing management of a wide array of 
technical and administrative support systems. Our request for resources 
in 2008 will support investment in five infrastructure projects now 
centrally managed by the CIO--computing infrastructure and operations 
($181.8 million); network infrastructure and operations ($31.7 
million); voice infrastructure and operations ($71.9 million); data and 
video infrastructure and operations ($130.8 million); and regional data 
centers ($30.0 million).
    VA's 2008 request provides $70.1 million for cyber security. This 
ongoing initiative involves the development, deployment, and 
maintenance of a set of enterprise-wide controls to better secure our 
IT architecture in support of all of the Department's program 
operations. Our request also includes $35.0 million for the Financial 
and Logistics Integrated Technology Enterprise (FLITE) system. FLITE is 
being developed to address a longstanding material weakness and will 
effectively integrate and standardize financial and logistics data and 
processes across all VA offices as well as provide management with 
access to timely and accurate financial, logistics, budget, asset, and 
related information on VA-wide operations. In addition, we are asking 
for $34.1 million for a new state-of-the-art human resource management 
system that will result in an electronic employee record and the 
capability to produce critical management information in a fraction of 
the time it now takes using our antiquated paper-based system.

                                Summary

    Our 2008 budget request of $86.75 billion will provide the 
resources necessary for VA to:

      strengthen our position as the Nation's leader in 
providing high-quality healthcare to a growing patient population, with 
an emphasis on those who count on us the most--veterans returning from 
service in Operation Iraqi Freedom and Operation Enduring Freedom, 
veterans with service-connected disabilities, those with lower incomes, 
and veterans with special healthcare needs;
      improve the delivery of benefits through the timeliness 
and accuracy of claims processing; and
      increase veterans' access to a burial option by opening 
new national and state veterans' cemeteries.

    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.

                                 
                Prepared Statement of David G. Greineder
    Deputy National Legislative Director, American Veterans (AMVETS)
    Chairman Filner, Ranking Member Buyer, and Members of the 
Committee:
    AMVETS is honored to join our fellow veterans service organizations 
and partners at this important hearing on the Department of Veterans 
Affairs budget request for fiscal year 2008. My name is David G. 
Greineder, Deputy National Legislative Director of AMVETS, and I am 
pleased to provide you with our best estimates on the resources 
necessary to carry out a responsible budget for VA.
    AMVETS testifies before you as a co-author of The Independent 
Budget. This is the 21st year AMVETS, the Disabled American 
Veterans, the Paralyzed Veterans of America, and the Veterans of 
Foreign Wars have pooled their resources together to produce a unique 
document, one that has stood the test of time.
    The IB, as it has come to be called, is our blueprint for building 
the kind of programs veterans deserve. Indeed, we are proud that over 
60 veteran, military, and medical service organizations endorse these 
recommendations. In whole, these recommendations provide decisionmakers 
with a rational, rigorous, and sound review of the budget required to 
support authorized programs for our nation's veterans.
    In developing this document, we believe in certain guiding 
principles. Veterans should not have to wait for benefits to which they 
are entitled. Veterans must be ensured access to high-quality medical 
care. Specialized care must remain the focus of VA. Veterans must be 
guaranteed timely access to the full continuum of healthcare services, 
including long-term care. And, veterans must be assured burial in a 
state or national cemetery in every state.
    Today, I will specifically address the National Cemetery 
Administration (NCA), however, I would like to briefly comment on the 
Administration's budget request coming out of the Office of Management 
and Budget (OMB) just 3 days ago.
    Everyone knows that the VA healthcare system is the best in the 
country, and responsible for great advances in medical science. VHA is 
uniquely qualified to care for veterans' needs because of its highly 
specialized experience in treating service-connected ailments. The 
delivery care system can provide a wide array of specialized services 
to veterans like those with spinal cord injuries and blindness. This 
type of care is very expensive and would be almost impossible for 
veterans to obtain outside of VA.
    Because veterans depend so much on VA and its services, AMVETS 
believes it is absolutely critical that the VA healthcare system be 
fully funded. It is important our nation keep its promise to care for 
the veterans who made so many sacrifices to ensure the freedom of so 
many. With the expected increase in the number of veterans, a need to 
increase VA healthcare spending should be an immediate priority this 
year. We must remain insistent about funding the needs of the system, 
and the recruitment and retention of vital healthcare professionals, 
especially registered nurses. Chronic under funding has led to 
rationing of care through reduced services, lengthy delays in 
appointments, higher co-payments and, in too many cases, sick and 
disabled veterans being turned away from treatment.
    Looking at the Administration's budget, released on Monday, The 
Independent Budget recommends Congress provide $36.3 billion to fund VA 
medical care for fiscal year 2008. We ask you to recognize that the VA 
healthcare system can only bring quality healthcare if it receives 
adequate and timely funding.
    One option, and we believe the best choice, to ensure VA has access 
to adequate and timely resources is through mandatory, or assured, 
funding. I would like to clearly state that AMVETS along with its 
Independent Budget partners strongly supports shifting VA healthcare 
funding from discretionary funding to mandatory. We recommend this 
action because the current discretionary system is not working. Moving 
to mandatory funding would give certainty to healthcare services. VA 
facilities would not have to deal with the uncertainty of discretionary 
funding, which has been inconsistent and inadequate for far too long. 
Most importantly, mandatory funding would provide a comprehensive and 
permanent solution to the current funding problem.
The National Cemetery Administration
    The Independent Budget acknowledges the dedicated and committed NCA 
staff who continue to provide the highest quality of service to 
veterans and their families despite funding shortfalls, aging 
equipment, and increasing workload. The devoted staff provides aid and 
comfort to hurting veterans' families in a very difficult time, and we 
thank them for their consolation.
    The NCA currently maintains more than 2.7 million gravesites at 124 
national cemeteries in 39 states and Puerto Rico. At the end of 2007, 
66 cemeteries will be open to all interments; 16 will accept only 
cremated remains and family members of those already interred; and 43 
will only perform interments of family members in the same gravesite as 
a previously deceased family member.
    VA estimates that about 27 million veterans are alive today. They 
include veterans from World War I, World War II, the Korean War, the 
Vietnam War, the Gulf War, the conflicts in Afghanistan and Iraq, and 
the Global War on Terrorism, as well as peacetime veterans. With the 
anticipated opening of the new national cemeteries, annual interments 
are projected to increase from approximately 102,000 in 2006 to 117,000 
in 2009. It is expected that one in every six of these veterans will 
request burial in a national cemetery.
    The NCA is responsible for five primary missions: (1) To inter, 
upon request, the remains of eligible veterans and family members and 
to permanently maintain gravesites; (2) to mark graves of eligible 
persons in national, state, or private cemeteries upon appropriate 
application; (3) to administer the state grant program in the 
establishment, expansion, or improvement of state veterans cemeteries; 
(4) to award a Presidential certificate and furnish a United States 
flag to deceased veterans; and (5) to maintain national cemeteries as 
national shrines sacred to the honor and memory of those interred or 
memorialized.
NCA Budget Request
    The Administration requests $166.8 million for the NCA for fiscal 
year 2008. The members of The Independent Budget recommend that 
Congress provide $218.3 million and 30 FTE for the operational 
requirements of NCA, the National Shrine Initiative, and the backlog of 
repairs. We recommend your support for a budget consistent with NCA's 
growing demands and in concert with the respect due every man and woman 
who wears the uniform of the United States Armed Forces.
    The national cemetery system continues to be seriously challenged. 
Though there has been progress made over the years, the NCA is still 
struggling to remove decades of blemishes and scars from military 
burial grounds across the country. Visitors to many national cemeteries 
are likely to encounter sunken graves, misaligned and dirty grave 
markers, deteriorating roads, spotty turf and other patches of decay 
that have been accumulating for decades. If the NCA is to continue its 
commitment to ensure national cemeteries remain dignified and 
respectful settings that honor deceased veterans and give evidence of 
the nation's gratitude for their military service, there must be a 
comprehensive effort to greatly improve the condition, function, and 
appearance of all our national cemeteries.
    In accordance with ``An Independent Study on Improvements to 
Veterans Cemeteries,'' which was submitted to Congress in 2002, The 
Independent Budget again recommends Congress establish a 5-year, $250 
million ``National Shrine Initiative'' to restore and improve the 
condition and character of NCA cemeteries as part of the FY2008 
operations budget.
    It should be noted that the NCA has done an outstanding job thus 
far in improving the appearance of our national cemeteries, but we have 
a long way to go to get us where we need to be. By enacting a 5-year 
program with dedicated funds and an ambitious schedule, the national 
cemetery system can fully serve all veterans and their families with 
the utmost dignity, respect, and compassion.
The State Cemetery Grants Program
    The State Cemetery Grants Program (SCGP) complements the NCA 
mission to establish gravesites for veterans in those areas where the 
NCA cannot fully respond to the burial needs of veterans. Several 
incentives are in place to assist states in this effort. For example, 
the NCA can provide up to 100 percent of the development cost for an 
approved cemetery project, including design, construction, and 
administration. In addition, new equipment, such as mowers and 
backhoes, can be provided for new cemeteries. Since 1978, the 
Department of Veterans Affairs has more than doubled acreage available 
and accommodated more than a 100 percent increase in burials through 
this program.
    To help provide reasonable access to burial options for veterans 
and their eligible family members, The Independent Budget recommends 
$37 million for the SCGP for fiscal year 2008. The availability of this 
funding will help states establish, expand, and improve state-owned 
veterans' cemeteries.
    Many states have difficulties meeting the requirements needed to 
build a national cemetery in their respective state. The large land 
areas and spread out population in these areas make it difficult to 
meet the ``170,000 veterans within 75 miles'' national veterans 
cemetery requirement. Recognizing these challenges, VA has implemented 
several incentives to assist states in establishing a veterans 
cemetery. For example, the NCA can provide up to 100 percent of the 
development cost for an approved cemetery project, including design, 
construction, and administration.
Burial Benefits
    There has been serious erosion in the value of the burial allowance 
benefits over the years. While these benefits were never intended to 
cover the full costs of burial, they now pay for only a small fraction 
of what they covered in 1973, when the Federal Government first started 
paying burial benefits for our veterans.
    In 2001 the plot allowance was increased for the first time in more 
than 28 years, to $300 from $150, which covers approximately 6 percent 
of funeral costs. The Independent Budget recommends increasing the plot 
allowance from $300 to $745, an amount proportionally equal to the 
benefit paid in 1973.
    In the 108th Congress, the burial allowance for service-connected 
deaths was increased from $500 to $2,000. Prior to this adjustment, the 
allowance had been untouched since 1988. The Independent Budget 
recommends increasing the service-connected burial benefit from $2,000 
to $4,100, bringing it back up to its original proportionate level of 
burial costs.
    The non-service-connected burial allowance was last adjusted in 
1978, and also covers just 6 percent of funeral costs. The Independent 
Budget recommends increasing the non-service-connected burial benefit 
from $300 to $1,270.
    The NCA honors veterans with a final resting place that 
commemorates their service to this nation. More than 2.7 million 
soldiers who died in every war and conflict are honored by burial in a 
VA national cemetery. Each Memorial Day and Veterans Day we honor the 
last full measure of devotion they gave for this country. Our national 
cemeteries are more than the final resting place of honor for our 
veterans, they are hallowed ground to those who died in our defense, 
and a memorial to those who survived.
    Mr. Chairman, this concludes my testimony. I thank you again for 
the privilege to present our views, and I would be pleased to answer 
any questions you might have.

                                 
  Statement of Paul A. Morin, National Commander, The American Legion
    Mr. Chairman and Members of the Committee:
    As The American Legion's National Commander, I thank you for this 
opportunity to present the views of its 2.7 million members on the 
President's Fiscal Year 2008 budget request.
    The President's FY 2008 budget request is designed to allow VA to 
address its three highest priorities:

      Provide timely, high-quality healthcare to veterans who 
need VA the most--those with service-connected disabilities, lower 
incomes, special healthcare needs, and service in Operation Iraqi 
Freedom and Operation Enduring Freedom.
      Address the significant increase in claims for 
compensation and pension.
      Ensure the burial needs of veterans and their eligible 
family members are met, and maintain veterans' cemeteries as national 
shrines.

    The American Legion will continue to work with the Secretary, 
Congress and the entire veterans' community to ensure that VA is indeed 
capable of providing the highest quality healthcare services ``. . . 
for him who shall have borne the battle and for his widow and his 
orphan.'' In 1996, Eligibility Reform was enacted to reopen the VA 
healthcare system to all eligible veterans within existing 
appropriations. Therefore, the challenge faced is to make sure no 
veteran in need of healthcare is ever turned away from a VA medical 
care facility as a result of budgetary shortfalls.
    There is no question that all service-connected disabled veterans 
and economically disadvantaged veterans must receive timely access to 
quality healthcare; however, their comrades-in-arms should also receive 
their earned benefit--enrollment in the VA healthcare delivery system. 
Rather than supporting legislative proposals designed to drive veterans 
from the world's best healthcare delivery system, The American Legion 
will continue to advocate new revenue streams to allow any veteran to 
receive VA healthcare.
    Equally as important, The American Legion remains steadfastly in 
support of achieving timely adjudication of VA disability claims and 
pensions. As a nation at war, the expectation of an increase in the 
number of new disability claims is apparent. The newest generation of 
wartime veterans rightly deserve timely adjudication of their claims. 
Again, the Secretary, Congress and the veterans' community must work 
toward meaningful solutions to the ever-increasing backlog of veterans' 
disability claims. Increased funding and additional staffing is a solid 
first step toward change.
    The American Legion fully supports the goals of the National 
Cemetery Administration. The addition of new national cemeteries and 
state veterans' cemeteries is critical in meeting the growing need.
    With that in mind, The American Legion offers the following 
budgetary recommendations for selected discretionary programs within 
the Department of Veterans Affairs for FY 2008:


----------------------------------------------------------------------------------------------------------------
                                                    FY06 Funding      President's Request      Legion's Request
----------------------------------------------------------------------------------------------------------------
Medical Care                                     $30.8 billion         $36.6 billion         $38.4 billion
----------------------------------------------------------------------------------------------------------------
Medical Services                                 $22.1 billion         $27.2 billion           $29 billion
----------------------------------------------------------------------------------------------------------------
Medical Administration                            $3.4 billion          $3.4 billion          $3.4 billion
----------------------------------------------------------------------------------------------------------------
Medical Facilities                                $3.3 billion          $3.6 billion          $3.6 billion
----------------------------------------------------------------------------------------------------------------
Medical Care Collections                            ($2 billion)        ($2.4 billion)          $2.4 billion*
----------------------------------------------------------------------------------------------------------------
Medical and Prosthetics
Research                                          $412 million          $411 million          $472 million
----------------------------------------------------------------------------------------------------------------
Construction
----------------------------------------------------------------------------------------------------------------
Major                                             $1.6 billion          $727 million          $1.3 billion
----------------------------------------------------------------------------------------------------------------
Minor                                             $233 million          $233 million          $279 million
----------------------------------------------------------------------------------------------------------------
State Extended Care
Facilities Grant Program                           $85 million           $85 million          $250 million
----------------------------------------------------------------------------------------------------------------
State Veterans' Cemetery
Grants Program                                     $32 million           $32 million           $42 million
----------------------------------------------------------------------------------------------------------------
National Cemetery
Administration                                    $149 million          $166 million          $178 million
----------------------------------------------------------------------------------------------------------------
General Administration                            $294 million          $274 million          $300 million
----------------------------------------------------------------------------------------------------------------
Information Technology                            $1.2 billion          $1.9 billion          $1.9 billion
----------------------------------------------------------------------------------------------------------------
* Third-party reimbursements should supplement rather than offset discretionary funding.


MEDICAL CARE
    The Department of Veterans Affairs' standing as the nation's leader 
in providing safe, high-quality healthcare in the healthcare industry 
(both public and private) is well documented. Now VA is also recognized 
internationally as the benchmark for healthcare services:

      December 2004, RAND investigators found that VA 
outperforms all other sectors of the U.S. healthcare industry across a 
spectrum of 294 measures of quality in disease prevention and 
treatment;
      In an article published in the Washington Monthly (Jan/
Feb 2005) ``The Best Care Anywhere'' featured the VA healthcare system;
      In the prestigious Journal of the American Medical 
Association (May 18, 2005) noted that VA's healthcare 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 U.S. News and World Report (Jul 18, 2005) issue 
included a special report on the best hospitals in the country titled 
``Military Might--Today's VA Hospitals Are Models of Top-Notch Care'' 
highlighting the transformation of VA healthcare;
      The Washington Post (Aug 22, 2005) ran a front-page 
article titled ``Revamped Veterans' Health Care Now a Model'' that 
spotlights VA healthcare accomplishments;
      In 2006, VA received the highly coveted and prestigious 
``Innovations in American Government'' Award from Harvard's Kennedy 
School of Government for its advanced electronic health records and 
performance measurement system; and
      Recently, in January 2007, the medical journal Neurology 
wrote: ``The VA has achieved remarkable improvements in patient care 
and health outcomes, and is a cost-effective and efficient 
organization.''

    Although VA is considered a national resource, the Secretary of 
Veterans Affairs continues to prohibit the enrollment of any new 
Priority Group 8 veterans, even if they are Medicare-eligible or have 
private insurance coverage. This prohibition is not based on their 
honorable military service, but rather on limited resources provided to 
the VA medical care system. For 2 years following receiving an 
honorable discharge, veterans from Operations Enduring Freedom and 
Iraqi Freedom are able to receive healthcare through VA, but many of 
their fellow veterans and those of other armed conflicts may very well 
be denied enrollment due to limited existing appropriations. This is 
truly a national tragedy.
    As the Global War on Terrorism continues, fiscal resources for VA 
will continue to be stretched to their limits and veterans will 
continue to go to their elected officials requesting additional money 
to sustain a viable VA capable of caring for all veterans, not just the 
most severely wounded or economically disadvantaged. VA is often the 
first experience veterans have with the Federal Government after 
leaving the military. This nation's veterans have never let this 
country down; Congress and VA should do its best to not let veterans 
down.
    The President's budget request for FY 2008 calls for Medical Care 
funding to be $36.6 billion, which is about $1.8 billion less than The 
American Legion's recommendation of $38.4 billion. The major difference 
is the President's budget request continues to offset the discretionary 
appropriations by its Medical Care Collection Fund's goal ($2.4 
billion), whereas The American Legion considers this collection as a 
supplement since it is for the treatment of nonservice-connected 
medical conditions.
Medical Services
    The President's budget request assumes the enrollment of new 
Priority Group 8 veterans will remain suspended. The American Legion 
strongly recommends reconsidering this ``lockout'' of eligible 
veterans, especially for those veterans who are Medicare-eligible, 
military retirees enrolled in TRICARE or TRICARE for Life, or have 
private healthcare coverage. Successful seamless transition from 
military service should not be penalized, but rather encouraged. This 
prohibition sends the wrong message to recently separated veterans. No 
eligible veteran should be ``locked out'' of the VA healthcare delivery 
system.
    The VA healthcare system enjoys a glowing reputation as the best 
healthcare delivery system in the country, so why ``lock out'' any 
eligible veteran, especially those that have the means to reimburse VA 
for services received? New revenue streams from third-party 
reimbursements and co-payments can supplement the ``existing 
appropriations,'' but sound fiscal management initiatives are required 
to enhance third-party collections of reasonable charges.
    In FY 2008, VA expects to treat 5.8 million patients (an increase 
of 2.4 percent). According to the President's budget request, VA will 
treat over 125,000 more Priority 1-6 veterans in 2008 representing a 
3.3 percent increase over the number of these priority veterans treated 
in 2007. Priority 7 and 8 veterans are projected to decrease by over 
15,000 or 1.1 percent from 2007 to 2008. However, VA will provide 
medical care to non-veterans; this population is expected to increase 
by over 24,000 patients or 4.8 percent over this same time period. In 
2008, VA anticipates treating 263,000 Operation Iraqi Freedom (OIF) and 
Operation Enduring Freedom (OEF) veterans, an increase of 54,000 
patients, or 25.8 percent, over the 2007 level.
    The American Legion supports the President's mental health 
initiative to provide $360 million to deliver mental health and 
substance abuse care to eligible veterans in need of treatment of 
serious mental illness, to include post-traumatic stress disorder.
    The American Legion remains opposed to the concept of charging an 
enrollment fee for an earned benefit. Although the President's new 
proposal is a tiered approach targeted at Priority Groups 7 and 8 
veterans currently enrolled, the proposal does not provide improved 
healthcare coverage, but rather creates a fiscal burden for the 1.4 
million Priority Groups 7 and 8 patients. This initiative clearly 
projects further reductions in the number of Priority Groups 7 and 8 
veterans leaving the system for other healthcare alternatives. This 
proposed vehicle for gleaning of veterans would apply to both service-
connected disabled veterans as well as nonservice-connected disabled 
veterans in Priority Groups 7 and 8.
    The American Legion also remains opposed to the President's 
proposed increase in VA pharmacy co-pays from the current $8 to $15 for 
enrolled Priority Groups 7 and 8 veterans. This proposal would nearly 
double current pharmacy costs to this select group of veterans.
    The American Legion recommends $29 billion for Medical Services, 
$1.8 billion more than the President's budget request of $27.2 billion.
Medical Administration
    The President's budget request of $3.4 billion is a slight increase 
in FY 2006 funding level. VA plans to transfer 3,721 full-time 
equivalents from Medical Administration to Information Technology in FY 
2008. The American Legion applauds the President recommending this 
level of funding.
Medical Facilities
    The President's budget request of $3.6 billion is about $234 
million more than the FY 2006 funding level. The American Legion agrees 
with this recommendation to maintain VA existing infrastructure of 
4,900 buildings and over 15,700 acres. In FY 2008, VA will transfer 
5,689 full-time equivalents from Medical Facilities to Medical 
Services. It has been determined that the costs incurred for hospital 
food service workers, provisions and related supplies are for the 
direct care of patients which Medical Services is responsible for 
providing.
Medical Care Collection Fund (MCCF)
    The Balanced Budget Act of 1997, Public Law 105-33, established the 
VA Medical Care Collections Fund (MCCF), requiring that amounts 
collected or recovered from third-party payers after June 30, 1997 be 
deposited into this fund. The MCCF is a depository for collections from 
third-party insurance, outpatient prescription co-payments and other 
medical charges and user fees. The funds collected may only be used for 
providing VA medical care and services and for VA expenses for 
identification, billing, auditing and collection of amounts owed the 
Federal Government. The American Legion supported legislation to allow 
VA to bill, collect, and reinvest third-party reimbursements and co-
payments; however, The American Legion adamantly opposes the scoring of 
MCCF as an offset to the annual discretionary appropriations since the 
majority of the collected funds come from the treatment of nonservice-
connected medical conditions. Historically, these collection goals far 
exceed VA's ability to collect accounts receivable.
    In FY 2006, VA collected nearly $2 billion, a significant increase 
over the $540 million collected in FY 2001. VA's ability to capture 
these funds is critical to its ability to provide quality and timely 
care to veterans. Miscalculations of VA required funding levels result 
in real budgetary shortfall. Seeking annual emergency supplemental is 
not the most cost-effective means of funding the nation's model 
healthcare delivery system.
    Government Accountability Office (GAO) reports have described 
continuing problems in VHA's ability to capture insurance data in a 
timely and correct manner and raised concerns about VHA's ability to 
maximize its third-party collections. At three medical centers visited, 
GAO found an inability to verify insurance, accepting partial payment 
as full, inconsistent compliance with collections follow-up, 
insufficient documentation by VA physicians, insufficient automation 
and a shortage of qualified billing coders were key deficiencies 
contributing to the shortfalls. VA should implement all available 
remedies to maximize its collections of accounts receivable.
    The American Legion opposes offsetting annual VA discretionary 
funding by the arbitrarily set MCCF goal, especially since VA is 
prohibited from collecting any third-party reimbursements from the 
nation's largest Federally mandated health insurer--Medicare.
Medicare Reimbursement
    As do most American workers, veterans pay into the Medicare system 
without choice throughout their working lives, including active-duty. A 
portion of each earned dollar is allocated to the Medicare Trust Fund 
and although veterans must pay into the Medicare system, VA is 
prohibited from collecting any Medicare reimbursements for the 
treatment of allowable, nonservice-connected medical conditions. This 
prohibition constitutes a multi-billion dollar annual subsidy to the 
Medicare Trust Fund. The American Legion does not agree with this 
policy and supports Medicare reimbursement for VHA for the treatment of 
allowable, nonservice-connected medical conditions of allowable 
enrolled Medicare-eligible veterans.
    As a minimum, VA should receive credit for saving the Centers for 
Medicare and Medicaid Services billions of dollars in annual mandatory 
appropriations.

                    MEDICAL AND PROSTHETICS RESEARCH

    The American Legion believes that VA's focus in research should 
remain on understanding and improving treatment for conditions that are 
unique to veterans. The Global War on Terrorism is predicted to last at 
least two more decades. Service members are surviving catastrophically 
disabling blast injuries in Iraq, Afghanistan and elsewhere due to the 
superior armor they are wearing in the combat theater and the timely 
access to quality triage. The unique injuries sustained by the new 
generation of veterans clearly demands particular attention. There have 
been reported problems of VA not having the state-of-the-art 
prostheses, like DoD, and that the fitting of the prostheses for women 
has presented problems due to their smaller stature.
    In addition, The American Legion supports adequate funding for 
other VA research activities, including basic biomedical research as 
well as bench-to-bedside projects. Congress and the Administration 
should encourage acceleration in the development and initiation of 
needed research on conditions that significantly affect veterans--such 
as prostate cancer, addictive disorders, trauma and wound healing, 
post-traumatic stress disorder, rehabilitation, and others jointly with 
DoD, the National Institutes of Health (NIH), other Federal agencies, 
and academic institutions.
    The American Legion recommends $472 million for Medical and 
Prosthetics Research in FY 2008, $61 million more than the President's 
budget request of $411 million.

                              CONSTRUCTION

Major Construction
    Over the past several years, Congress has kept a tight hold on the 
purse strings that control the funding needs for the construction 
program within VA. The hold out, presumably, is the development of a 
coherent national plan that will define the infrastructure VA will need 
in the decades to come. VA has developed that plan and it is CARES. The 
CARES process identified more than 100 major construction projects in 
37 states, the District of Columbia, and Puerto Rico. Construction 
projects are categorized as major if the estimated cost is over $7 
million. Now that VA has a plan to deliver healthcare through the year 
2022, it is up to Congress to provide adequate funds. The CARES plan 
calls for, among other things, the construction of new hospitals in 
Orlando and Las Vegas and replacement facilities in Louisville and 
Denver for a total cost estimate of well over $1 billion alone for 
these four facilities. VA has not had this type of progressive 
construction agenda in decades. Major construction money can be 
significant and proper utilization of funds must be well planned out. 
The American Legion is pleased to see six medical facility projects 
(Pittsburgh, Denver, Orlando, Las Vegas, Syracuse, and Lee County, FL) 
included in this budget request.
    In addition to the cost of the proposed new facilities are the many 
construction issues that are virtually ``put on hold'' for the past 
several years due to inadequate funding and the moratorium placed on 
construction spending by the CARES process. One of the most glaring 
shortfalls is the neglect of the buildings sorely in need of seismic 
correction. This is an issue of safety. Hurricane Katrina taught a very 
real lesson on the unacceptable consequences of procrastination. The 
delivery of healthcare in unsafe buildings cannot be tolerated and 
funds must be allocated to not only construct the new facilities, but 
also to pay for much-needed upgrades at existing facilities. Gambling 
with the lives of veterans, their families and VA employees is 
absolutely unacceptable.
    The American Legion believes that VA has effectively shepherded the 
CARES process to its current state by developing the blueprint for the 
future delivery of VA healthcare--it is now time for Congress to do the 
same and adequately fund the implementation of this comprehensive and 
crucial undertaking.
    The American Legion recommends $1.3 billion for Major Construction 
in FY 2008, $573 million more than the President's budget request of 
$727 million to fund more pending ``life-safety'' projects.
Minor Construction
    VA's minor construction program has suffered significant neglect 
over the past several years as well. The requirement to maintain the 
infrastructure of VA's buildings is no small task. Because the 
buildings are old, renovations, relocations and expansions are quite 
common. When combined with the added cost of the CARES program 
recommendations, it is easy to see that a major increase over the 
previous funding level is crucial and well overdue.
    The American Legion recommends $279 million for Minor Construction 
in FY 2008, $46 million more than the President's budget request of 
$233 million to address more CARES proposal minor construction 
projects.
Capital Asset Realignment for Enhanced Services (CARES)
    In March 1999, GAO published a report on VA's need to improve 
capital asset planning and budgeting. GAO estimated that over the next 
few years, VA could spend one of every four of its healthcare dollars 
operating, maintaining, and improving capital assets at its national 
major delivery locations, including 4,700 buildings and 18,000 acres of 
land nationwide.
    Recommendations stemming from the report included the development 
of asset-restructuring plans for all markets to guide future investment 
decisionmaking, among other initiatives. VA's answer to GAO and 
Congress was the initiation and development of the Capital Asset 
Realignment for Enhanced Services (CARES) program.
    The CARES initiative is a blueprint for the future of VHA--a fluid 
work in progress, in constant need of reassessment. In May 2004, the 
long awaited final CARES decision was released. The decision directed 
VHA to conduct 18 feasibility studies at those healthcare delivery 
sites where final decisions could not be made due to inaccurate and 
incomplete information. VHA contracted Pricewaterhouse Cooper (PwC) to 
develop a broad range of viable options and, in turn, develop business 
plans based on a limited number of selected options. To help develop 
those options and to ensure stakeholder input, then-VA Secretary 
Principi constituted the Local Advisory Panels (LAPs), which are made 
up of local stakeholders. The final decision on which business plan 
option will be implemented for each site lies with the Secretary of 
Veterans Affairs.
    The American Legion is dismayed over the slow progress in the LAP 
process and the CARES initiative overall. Both Stage I and Stage II of 
the process include two scheduled LAP meetings at each of the sites 
being studied with the whole process concluding on or about February 
2006.
    It wasn't until April 2006, after nearly a 7-month hiatus, that 
Secretary Nicholson announced the continuation of the services at Big 
Spring, Texas, and like all the other sites, has only been through 
Stage I. Seven months of silence is no way to reassure the veterans' 
community that the process is alive and well. The American Legion 
continues to express concern over the apparent short-circuiting of the 
LAPs and the silencing of the stakeholders. The American Legion intends 
to hold accountable those who are entrusted to provide the best 
healthcare services to the most deserving population--the nation's 
veterans.
    Upon conclusion of the initial CARES process, then-Secretary 
Principi called for a ``billion dollars a year for the next seven 
years'' to implement CARES. The American Legion continues to support 
that recommendation and encourages VA and Congress to ``move out'' with 
focused intent.

              STATE EXTENDED CARE FACILITY GRANTS PROGRAM

    Since 1984, nearly all planning for VA inpatient nursing home care 
has revolved around State Veterans' Homes and contracts with public and 
private nursing homes. The reason for this is obvious; VA paid a per 
diem of $59.48 for each veteran it placed in State Veterans' Homes, 
compared to the $354 VA pays to maintain a veteran for 1 day in its own 
nursing home care units.
    Under the provisions of title 38, United States Code, VA is 
authorized to make payments to states to assist in the construction and 
maintenance of State Veterans' Homes. Today, there are 109 State 
Veterans' Homes in 47 states with over 23,000 beds providing nursing 
home, hospital, and domiciliary care. Grants for Construction of State 
Extended Care Facilities provide funding for 65 percent of the total 
cost of building new veterans homes. Recognizing the growing long-term 
healthcare needs of older veterans, it is essential that the State 
Veterans' Home Program be maintained as a viable and important 
alternative healthcare provider to the VA system. The American Legion 
opposes any attempts to place moratoria on new State Veterans' Home 
construction grants. State authorizing legislation has been enacted and 
state funds have been committed. The West Los Angeles State Veterans' 
Home, alone, is a $125 million project. Delaying this and other 
projects could result in cost overruns from increasing building 
materials costs and may result in states deciding to cancel these much-
needed facilities.
    The American Legion supports:

      increasing the amount of authorized per diem payments to 
50 percent for nursing home and domiciliary care provided to veterans 
in State Veterans' Homes;
      the provision of prescription drugs and over-the-counter 
medications to State Veterans' Homes Aid and Attendance patients along 
with the payment of authorized per diem to State Veterans' Homes; and
      allowing for full reimbursement of nursing home care to 
70 percent service-connected veterans or higher, if the veteran resides 
in a State Veterans' Home.

    The American Legion recommends $250 million for the State Extended 
Care Facility Construction Grants Program in FY 2008, $165 million more 
than the President's budget request. This additional funding will 
address more pending life-safety projects and new construction 
projects.

                     STATE CEMETERY GRANTS PROGRAM

    The State Veterans' Cemetery Grant Program is not intended to 
replace National Cemeteries, but to complement them. Grants for state-
owned and operated cemeteries can be used to establish, expand and 
improve on existing cemeteries. States are planning to open 24 new 
state veterans' cemeteries between 2007 and 2012. There are 60 
operational cemeteries and two more under construction. Since NCA 
concentrates its construction resources on large metropolitan areas, it 
is unlikely that new national cemeteries will be constructed in all 
states. Therefore, individual states are encouraged to pursue 
applications for the State Cemetery Grants Program. Fiscal commitment 
from the state is essential to keep the operation of the cemetery on 
track. NCA estimates it takes about $300,000 a year to operate a state 
cemetery.
    The American Legion recommends $42 million for the State Cemetery 
Grants Program in FY 2008, $10 million more than the President's budget 
request.

                    NATIONAL CEMETERY ADMINISTRATION

    The mission of the National Cemetery Administration is to honor 
veterans with final resting places in national shrines and with lasting 
tributes that commemorate their service to this Nation. The National 
Cemetery Administration's vision is to serve all veterans and their 
families with the utmost dignity, respect, and compassion. Every 
national cemetery should be a place that inspires visitors to 
understand and appreciate the service and sacrifice of this Nation's 
veterans.
National Cemetery Expansion
    The American Legion supported P.L. 108-109, the National Cemetery 
Expansion Act of 2003, authorizing VA to establish new national 
cemeteries to serve veterans in the areas of: Bakersfield, Calif.; 
Birmingham, Ala.; Jacksonville, Fla.; Sarasota County, Fla.; 
southeastern Pennsylvania; and Columbia-Greenville, S.C. All six areas 
have veterans' populations exceeding 170,000, which is the threshold VA 
has established for new national cemeteries. By 2009, all six new 
national cemeteries should be open to serve veterans in these areas.
    There are approximately 24 million veterans alive today. Nearly 
688,000 veteran deaths are estimated to occur in 2008. The total number 
of graves maintained by VA is expected to increase from 2.8 million in 
2006 to just over 3.2 million by 2012. The VA expects that at least 12 
percent of these veterans will request burial in a national cemetery. 
Considering the growing costs of burial services and the excellent 
quality of service the NCA is providing, The American Legion foresees 
that this percentage will be much greater. By 2012, four more national 
cemeteries are expected to exhaust their supply of available, 
unassigned gravesites.
    Congress must provide sufficient major construction appropriations 
to permit NCA to accomplish its stated goal of ensuring that burial in 
a national or state cemetery is a realistic option by locating 
cemeteries within 75 miles of 90 percent of eligible veterans.
National Shrine Commitment
    Maintaining cemeteries as National Shrines is one of NCA's top 
priorities. This commitment involves raising, realigning and cleaning 
headstones and markers to renovate gravesites. The work that has been 
done so far has been outstanding; however, adequate funding is key to 
maintaining this very important commitment. The American Legion 
supports NCA's goal of completing the National Shrine Commitment within 
5 years. This commitment includes the establishment of standards of 
appearance for national cemeteries that are equal to the standards of 
the finest cemeteries in the world. Operations, maintenance and 
renovation funding must be increased to reflect the true requirements 
of the NCA to fulfill this commitment.
    The American Legion recommends $178 million for the National 
Cemetery Administration in FY 2008, $12 million more than the 
President's budget request.

                         INFORMATION TECHNOLOGY

    The data theft that occurred in May of last year serves as a 
monumental wake up call to the nation. VA can no longer ignore IT 
security. The recovery of the laptop is indeed cause for optimism; 
however, we must not discount the possibility that every name on that 
list could still be subject to possible identity theft. The complete 
overhaul of VA IT is only in its beginning stages. Meanwhile, there are 
still unresolved security breaches within VA including the most recent 
theft of a laptop from a VA contractor. How many computers need to be 
stolen before veterans get some real assurances from the Federal 
Government that their information is not only safe, but that safeguards 
will be in place to help protect them against identity theft? The 
American Legion once again calls on VA and the Administration to keep 
its promise to veterans and provide free credit monitoring for 1 year. 
The American Legion is hopeful that the steps VA takes to strengthen 
its IT security will renew the confidence and trust of veterans who 
depend on VA for the benefits they have earned.
    Funding for the IT overhaul should not be paid for with money from 
other VA programs. This would in essence make veterans pay for VA's 
gross negligence in the matter. The American Legion hopes that Congress 
will not attempt to fix this problem on the backs of America's veterans 
and from scarce fiscal resources provided to the VA healthcare 
delivery.
    VA has shown it can be a leader in the areas of care and service. 
Its accomplishments, from providing high quality medical care to 
leading the world in the development of electronic records, are 
indicators that VA can also be the nation's leader in IT security.
    The American Legion believes that there should be a complete review 
of IT security governmentwide. VA isn't the only agency within the 
government that needs to overhaul its IT security protocol. The 
American Legion would urge Congress to exercise its oversight authority 
and review each Federal agency to ensure that the personal information 
of all Americans is secure.
    The American Legion agrees with the President's budget request for 
$1.9 billion for Information Technology in FY 2008.

                      VA's LONG-TERM CARE MISSION

    Historically, VA's Long-Term Care (LTC) has been the subject of 
discussion and legislation for nearly two decades. In a landmark July 
1984 study, Caring for the Older Veteran, it was predicted that a wave 
of elderly veterans had the potential to overwhelm VA's long-term care 
capacity. Further, the recommendations of the Federal Advisory 
Committee on the Future of Long-Term Care in its 1998 report VA Long-
Term Care at the Crossroads, made recommendations that serve as the 
foundation for VA's national strategy to revitalize and reengineer 
long-term care services. It is now 2006 and that wave of veterans has 
arrived.
    Additionally, Public Law 106-117, the Millennium Act, enacted in 
November 1999, required VA to continue to ensure 1998 levels of 
extended care services (defined as VA nursing home care, VA 
domiciliary, VA home-based primary care, and VA adult day healthcare) 
in its facilities. Yet, VA has continually failed to maintain the 1998 
bed levels mandated by law.
    VA's inability to adequately address the long-term care problem 
facing the agency was most notable during the CARES process. The 
planning for the long-term care mission, one of the major services VA 
provides to veterans, was not even addressed in the CARES initiative. 
That CARES initiative is touted as the most comprehensive analysis of 
VA's healthcare infrastructure that has ever been conducted.
    Incredibly, despite 20 years of forewarning, the CARES Commission 
report to the VA Secretary states that VA has yet to develop a long-
term care strategic plan with well-articulated policies that address 
the issues of access and integrated planning for the long-term care of 
seriously mentally ill veterans. The Commission also reported that VA 
had not yet developed a consistent rationale for the placement of long-
term care units. It was not for the lack of prior studies that VA has 
never had a coordinated long-term care strategy. The Secretary's CARES 
decision agreed with the Commission and directed VHA to develop a 
strategic plan, taking into consideration all of the complexities 
involved in providing such care across the VA system.
    The American Legion supports the publishing and implementation of a 
long-term care strategic plan that addresses the rising long-term care 
needs of America's veterans. We are, however, disappointed that it has 
now been over 2 years since the CARES decision and no plan has been 
published.
    It is vital that VA meet the long-term care requirements of the 
Millennium Health Care Act and we urge this Committee to support 
adequate funding for VA to meet the long-term care needs of America's 
Veterans. The American Legion supports the President's $4.6 billion 
funding recommendation for FY 2008.

                           HOMELESS VETERANS

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

                 VETERANS BENEFITS ADMINISTRATION (VBA)

    The VA has a statutory responsibility to ensure the welfare of the 
nation's veterans, their families, and survivors. Providing quality 
decisions in a timely manner has been, and will continue to be, one of 
the VA's most difficult challenges.
Workload and Claims Backlog
    There are approximately 3.5 million veterans and beneficiaries 
currently receiving VA compensation and pension benefits. In 2006, VA 
added almost 250,000 new beneficiaries to the compensation and pension 
rolls. VA anticipates receiving about 800,000 claims a year in 2007 and 
2008. The current staffing levels do not enable VA to reduce the 
pending claims inventory and provide timely service to veterans; 
therefore, the President is requesting an increase of 457 full-time 
equivalents compensation and pension personnel. The productivity of the 
additional staff will increase throughout 2008 and in subsequent years 
as these new employees receive training and gain experience. VA 
believes the additional staffing will enable VBA to improve claims 
processing timeliness, reduce appeals workload, improve appeals 
processing timeliness, and enhance services to veterans returning from 
the Global War on Terrorism.
    The increasing complexity of VA claims adjudication continues to be 
a major challenge for VA rating specialists. Since judicial review of 
veterans' claims was enacted in 1988, the remand rate of those cases 
appealed to the United States Court of Appeals for Veterans Claims 
(CAVC) has, historically, been about 50 percent. In a series of 
precedent-setting decisions by the CAVC and the United States Court of 
Appeals for the Federal Circuit, a number of longstanding VA policies 
and regulations have been invalidated because they were not consistent 
with statute. These court decisions immediately added thousands of 
cases to regional office workloads, since they require the review and 
reworking of tens of thousands of completed and pending claims.
    As of August 19, 2006, there were more than 389,000 rating cases 
pending in the VBA system. Of these, 92,047 (23.6 percent) have been 
pending for more than 180 days. According to the VA, the appeals rate 
has also increased from a historical rate of about 7 percent of all 
rating decisions being appealed to a current rate that fluctuates from 
11 to 14 percent. This equates to more than 152,000 appeals currently 
pending at VA regional offices, with more than 132,000 requiring some 
type of further adjudicative action.
Staffing
    Whether complex or simple, VA regional offices are expected to 
consistently develop and adjudicate veterans' and survivors' claims in 
a fair, legally proper, and timely manner. The adequacy of regional 
office staffing has as much to do with the actual number of personnel 
as it does with the level of training and competency of the 
adjudication staff. VBA has lost much of its institutional knowledge 
base over the past 4 years, due to the retirement of many of its 30-
plus year employees. As a result, staffing at most regional offices is 
made up largely of trainees with less than 5 years of experience. Over 
this same period, as regional office workload demands escalated, these 
trainees have been put into production units as soon as they completed 
their initial training.
    Concern over adequate staffing in VBA to handle its demanding 
workload was addressed by VA's Office of the Inspector General (IG) in 
a report released in May 2005 (Report No. 05-00765-137, dated May 19, 
2005). The IG specifically recommended, ``in view of growing demand, 
the need for quality and timely decisions, and the ongoing training 
requirements, reevaluate human resources and ensure that the VBA field 
organization is adequately staffed and equipped to meet mission 
requirements.'' The Under Secretary for Benefits has conceded that the 
number of personnel has decreased over the last few years. And the 
congressionally mandated Veterans' Disability Benefits Commission is 
also closely looking at the adequacy of current staffing levels.
    It is an extreme disservice to veterans, not to mention 
unrealistic, to expect VA to continue to process an ever increasing 
workload, while maintaining quality and timeliness, with less staff. 
Our current wartime situation provides an excellent opportunity for VA 
to actively seek out returning veterans from Operations Enduring 
Freedom and Iraqi Freedom, especially those with service-connected 
disabilities, for employment opportunities within VBA. To ensure VA and 
VBA are meeting their responsibilities, The American Legion strongly 
urges Congress to scrutinize VBA's budget requests more closely. Given 
current and projected future workload demands, regional offices clearly 
will need more rather than fewer personnel and The American Legion is 
ready to support additional staffing. However, VBA must be required to 
provide better justification for the resources it says are needed to 
carry out its mission and, in particular, how it intends to improve the 
level of adjudicator training, job competency, and quality assurance.

                       GI BILL EDUCATION BENEFITS

    Over 96 percent of recruits currently sign up for the MGIB and pay 
$1,200 out of their first year's pay to guarantee eligibility. However, 
only one-half of these military personnel use any of the current 
Montgomery GI Bill benefits. We believe this is directly related to the 
fact that current GI Bill benefits have not kept pace with the 
increasing cost of education. Costs for attending the average 4-year 
public institution as a commuter student during the 1999-2000 academic 
year was nearly $9,000. On October 1, 2005, the basic monthly rate of 
reimbursement under MGIB was raised to $1,034 per month for a 
successful 4-year enlistment and $840 for an individual whose initial 
active duty obligation was less than 3 years. The current educational 
assistance allowance for persons training full-time under the MGIB 
Selected Reserve is $297 per month.
    The Servicemen's Readjustment Act of 1944, P.L. 78-346, the 
original GI Bill, provided millions of members of the Armed Forces an 
opportunity to seek higher education. Many of these individuals may not 
have been afforded this opportunity without the generous provisions of 
that act. Consequently, these former service members made a substantial 
contribution not only to their own careers, but also to the economic 
wellbeing of the country. Of the 15.6 million veterans eligible, 7.8 
million took advantage of the educational and training provisions of 
the original GI Bill. Between 1944 and 1956, when the original GI Bill 
ended, the total educational cost of the World War II bill was $14.5 
billion. The Department of Labor estimates that the government actually 
made a profit, because veterans who had graduated from college 
generally earned higher salaries and, therefore, paid more taxes.
    Today, a similar concept applies. The educational benefits provided 
to members of the Armed Forces must be sufficiently generous to have an 
impact. The individuals who use MGIB educational benefits are not only 
improving their career potential, but also making a greater 
contribution to their community, state, and nation.
    The American Legion recommends the 110th Congress make the 
following improvements to the current MGIB:

      The dollar amount of the entitlement should be indexed to 
the average cost of a college education including tuition, fees, 
textbooks, and other supplies for a commuter student at an accredited 
university, college, or trade school for which they qualify;
      The educational cost index should be reviewed and 
adjusted annually;
      A monthly tax-free subsistence allowance indexed for 
inflation must be part of the educational assistance package;
      Enrollment in the MGIB shall be automatic upon 
enlistment; however; benefits will not be awarded unless eligibility 
criteria have been met;
      The current military payroll deduction ($1,200) 
requirement for enrollment in MGIB must be terminated;
      If a veteran enrolled in the MGIB acquired educational 
loans prior to enlisting in the Armed Forces, MGIB benefits may be used 
to repay those loans;
      If a veteran enrolled in MGIB becomes eligible for 
training and rehabilitation under Chapter 31, of title 38, United 
States Code, the veteran shall not receive less educational benefits 
than otherwise eligible to receive under MGIB;
      Separating service members and veterans seeking a 
license, credential, or to start their own business must be able to use 
MGIB educational benefits to pay for the cost of taking any written or 
practical test or other measuring device;
      Eligible veterans shall have an unlimited number of years 
after discharge to utilize MGIB educational benefits;
      Eligible veterans should have the right to transfer their 
earned benefits to their spouse and dependents; and
      Eligible members of the Select Reserves, who qualify for 
MGIB educational benefits shall receive not more than half of the 
tuition assistance and subsistence allowance payable under the MGIB and 
have up to 5 years after their date of separation to use MGIB 
educational benefits.

        VOCATIONAL REHABILITATION AND EMPLOYMENT SERVICE (VR&E)

    The mission of the VR&E program is to help qualified, service-
disabled veterans achieve independence in daily living and, to the 
maximum extent feasible, obtain and maintain suitable employment. The 
American Legion fully supports these goals. As a nation at war, there 
continues to be an increasing need for VR&E services to assist 
Operations Iraqi Freedom and Enduring Freedom veterans in reintegrating 
into independent living, achieving the highest possible quality of 
life, and securing meaningful employment. To meet America's obligation 
to these specific veterans, VA leadership must focus on marked 
improvements in case management, vocational counseling, and--most 
importantly--job placement.
    The successful rehabilitation of our severely disabled veterans is 
determined by the coordinated efforts of every Federal agency (DoD, VA, 
DoL, OPM, HUD, etc.) involved in the seamless transition from the 
battlefield to the civilian workplace. Timely access to quality 
healthcare services, favorable physical rehabilitation, vocational 
training, and job placement play a critical role in the ``seamless 
transition'' of each and every veteran, as well as his or her family.
    Administration of VR&E and its programs is a responsibility of the 
Veterans Benefits Administration (VBA). Providing effective employment 
programs through VR&E must become a priority. Until recently, VR&E's 
primary focus has been providing veterans with skills training, rather 
than providing assistance in obtaining meaningful employment. Clearly, 
any employability plan that doesn't achieve the ultimate objective--a 
job--is falling short of actually helping those veterans seeking 
assistance in transitioning into the civilian workforce.
    Vocational counseling also plays a vital role in identifying 
barriers to employment and matching veterans' transferable job skills 
with those career opportunities available for fully qualified 
candidates. Becoming fully qualified becomes the next logical objective 
toward successful transition.
    Veterans Preference in Federal hiring plays an important role in 
guiding veterans to career possibilities within the Federal Government 
and must be preserved. There are scores of employment opportunities 
within the Federal Government that educated, well-trained, and 
motivated veterans can fill--given a fair and equitable chance to 
compete. Working together, all Federal agencies should identify those 
vocational fields, especially those with high turnover rates, suitable 
for VR&E applicants. Career fields like information technology, claims 
adjudications, debt collection, etc., offer employment opportunities 
and challenges for career-oriented applicants that also create career 
opportunities outside the Federal Government.
    GAO has also cited exceptionally high workloads for a limited 
number of staff members at VR&E offices. This increased workload 
hinders the staff's ability to effectively assist individual veterans 
with identifying employment opportunities. In April 2005, the average 
caseload of a typical VR&E counselor approached 160 veterans. The 
American Legion is pleased that an additional number of 150 full-time 
equivalents will be hired and we applaud the President's budget request 
for $159.5 million in FY 2008. It is vital that Congress approve this 
request to adequately address the expected increase of veterans needing 
assistance.

                       HOME LOAN GUARANTY PROGRAM

    VA's Home Loan Guaranty program has been in effect since 1944 and 
has afforded nearly 17 million veterans the opportunity to purchase 
homes. The Home Loan programs offer veterans a centralized, affordable 
and accessible method of purchasing homes in return for their service 
to this nation. The program has been so successful over past years that 
not only has the program paid for itself but has also shown a profit in 
recent years. The American Legion believes that it is unfair for 
veterans to pay high funding fees of 2 to 3 percent, which can add 
approximate $3,000 to $11,000 for a first time buyer. The VA funding 
fee was initially enacted to defray the costs of the VA guaranteed home 
loan program. The current funding fee paid to VA to defray the cost of 
the home loan has had a negative effect on many veterans who choose not 
to participate in this highly beneficial program. Therefore, The 
American Legion strongly recommends that the VA funding fee on home 
loans be reduced or eliminated for all veterans whether active duty, 
reservist, or National Guard.
Specially Adapted Housing
    The American Legion believes that with the increasing numbers of 
disabled veterans returning from Iraq and Afghanistan, the need for 
specially adapted housing is paramount. Therefore, The American Legion 
strongly recommends that the current $50,000 grant for specially 
adapted housing be increased to $55,000 and special home adaptations be 
increased from $10,000 to $12,300. Specially adapted housing grants are 
available for the installation of wheelchair ramps, chair lifts, 
modifications to kitchens and bathrooms and other adaptations to homes 
for veterans who cannot move about without the use of wheelchairs, 
canes or braces or who are blind and suffer the loss or loss of use of 
one lower extremity. Special home adaptation grants are available for 
veterans who are legally blind or have lost the use of both hands.

                                SUMMARY

    Mr. Chairman and Members of the Committee, The American Legion 
appreciates the strong relationship we have developed with this 
Committee. With increasing military commitments worldwide, it is 
important that we work together to ensure that the services and 
programs offered through VA are available to the new generation of 
American service members who will soon return home. You have the power 
to ensure that their sacrifices are indeed honored with the thanks of a 
grateful nation.
    The American Legion is fully committed to working with each of you 
to ensure that America's veterans receive the entitlements they have 
earned. Whether it is improved accessibility to healthcare, timely 
adjudication of disability claims, improved educational benefits or 
employment services, each and every aspect of these programs touches 
veterans from every generation. Together we can ensure that these 
programs remain productive, viable options for the men and women who 
have chosen to answer the nation's call to arms.
    Thank you for allowing me the opportunity to appear before you 
today.

                                 
                      Statement of Brian Lawrence
  Assistant National Legislative Director, Disabled American Veterans
    Mr. Chairman and Members of the Committee:
    I am pleased to appear before you on behalf of the Disabled 
American Veterans (DAV), which is one of the four member organizations 
of The Independent Budget (IB). We appreciate the opportunity to 
present the recommendations of the fiscal year (FY) 2008 IB and compare 
them to the President's proposed FY 2008 budget for veterans' programs. 
As you know, the IB is a budget and policy document that sets forth the 
collective views of the DAV, AMVETS, the Paralyzed Veterans of America 
(PVA), and the Veterans of Foreign Wars of the United States (VFW). 
Each organization has a principal responsibility for a major component 
of the budget. My testimony focuses on Department of Veterans (VA) 
benefit programs, which are administered by the Veterans Benefits 
Administration (VBA). VBA is further divided into the following 
services: Compensation and Pension (C&P), Vocational Rehabilitation and 
Employment (VR&E), Education, Loan Guaranty, and Insurance. VBA and its 
constituent departments are funded under the General Operating Expenses 
(GOE).
    The level of funding sought in the President's FY 2008 budget for 
VBA is approximately $1.2 billion, an increase of $30 million over last 
year's level. This amount falls far short of the IB assessment, which 
anticipates that VBA will require more than $1.9 billion to meet the 
needs of disabled veterans. The difference between the Administration's 
and the IB proposals is more than $700 million.

                              C&P Service

    With the Administration's proposed budget, C&P Service would be 
authorized total 9,559 FTE, which is a total increase of 114. This 
recommendation does not appear to be aligned with the Administration's 
stated goal to decrease the number of backlogged compensation claims. 
For nearly a decade, C&P has struggled to find a way to address claims 
processing problems and establish a viable long-term claims process. 
Despite its ongoing efforts, the backlog remains unacceptably high, and 
disabled veterans and their families suffer the consequences. While a 
number of factors play a role, the backlog has persisted primarily 
because of inadequate resources compounded by higher claims volumes. 
The disability claims workload from returning war veterans and veterans 
of previous periods has steadily increased since 2000. The IB 
anticipates that this trend will continue, considering the ongoing 
hostilities in Iraq and Afghanistan, as well as an aging veteran 
population. However, the VA perspective is that a slight decrease in 
the number of claims receipts will occur during 2007 and 2008. This 
prediction is somewhat troubling, considering that the VA funding 
shortfall that occurred in 2005 was attributed to error in estimating 
the number of future claims receipts.
    During both FY 2005 and FY 2006, the total number of compensation, 
pension, and burial claims increased by an average annual rate of 4.5 
percent. During this same period, the number of pending claims 
increased by a total of more than 33 percent. With an aging veterans' 
population and ongoing hostilities in Iraq and Afghanistan, it is 
reasonable to expect a continuation of inclined rates. Assuming the 
annual percentage rate of growth remains the same as in preceding 
years, VA can expect 874,136 claims for C&P in FY 2007. Further 
complicating this issue is legislation requiring VA to invite veterans 
in six states to request review of past claims decisions and disability 
ratings. It is estimated that this outreach project will produce 56,000 
additional claims. Given past claims processing times, much of this 
workload will carry over into FY 2008, making the new total more than 
930,000 claims in FY 2008. Clearly, VA will require more resources just 
to keep the backlog from growing, and it will require a significant 
increase in resources to fulfill the President's goal to reduce and 
eventually eliminate the claims backlog.
    In its budget submission for FY 2007, VA projected production based 
an output of 109 claims per direct program FTE. The Independent Budget 
Veterans Service Organizations have long argued that VA's production 
requirements do not allow for thorough development and careful 
consideration of disability claims, resulting in compromised quality, 
higher error and appeal rates, and even more overload on the system, 
and adding to the claims backlog. The IB asserts a more reasonable 
estimate of accurate productivity is 100 claims per FTE. With an 
estimated 930,000 claims in FY 2008, that would require 9,300 direct 
program FTE. With the FY 2007 level of 1,375 support FTE added, this 
would require C&P to be authorized 10,675 total FTE for FY 2008.
    The IB estimates for the numbers of FTE do not accommodate the 
kinds of demands that may arise as a consequence of Congressional 
injection of attorneys into the claims process. The VA claims system 
was designed to be open, informal, and helpful to veterans. It is 
reasonable to expect that the involvement of fee-charging lawyers and 
agents will negatively impact productivity in the claims adjudication 
process and further bog down the system and eventually lead to the need 
for even more increases in C&P staffing. For example, VA will have the 
responsibility of oversight and administration of fee agreements under 
which the Secretary is to pay the attorney directly from past-due 
benefits awarded on the basis of the claim. We believe this leaves open 
the possibility for abuse. Allowing fee-charging lawyers and agents 
into the system will profoundly change the administrative claims 
process to the detriment of veterans and other claimants. We believe 
there is a potential for wide-ranging unintended consequences that will 
be beneficial for neither claimants nor the government. Beyond the cost 
to veterans, added administrative costs for VA are likely to be 
substantial, without commensurate added advantages or benefits for 
either.
    In addition to recommending additional resources, the IB has 
identified two other critical areas that VA must address before it can 
reach its goal to reduce the backlog. First, it must continue to 
establish and improve training programs to enable newly hired C&P 
personnel to absorb the tremendous volume of information contained in 
the laws, regulations, and court decisions pertaining to veterans' 
benefits claims. This is a monumental task in itself, and it is 
understandable that newly hired FTE require a considerable `ramp-up' 
period before they are able to make accurate claims decisions. As you 
know, the DAV maintains a National Service Officer (NSO) corps of 
approximately 260 employees who represent and assist disabled veterans 
and their dependents throughout the claims process. Each NSO goes 
through a mandatory training period that lasts anywhere from 16 to 26 
months before they are allowed to conduct unsupervised work. A similar 
extensive training program for VA claims personnel would help to reduce 
errors along with the number of appeals that are accumulating into a 
mountainous backlog.
    Second, C&P personnel must be accountable for the quality of work 
they produce. In the past, focus has primarily been on productivity. 
But producing a high number of claims decisions is detrimental if a 
significant number of them have to be reworked during an appeals 
process that adds months or years to the amount of time disabled 
veterans must wait for the benefits to which they are entitled. C&P 
personnel who consistently make errors and fail to improve despite 
remedial training must not be retained in a position where their 
numerous poor decisions impact disabled veterans.
    VA must establish a long-term strategy focused principally on 
attaining quality and not merely achieving production quotas in claims 
processing, or emphasizing how well and efficient it deals with the 
needs of new veterans of current wars. It must obtain supplementary 
resources for VBA, and it must invest these in that long-term strategy 
rather than reactively targeting them to short-term, temporary, and 
superficial gains. Only then can VBA proceed in a way that veterans' 
needs are addressed timely with the effects of disability alleviated by 
prompt delivery of appropriate benefits.

                                  VR&E

    For VR&E Service, the President's budget seeks funding for 1,260 
FTE. The IB recommends 1,375 FTE for this business line. VR&E's 
workload is expected to continue to increase primarily as a consequence 
of the war in Iraq and ongoing hostilities in Afghanistan. Also, given 
its increased reliance on contract services, VR&E needs additional FTE 
dedicated to management and oversight of contract counselors and 
rehabilitation and employment service providers. As a part of its 
strategy to enhance accountability and efficiency, the VA Vocational 
Rehabilitation and Employment Task Force recommended in its March 2004 
report creation and training of new staff positions for this purpose. 
Other new initiatives recommended by the Task Force also require an 
investment of personnel resources. To implement reforms to improve the 
effectiveness and efficiency of its programs, the Task Force 
recommended that VA should add new FTE positions to the VR&E workforce. 
The FY 2007 total of 1,125 FTE for VR&E should be increased by 250, to 
1,375 total FTE.

                           Education Service

    For Education Service, the President's budget seeks funding for 894 
FTE. While we appreciate the additional support, we believe the 
President's recommended staffing level for Education Service falls 
short of what is needed. As it has with its other benefit programs, VA 
has been striving to provide more timely and efficient service to its 
claimants for education benefits. Though the workload (number of 
applications and recurring certifications, etc.) increased by 11 
percent during recent years, direct program FTE were reduced from 708 
at the end of FY 2003 to 675 at the end of FY 2005. Based on experience 
during FY 2004 and FY 2005, it is very conservatively estimated that 
the workload will increase by 5.5 percent in FY 2008. VA must increase 
staffing to meet the existing and added workload, or service to 
veterans seeking educational benefits will decline. Based on the number 
of direct program FTE at the end of FY 2003 in relation to the workload 
at that time, VBA must increase direct program staffing in its 
Education Service in FY 2008 to 873 FTE, 149 more direct program FTE 
than authorized for FY 2007. With the addition of the 160 support FTE 
as currently authorized, Education Service should be provided 1,033 
total FTE for FY 2008.

                  Other Suggested Benefit Improvements

    The benefit programs are effective for their intended purposes only 
to the extent VBA can deliver benefits to entitled veterans and 
dependents in a timely fashion. However, in addition to ensuring that 
VBA has the resources necessary to accomplish its mission in that 
manner, Congress must also make adjustments to the programs from time 
to time to address increases in the cost of living and needed 
improvements. The IB makes a number of recommendations to adjust rates 
and improve the benefit programs administered by VBA. Some of those 
recommendations are:

      Establish cost-of-living-adjustments (COLAs) for 
compensation, dependency and indemnity compensation (DIC).
      Reject extension of provisions for rounding down 
compensation COLAs and allow current temporary provisions to expire.
      Increase specially adapted housing grants and provide for 
automatic annual COLAs.
      Increase automobile and adaptive equipment grants and 
provide for automatic annual COLAs.
      Establish a grant to cover the costs of home adaptations 
for veterans who replace their specially adapted homes with new 
housing.
      Increase rates of payment to veterans who are housebound 
or in need of regular aid-and-attendance due to service-connected 
disabilities.
      Establish presumption of service connection for hearing 
loss and tinnitus for veterans whose military duties involved high 
level noise exposure or combat.
      Protect veterans' benefits against awards to third 
parties in divorce actions.
      Eliminate remaining offset between career military 
retirement pay and VA compensation.
      Eliminate offset between DIC and the Survivor Benefit 
Plan.
      Increase DIC for survivors of military personnel who died 
on active duty.
      Lower age requirement for reinstatement of DIC to re-
married survivors of service-connected veterans, from 57 to 55 years of 
age.
      Repeal funding fees for VA home loan guaranty.
      Update premium schedule for SDVI to reflect current 
mortality tables.
      Increase maximum protection of SDVI policies to at least 
$50,000.
      Increase maximum protection of Veterans' Mortgage Life 
Insurance from $90,000 to $150,000.
      Reject recommendations to compensate service-connected 
disabilities through payment of lump-sum settlements to veterans.

    We invite the Committee's attention to the section of the IB 
addressing the Benefit Programs for details on these and other IB 
recommendations for improvement.
    Another important component of our system of veterans' benefits is 
the right to appeal VA's benefits decisions to an independent court. 
The IB includes recommendations to improve the processes of judicial 
review in veterans' benefits matters. Again, we invite the Committee's 
attention to the IB for the details of these recommendations. In 
addition, the IB recommends that Congress enact legislation to 
authorize and fund construction of a courthouse and justice center for 
the United States Court of Appeals for Veterans Claims.

                                Closing

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

                                 
                        Statement of Carl Blake
      National Legislative Director, Paralyzed Veterans of America
    Mr. Chairman and Members of the Committee, as one of the four co-
authors of The Independent Budget, Paralyzed Veterans of America (PVA) 
is pleased to present the views of The Independent Budget regarding the 
funding requirements for the Department of Veterans Affairs (VA) 
healthcare system for FY 2008.
    PVA, along with AMVETS, Disabled American Veterans, and the 
Veterans of Foreign Wars, is proud to come before you this year marking 
the beginning of the third decade of The Independent Budget, a 
comprehensive budget and policy document that represents the true 
funding needs of the Department of Veterans Affairs. The Independent 
Budget uses commonly accepted estimates of inflation, healthcare costs 
and healthcare demand to reach its recommended levels. This year, the 
document is endorsed by 53 veterans' service organizations, and medical 
and healthcare advocacy groups.
    Last year proved to be a unique year for reasons very different 
from 2005. The VA faced a tremendous budgetary shortfall during FY 2005 
that was subsequently addressed through supplemental appropriations and 
additional funds added to the FY 2006 appropriation. For FY 2007, the 
Administration submitted a budget request that nearly matched the 
recommendations of The Independent Budget. These actions simply 
validated the recommendations of The Independent Budget once again.
    Unfortunately, even as we testify today, Congress has yet to 
complete the appropriations bill more than one-third of the way through 
the current fiscal year. Despite the positive outlook for funding as 
outlined in H.J. Res. 20, the FY 2007 Continuing Resolution, the VA has 
been placed in a critical situation where it is forced to ration care 
and place freezes on hiring of much needed medical staff. Waiting times 
have also continued to increase. Furthermore, the VA has had to 
cannibalize other accounts in order to continue to provide medical 
services, jeopardizing not only the VA healthcare system but the actual 
healthcare of veterans. It is unconscionable that Congress has allowed 
partisan politics and political wrangling to trump the needs of the men 
and women who have served and continue to serve in harm's way.
    For FY 2008, the Administration has requested $34.2 billion for 
veterans' healthcare, a $1.9 billion increase over the levels 
established in H.J. Res. 20, the continuing resolution for FY 2007. 
Although we recognize this as another step forward, it still falls well 
short of the recommendations of The Independent Budget. For FY 2008, 
The Independent Budget recommends approximately $36.3 billion, an 
increase of $4.0 billion over the FY 2007 appropriation level yet to be 
enacted and approximately $2.1 billion over the Administration's 
request.
    The medical care appropriation includes three separate accounts--
Medical Services, Medical Administration, and Medical Facilities--that 
comprise the total VA healthcare funding level. For FY 2008, The 
Independent Budget recommends approximately $29.0 billion for Medical 
Services. Our Medical Services recommendation includes the following 
recommendations:


 
                                                          (Dollars in
                                                           Thousands)
 
Current Services Estimate                                   $26,302,464
Increase in Patient Workload                                $ 1,446,636
Increase in Full-time Employees                            $    105,120
Policy Initiatives                                          $ 1,125,000
                                                      ------------------
  Total FY 2008 Medical Services                            $28,979,220
 


    In order to develop our current services estimate, we used the 
Obligations by Object in the President's Budget to set the framework 
for our recommendation. We believe this method allows us to apply more 
accurate inflation rates to specific accounts within the overall 
account. Our inflation rates are based on 5-year averages of different 
inflation categories from the Consumer Price Index-All Urban Consumers 
(CPI-U) published by the Bureau of Labor Statistics every month.
    Our increase in patient workload is based on a 5.5 percent increase 
in workload. This projected increase reflects the historical trend in 
the workload increase over the last 5 years. The policy initiatives 
include $500 million for improvement of mental health services, $325 
million for funding the fourth mission (an amount that nearly matches 
current VA expenditures for emergency preparedness and homeland 
security as outlined in the 2007 Mid-Session Review), and $300 million 
to support centralized prosthetics funding.
    For Medical Administration, The Independent Budget recommends 
approximately $3.4 billion. Finally, for Medical Facilities, The 
Independent Budget recommends approximately $4.0 billion. This 
recommendation includes an additional $250 million above the FY 2008 
baseline in order to begin to address the non-recurring maintenance 
needs of the VA.
    Although The Independent Budget healthcare recommendation does not 
include additional money to provide for the healthcare needs of 
category 8 veterans now being denied enrollment into the system, we 
believe that adequate resources should be provided to overturn this 
policy decision. VA estimates that more than 1.5 million category 8 
veterans will have been denied enrollment in the VA healthcare system 
by FY 2008. Assuming a utilization rate of 20 percent, in order to 
reopen the system to these deserving veterans, The Independent Budget 
estimates that VA will require approximately $366 million. The 
Independent Budget veterans service organizations (IBVSO) believe the 
system should be reopened to these veterans and that this money should 
be appropriated in addition to our Medical Care recommendation.
    Although not proposed to have a direct impact on veterans' 
healthcare, we are deeply disappointed that the Administration chose to 
once again recommend an increase in prescription drug co-payments from 
$8 to $15 and an indexed enrollment fee based on veterans' incomes. 
These proposals will simply add additional financial strain to many 
veterans, including PVA members and other veterans with catastrophic 
disabilities. Although the VA does not overtly explain the impact of 
these proposals, similar proposals in the past have estimated that 
nearly 200,000 veterans will leave the system and more than 1,000,000 
veterans will choose not to enroll. It is astounding that this 
Administration would continue to recommend policies that would push 
veterans away from the best healthcare system in the world. Congress 
has soundly rejected these proposals in the past and we call on you to 
do so once again.
    For Medical and Prosthetic Research, The Independent Budget is 
recommending $480 million. This represents a $66 million increase over 
the FY 2007 appropriated level established in the continuing resolution 
and $69 million over the Administration's request for FY 2008. We are 
very concerned that the Medical and Prosthetic Research account 
continues to face a virtual flatline in its funding level. Research is 
a vital part of veterans' healthcare, and an essential mission for our 
national healthcare system. VA research has been grossly underfunded in 
comparison to the growth rate of other Federal research initiatives. We 
call on Congress to finally correct this oversight.
    The Independent Budget recommendation also recognizes a significant 
difference in our recommended amount of $1.34 billion for Information 
Technology versus the Administration's recommended level of $1.90 
billion. However, when compared to the account structure that The 
Independent Budget utilizes, the Administration's recommendation 
amounts to approximately $1.30 billion. The Administration's request 
also includes approximately $555 million in transfers from all three 
accounts in Medical Care as well as the Veterans Benefits 
Administration and the National Cemetery Administration. Unfortunately, 
these transfers are only partially defined in the Administration's 
budget justification documents. Given the fact that the veterans' 
service organizations have been largely excluded from the discussion of 
how the Information Technology reorganization would take place and the 
fact that little or no explanation was provided in last year's budget 
submission, our Information Technology recommendation reflects what 
information was available to us and the funding levels that Congress 
deemed appropriate from last year. We certainly could not have foreseen 
the VA's plan to shift additional personnel and related operations 
expenses.
    Finally, we remain concerned that the Major and Minor Construction 
accounts continue to be underfunded. Although the Administration's 
request includes a fair increase in Major Construction from the 
expected appropriations level of $399 million to $727 million, it still 
does not go far enough to address the significant infrastructure needs 
of the VA. Furthermore, the actual portion of the Major Construction 
account that will be devoted to Veterans Health Administration 
infrastructure is only approximately $560 million. We also believe that 
the Minor Construction request of approximately $233 million does 
little to help the VA offset the rising tide of necessary 
infrastructure upgrades. Without the necessary funding to address minor 
construction needs, these projects will become major construction 
problems in short order. For FY 2008, The Independent Budget recommends 
approximately $1.6 billion for Major Construction and $541 million for 
Minor Construction.
    In closing, to address the problem of adequate resources provided 
in a timely manner, The Independent Budget has proposed that funding 
for veterans' healthcare be removed from the discretionary budget 
process and made mandatory. The budget and appropriations process over 
the last number of years demonstrates conclusively how the VA labors 
under the uncertainty of not only how much money it is going to get, 
but, equally important, when it is going to get it. No Secretary of 
Veterans Affairs, no VA hospital director, and no doctor running an 
outpatient clinic knows how to plan and even provide care on a daily 
basis without the knowledge that the dollars needed to operate those 
programs are going to be available when they need them.
    Making veterans healthcare funding mandatory would not create a new 
entitlement, rather, it would change the manner of healthcare funding, 
removing the VA from the vagaries of the appropriations process. Until 
this proposal becomes law, however, Congress and the Administration 
must ensure that VA is fully funded through the current process. We 
look forward to working with this Committee in order to begin the 
process of moving a bill through the House, and the Senate, as soon as 
possible.
    In the end, it is easy to forget, that the people who are 
ultimately affected by wrangling over the budget are the men and women 
who have served and sacrificed so much for this nation. We hope that 
you will consider these men and women when you develop your budget 
views and estimates, and we ask that you join us in adopting the 
recommendations of The Independent Budget.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

                                 
     Statement of Dennis M. Cullinan, National Legislative Director
             Veterans of Foreign Wars of the United States
    On behalf of the 2.4 million men and women of the Veterans of 
Foreign Wars of the U.S. (VFW), this nation's largest combat veterans' 
organization, I would like to thank you for the opportunity to testify 
today on the Fiscal Year 2008 budget for the Department of Veterans 
Affairs (VA).
    The VA construction budget has, for the past few years, been 
dominated by the Capital Asset Realignment for Enhanced Services 
(CARES) process.
    CARES is a system-wide, data-drive assessment of VA's capital 
infrastructure. It aimed to identify the needs of veterans to aid in 
the planning of future and realignment of current VA facilities to most 
efficiently meet those needs. It was not just a one-time evaluation but 
also the creation of a process and framework to continue to determine 
veterans' future requirements.
    Throughout the entire CARES process, The Independent Budget 
veterans' service organizations (IBVSOs) were highly supportive, as 
long as VA emphasized the ``ES''--enhanced services--portion of the 
acronym.

      2001--CARES pilot study in Network 12 (Chicago, Illinois; 
Wisconsin; and Upper Michigan) completed.
      2002--Phase II of CARES began in all other networks of VA 
individually, to be compiled in the Draft National CARES Plan.
      2003--August: Draft National CARES Plan submitted to 
CARES Commission to review and gather public input.
      2004--February: VA Secretary receives CARES Commission 
recommendations.
      2004--May: VA Secretary announces his decision on CARES, 
but calls for additional ``CARES Business Plan Studies'' at 18 sites 
throughout the country.

    These CARES Business Plan Studies are available on VA's CARES 
website, www.va.gov/cares. As of December 2006, only ten of these 
studies have been completed, despite VA's stated June 2006 deadline. 
The IBVSOs look forward to the final results so that implementation of 
these important plans can go forward.
    The IBVSOs believe that all decisions on CARES should be consistent 
with the CARES Decision document and its established priorities, or 
with the findings of the CARES review commission that largely confirmed 
those priorities. Proposed changes or deviation from the plan should 
undergo the same rigorous data validation as the original projects.
    CARES was intended to be an apolitical, data-driven process that 
looked out for the best interest of veterans throughout the entire 
system. We are certainly pleased that the Secretary and Members of 
Congress are interested in the future of VA capital facilities, but we 
urge all involved to maintain consistency with the apolitical process 
that, as agreed to by all parties--stakeholders included--would provide 
the best way to determine future VA infrastructure needs to 
sufficiently care for all veterans. This was the hallmark of the CARES 
plan.
    Throughout the CARES process, the IBVSOs were greatly concerned 
with the underfunding of the construction budget. Congress and the 
Administration did not devote many resources to VA's infrastructure, 
preferring to wait for the final results of CARES. In past Independent 
Budgets we warned against this, pointing out that there were a number 
of legitimate construction needs identified by the local manager of VA 
facilities. A number of facilities were authorized, including House 
passage of the ``Veterans Hospital Emergency Repair Act,'' but funding 
was never appropriated, with the ongoing CARES review being used as the 
primary excuse.
    At the time, the IBVSOs argued that a de facto moratorium on 
construction was unnecessary because of our conviction that a number of 
these projects needed to go forward and that they would be fully 
justified in any future plans produced through CARES. Despite this 
reasonable argument, funding never came, and VA lost progress on 
hundreds of millions of dollars that otherwise would have been invested 
to meet the system's critical infrastructure needs.
    The IBVSOs continue to believe that this deferral of all major VA 
construction projects was poor policy. In the five-plus years the 
process took, construction and maintenance improvements lagged far 
beyond what the system truly needed. With CARES nearly complete, 
funding has not yet been proposed by the Administration nor approved by 
Congress to address the very large project backlog that has grown.
    We note this year that both Veterans' Committees have considered 
legislation that would authorize resumption of VA major medical 
facility construction projects, but with the breakdown of the 
appropriations process, these projects died with the end of the 109th 
Congress.
    In July 2004, VA Secretary Anthony Principi testified before the 
Health Subcommittee of the House Committee on Veterans' Affairs. In his 
testimony, he noted that CARES ``reflects a need for additional 
investments of approximately $1 billion per year for the next 5 years 
to modernize VA's medical infrastructure and enhance veterans' access 
to care.'' Since that statement, however, the amount actually 
appropriated by Congress for VA major medical facility construction has 
fallen far short of that goal; in fiscal year 2007, the Administration 
recommended a paltry $399 million for major construction.
    After that 5-year de facto moratorium and without additional 
funding coming forth, VA facilities have an even greater need than they 
did at the start of the CARES process. Accordingly, we urge the 
Administration and the Congress to live up to the Secretary's words by 
making a steady investment in VA's capital infrastructure to bring the 
system up to date with the needs of 21st century veterans.
    For major construction, the IBVSOs recommend $1.602 billion in 
funding. This includes funding for the projects on VA's priority list, 
advanced planning, and for construction costs for a number of new 
national cemeteries in accordance with the NCA strategic plan.


------------------------------------------------------------------------
                                                             Funding
                                                           (Dollars in
                                                            Thousands)
------------------------------------------------------------------------
CARES                                                         1,400,000
Master Planning                                                  20,000
Advanced Planning                                                45,000
Asbestos                                                          5,000
Claims Analyses                                                   3,000
Judgment Fund                                                     2,000
Hazardous Waste                                                   2,000
National Cemetery Administration                                 95,000
Staff Offices                                                     5,000
Historic Preservation                                            25,000
                                                        ----------------
    TOTAL                                                    $1,602,000
------------------------------------------------------------------------


    For minor construction, the IBVSOs recommend a total of $541 
million, the bulk of which will go toward the more than 100 minor 
construction projects identified by VA in its 5-year capital plan in 
fiscal year 2008.


------------------------------------------------------------------------
                                                             Funding
                                                           (Dollars in
                                                            Thousands)
------------------------------------------------------------------------
CARES/Non-CARES                                                 450,000
National Cemetery Administration                                 40,000
Veterans Benefits Administration                                 35,000
Staff                                                             6,000
Advanced Planning                                                10,000
                                                        ----------------
    TOTAL                                                   $   541,000
------------------------------------------------------------------------


Department of Veterans Affairs (VA) does not have adequate provisions 
to protect against deterioration and declining capital asset value.

    The last decade of underfunded construction budgets has led to a 
reduction in the recapitalization of VA's facilities. Recapitalization 
is necessary to protect the value of VA's capital assets by renewing 
the physical infrastructure to ensure safe and fully functional 
facilities. Failure to adequately invest in the system will result in 
its deterioration, creating even greater costs down the road.
    As in past years, we continue to cite the Final Report of the 
President's Task Force to Improve Health Care Delivery for our Nation's 
veterans (PTF). The PTF noted that in the period from 1996-2001, VA's 
recapitalization rate was 0.64 percent, which corresponds to an assumed 
building life of 155 years. When maintenance and restoration are 
factored into VA's major construction budget, VA annually invests less 
than 2 percent of plant replacement value in the system. The PTF 
observed that a minimum of 5 to 8 percent per year is necessary to 
maintain a healthy infrastructure and that failure to adequately fund 
could lead to unsafe, dysfunctional settings.
    Congress and the Administration must ensure that there are adequate 
funds for major and minor construction so that VA can properly reinvest 
in its capital assets to protect their value and ensure that healthcare 
can be provided in safe and functional facilities long into the future.

The deterioration of many Department of Veterans Affairs (VA) 
properties requires increased spending on nonrecurring maintenance.

    A Price Waterhouse study looked at VA facilities management and 
recommended that VA spend at least 2 to 4 percent of its plant 
replacement value on upkeep. Nonrecurring maintenance (NRM) consists of 
small projects that are essential to the proper maintenance and to the 
preservation of the lifespan of VA's facilities. Examples of these 
projects include maintenance to roofs, replacement of windows, and 
upgrades to the mechanical or electrical systems.
    Each year, VA grades each medical center, creating a facility 
condition assessment (FCA). These FCAs give a letter grade to various 
systems at each facility and assign a cost estimate associated with 
repairs or replacement. The latest FCAs have identified $4.9 billion 
worth of necessary repairs in projects with a letter grade of ``D'' or 
``F.'' F's must be taken care of immediately, and D's are in need of 
serious repairs or represent pieces of equipment reaching the end of 
their usable life. Most of these projects would be reparable using NRM 
funds.
    Another concern with NRM is with how it is allocated. NRM is under 
the Medical Care account and is distributed to various VISNs through 
the Veterans Equitable Resource Allocation (VERA) process. While this 
does move the money toward the areas with the highest demand for 
healthcare, it tends to move money away from facilities with the oldest 
capital structures, which generally need the most maintenance. It also 
could increase the tendency of some facilities to use maintenance money 
to address shortfalls in medical care funding.
    VA should spend $1.6 billion on NRM to make up for the lack of 
proper funding in previous years and to keep VA on the right track with 
maintenance for the future.
    VA must also resist the temptation to dip into NRM funding for 
health-care needs, as this could lead to far greater expenses down the 
road.

Veterans and staff continue to occupy buildings known to be at 
extremely high risk because of seismic deficiencies.

    The Independent Budget veteran's service organizations (IBVSOs) 
continue to be concerned with the seismic safety of the Department of 
Veterans Affairs (VA) facilities. The July 2006 Seismic Design 
Requirements report noted the existence of 73 critical VA facilities 
that, based on FEMA definitions, are at a ``moderately high'' or 
greater risk of seismic incident. Twenty-four of these have been deemed 
``very high'' risk, the highest standard.
    To address the safety of veterans and employees, VA includes 
seismic corrections in its annual list of projects to Congress. In 
conjunction with the Capital Asset Realignment for Enhanced Services 
process, progress is being made on eight of these facilities. More is 
needed, and, accordingly, funding will need to increase.
    For efficiency, most seismic correction projects should also 
include patient care enhancements as part of their total scope. Seismic 
correction typically includes lengthy and widespread disruption to 
hospital operations; it would be prudent to make medical care 
improvements at the same time to minimize disruptions in the future. 
While this approach is the most practical for the delivery of 
healthcare and services as well as for cost-effectiveness, it also 
results in higher up front project costs, which would require an 
increase in the construction budget.
    Congress must appropriate adequate construction funding to correct 
these critical seismic deficiencies.
    VA should schedule facility improvement projects concurrently with 
seismic corrections.

Each Department of Veterans Affairs (VA) medical center needs to 
develop a detailed master plan.

    This year's construction budget should include at least $20 million 
to fund architectural master plans. Without these plans, the Capital 
Asset Realignment for Enhanced Services (CARES) medical benefits will 
be jeopardized by hasty and short-sighted construction planning.
    The Independent Budget veteran's service organizations believe that 
each VA medical center should develop a facility master plan to serve 
as a clear roadmap to where the facility is going in the future. It 
should be an inclusive document that includes multiple projects for the 
future in a cohesive strategy.
    In many cases, VA plans construction in a reactive manner. Projects 
are funded first and then fitted onto the site. Each project is planned 
individually and not necessarily with respect to other ongoing projects 
or ones planned for the future. It is essential that each medical 
center has a plan that looks at the big picture to efficiently utilize 
space and funding. If all projects are not simultaneously planned, for 
example, the first project may be built in the best site for the second 
project. Master plans would prevent short-sighted construction that 
restricts, rather than expands, future options.
    Every new project in the master plan is a step in achieving the 
long-range CARES objectives. These plans must be developed so that all 
future projects can be prioritized, coordinated and phased. They are 
essential to efficiently use resources, but also to minimize disruption 
to VA patients and employees. Medical priorities, for example, must be 
adjusted for construction sequencing. If infrastructure changes must 
precede new construction, master plans will identify this so that 
schedules and budgets can be adjusted. Careful phasing is essential to 
avoid disrupting the delivery of medical care, and the correct planning 
of such will ensure that cost estimates of this phased-construction 
approach will be more accurate.
    There may be cases, too, where master planning will challenge the 
original CARES decisions, whether due to changing demand, unidentified 
need, or other cause. If CARES, for example, calls for the use of 
renovated space for a relocated program and a more comprehensive 
examination as part of a master plan later indicates that the site is 
impractical, different options should be considered. Master plans will 
help to correct and update invalid planning assumptions.
    VA must be mindful that some CARES plans involve projects 
constructed at more than one medical center. Master plans, as a result, 
most coordinate the priorities of both medical centers. Construction of 
a new SCI facility, for example, might be a high priority for the 
``gaining'' facility, but a lower priority for the ``donor'' facility. 
It may be best to fund and plan the two actions together, even though 
they are split between two different facilities.
    Another essential role of master planning is its use to account for 
three critical programs that VA left out of the initial CARES process: 
long-term care, severe mental illness, and domiciliary care. Because 
these were omitted, there is a strong need for a comprehensive plan, 
and a full facility master plan will help serve as a blueprint for each 
facility's needs in these essential areas.
    VA must ensure that each medical center develops and continues to 
work on long-range master plans to validate strategic planning 
decisions, prepare accurate budgets, and implement efficient 
construction that minimizes wasted expenses and disruptions to patient 
care.
    Congress must appropriate $20 million to allow each VA medical 
facility to develop architectural master plans to serve as roadmaps for 
the future.
    Each facility master plan should address long-term care, including 
plans for those with severe mental illness, and domiciliary care 
programs, which were omitted from the CARES process.
    VA must develop a format for these master plans so that there is 
standardization throughout the system, even though planning work will 
be performed by local contractors in each Veterans Integrated Service 
Network.

The Department of Veterans Affairs (VA) must develop a strategic plan 
for the infrastructure needs of these important programs.

    The initial Capital Asset Realignment for Enhanced Services (CARES) 
plan did not take long-term care or the mental health considerations of 
veterans into account when making recommendations. We were pleased that 
the CARES Review Commission recognized the need for proper accounting 
of these critical components of care in VA's future infrastructure 
planning. However, we continue to await VA's development of a long-term 
care strategic plan to meet the needs of aging veterans. The Commission 
recommended that VA ``develop a strategic plan for long-term care that 
includes policies and strategies for the delivery of care in 
domiciliary, residential treatment facilities and nursing homes, and 
for older seriously mentally ill veterans.''
    Moreover, the Commission recommended that the plan include 
strategies for maximizing the use of state veterans' homes, locating 
domiciliary units as close to patient populations as feasible and 
identifying freestanding nursing homes as an acceptable care model. In 
absence of that plan, VA will be unable to determine its future capital 
investment strategy for long-term care.
    VA must take a proactive approach to ensure that the infrastructure 
and support networks needed by veterans will be there for them in the 
future.
    We also concur with the CARES Commission's recommendations that VA 
take action to ensure consistent availability of mental health services 
across the system to include mental healthcare at community-based 
clinics along with the appropriate infrastructure to match demand for 
these specialized services. This is important in light of the growing 
demand for these types of services, especially among those returning 
from overseas in the wars in Iraq and Afghanistan.
    VA must develop a long-term care strategic plan to account for the 
needs of aging veterans now and into the future. This should include 
care options for older veterans with serious mental illnesses.
    VA must also develop plans to provide for the infrastructure needs 
associated with mental healthcare services, especially with the 
unprecedented current need for these services, and the likely 
tremendous long-term need of our returning service members.

The Department of Veterans Affairs (VA) must not use empty space 
inappropriately.

    Studies have suggested that the VA medical system has extensive 
amounts of empty space that can be reused for medical services. It has 
also been suggested that unused space at one medical center may help 
address a deficiency that exists at another location. Although the 
space inventories are accurate, the assumption regarding the 
feasibility of using this space is not.
    Medical facility planning is complex. It requires intricate design 
relationships for function, but also because of the demanding 
requirements of certain types of medical equipment. Because of this, 
medical facility space is rarely interchangeable, and if it is, it is 
usually at a prohibitive cost. Unoccupied rooms on the eighth floor, 
for example, cannot be used to offset a deficiency of space in the 
second floor surgery ward. Medical space has a very critical need for 
inter- and intradepartmental adjacencies that must be maintained for 
efficient and hygienic patient care.
    When a department expands or moves, these demands create a domino 
effect of everything around it, and these secondary impacts greatly 
increase construction expense and they can disrupt patient care.
    Some features of a medical facility are permanent. Floor-to-floor 
heights, column spacing, light, and structural floor loading cannot be 
altered. Different aspects of medical care have different requirements 
based upon these permanent characteristics. Laboratory or clinical 
spacing cannot be interchanged with ward space because of the needs of 
different column spacing and perimeter configuration. Patient wards 
require access to natural light and column grids that are compatible 
with room-style layouts. Labs should have long structural bays and 
function best without windows. When renovating empty space, if the area 
is not suited to its planned purpose, it will create unnecessary 
expenses and be much less efficient.
    Renovating old space rather than constructing new space creates 
only a marginal cost savings. Renovations of a specific space typically 
cost 85 percent of what a similar, new space would. When you factor in 
the aforementioned domino or secondary costs, the renovation can end up 
costing more and produce a less satisfactory result. Renovations are 
sometimes appropriate to achieve those critical functional adjacencies, 
but it is rarely economical.
    Many older VA medical centers that were rapidly built in the 1940s 
and 1950s to treat a growing veteran population are simply unable to be 
renovated for more modern needs. Most of these Bradley-style buildings 
were designed before the widespread use of air conditioning and the 
floor-to-floor heights are very low. Accordingly, it's impossible to 
retrofit them for modern mechanical systems. They also have long, 
narrow wings radiating from a small central core, which is an 
inefficient way of laying out rooms for modern use. This central core, 
too, has only a few small elevator shafts, complicating the vertical 
distribution of modern services.
    Another important problem with this unused space is its location. 
Much of it is not located in a prime location; otherwise it would have 
been previously renovated or demolished for new construction. This 
space is typically located in outlying buildings or on upper floor 
levels and is unsuitable for modern use.
    VA should develop a plan for addressing its excess space in non-
historic properties that are not suitable for medical or support 
functions due to their permanent characteristics or locations.

The Department of Veterans Affairs (VA) must continue to develop and 
revise facility design guides for spinal cord injury/spinal cord 
disorders.

    With the largest healthcare system in the U.S., VA has an advantage 
in its ability to develop, evaluate, and refine the design and 
operation of its many facilities. Every new clinic's design can benefit 
from lessons learned from the construction and operation of previous 
clinics. VA also has the unique opportunity to learn from medical 
staff, engineers, and from its users--veterans and their families--as 
to what their needs are, allowing them to generate improvements to 
future designs.
    As part of this, VA provides design guides for certain types of 
facilities that provide care to veterans. These guides are rough tools 
used by the designer, clinician, staff, and management during the 
design process. These design guides, which are viewable on the 
Facilities Management webpage, cover a variety of types of care.
    These design guides, due to modernization of equipment and lessons 
learned at other facilities, should be revised regularly. Some of the 
design guides have not been updated in over a decade, despite the 
massive transition of the VA healthcare system from an inpatient-based 
system. The Independent Budget veterans' service organizations (IBVSOs) 
understand that VA intends to regularly update these guides, and we 
would urge that increased funding be allocated to the Advanced Planning 
Fund to revise and update these essential guides.
    As in past years, the IBVSOs would note the need for guides for 
long-term care at spinal cord injury/dysfunction (SCI/D) centers. It is 
important that these guides be separate from the guides that call for 
acute care as the needs of the two are dramatically different.
    These facilities must be less institutional in their character with 
a more homelike environment. Rooms and communal space should be 
designed to accommodate patients who will be living at these facilities 
for a long time. They must include simple ideas that would improve the 
daily life of these patients. Corridor length should be limited. They 
should include wide areas with windows to create tranquil places or 
areas to gather. Centers should have courtyard areas where the climate 
is temperate and indoor solariums where it is not. We believe that a 
complete guideline for these facilities would also include a discussion 
of design philosophies that emphasize the quality of life of these 
patients, and not just the specific criteria for each space. Because 
the type of care these patients need is unique, it is essential that 
this type of design guidance is available to contracted architects.
    VA must revise and update their design guides on a regular basis.
    VA should develop a long-term care design guide for SCI/D centers 
to accommodate the special needs of these unique patients.

The Department of Veterans Affairs' extensive inventory of historic 
structures must be protected and preserved.

    VA has an extensive inventory of historic structures, which 
highlight America's long tradition of providing care to veterans. These 
buildings and facilities enhance our understanding of the lives of 
those who have worn the uniform, and who helped to develop this great 
nation. Of the approximately 2,000 historic structures, many are 
neglected and deteriorate year after year because of a lack of funding. 
These structures should be stabilized, protected, and preserved because 
of their importance.
    Most of these facilities are not suitable for modern patient care, 
and, as a result, a preservation strategy was not included in the 
Capital Asset Realignment for Enhanced Services process. As a first 
step in addressing its responsibility to preserve and protect these 
buildings, VA must develop a comprehensive program for these historic 
properties.
    VA must make an inventory of these properties, classifying their 
physical condition and their potential for adaptive reuse. Medical 
centers, local governments, nonprofit organizations or private sector 
businesses could potentially find a use for these important structures 
that would preserve them into the future.
    The Independent Budget veterans' service organizations recommend 
that VA establish partnerships with other Federal departments, such as 
the Department of the Interior, and with private organizations, such as 
the National Trust for Historic Preservation. Their expertise would be 
helpful in creating this new program.
    As part of its adaptive reuse program, VA must ensure that 
facilities that are leased or sold are maintained properly for 
preservation's sake. VA's legal responsibilities could, for example, be 
addressed through easements on property elements, such as building 
exteriors or grounds. We would point to the partnership between the 
Department of the Army and the National Trust for Historic Preservation 
as an example of how VA could successfully manage its historic 
properties.
    P.L. 108-422, the Veterans Health Programs Improvement Act, 
authorized historic preservation as one of the uses of a new capital 
assets fund that receives funding from the sale or lease of VA 
property. We applaud its passage, and encourage its use.
    VA must begin a comprehensive program to preserve and protect its 
inventory of historic properties.
    We thank you for allowing us to testify today, and we would be 
happy to answer any questions that you or the Committee may have.

                                 
                        Statement of John Rowan
            National President, Vietnam Veterans of America
    Chairman Filner, Ranking Member Buyer and distinguished Members of 
the Committee, on behalf of all of our officers, Board of Directors, 
and members, I thank you for giving Vietnam Veterans of America (VVA) 
the opportunity to testify regarding the President's fiscal year 2008 
budget request for the Department of Veterans Affairs today. I am 
pleased to welcome so many new and returning Members onto the Committee 
this year. VVA looks forward to working with all of you to address the 
needs of the unique system created to serve our nation's veterans.
    I particularly wish to thank you, Mr. Chairman, for your 
impassioned and erudite speech to the Majority caucus that resulted in 
$3.6 billion being added to the continuing resolution for healthcare at 
the Veterans Health Administration. Your willingness to take a strong 
stand when it was not yet the conventional wisdom once again helped 
America, particularly America's veterans and our families. VVA thanks 
you for your strong leadership, and salutes your lifelong willingness 
to ``speak truth to power.''
    Mr. Chairman, several years ago, Vietnam Veterans of America 
developed a White Paper in support of the need for assured funding for 
the veterans healthcare system, which I know you have read and shared 
with others. I also know you have been a long-time supporter of 
legislation to achieve assured funding. You have always understood the 
need for such a mechanism to correct the problems in the current system 
of funding. As we have this discussion in regard to the FY '08 budget 
for VA, the readily apparent need for this legislation has never been 
more pressing. We look forward to working with you to ensure its 
enactment.
    VVA does wish to recognize that this year's request from the 
President for the VA Budget, while lacking in many other respects, is 
relatively free of budget gimmicks that have so plagued discussions in 
the past. VVA believes that this is due to the strong efforts of 
Secretary Nicholson in doing battle to strip out the favorite 
gimcrackery of that permanent staff over at the Office of Management 
and Budget (OMB). VVA commends the Secretary of Veterans' Affairs in 
this regard for seeking to have an honestly presented budget proposal.
Veterans Health Administration
    VVA is recommending an increase of $6.9 billion to the expected 
fiscal year 2007 appropriation for the medical care business line. We 
recognize that the budget recommendation VVA is making this year is 
extraordinary, but with troops in the field, years of underfunding of 
healthcare organizational capacity, renovation of an archaic and 
dilapidated infrastructure, and updating capital equipment and several 
cohorts of war veterans reaching ages of peak healthcare utilization, 
these are extraordinary times. It's past time to meet these needs.
    In contrast to what is clearly needed, we believe the 
Administration's fiscal year 2008 request for $2 billion more than the 
expected 2007 appropriation in the continuing resolution is inadequate. 
Unfortunately, we still are unsure of the bottom line for fiscal year 
2007. While we certainly appreciate that the Congress is planning to 
restore funding for veterans healthcare in the continuing resolution 
(and it is essential that it does so to ensure the Department's ability 
to meet ongoing obligations), the fact that VA is still uncertain about 
the amount of funding it will receive a third of the way through the 
fiscal year does, in and of itself, make the case for assured funding.
    The $2 billion increase the Administration has requested for 
medical care may almost keep pace with inflation, but it will not allow 
VA to enhance its healthcare or mental healthcare services for 
returning veterans, restore diminished staff in key disciplines like 
clinicians needed to care for hepatitis C, restore needed long-term 
care programs for aging veterans, or allow working-class veterans to 
return to their healthcare system. VVA's recommendation does 
accommodate these goals, in addition to restoring eligibility to 
veterans exposed to Agent Orange for the care of their related 
conditions.
    I need not tell you about the many successes of the Department of 
Veterans Affairs in recent years. The veterans' service organizations 
are often seen as critics of the Department. While we sometimes take 
exception to its policy decisions, we are also its most stalwart 
champions. Over the last decade the Veterans Health Administration 
(VHA) at VA has taken steps to become a higher quality, more accessible 
healthcare system. It has demonstrated great efficiency by almost 
doubling the number of veterans it treats while holding per capita 
costs relatively constant. It has developed hundreds of Community Based 
Outreach Clinics (CBOC). VHA has received many prestigious awards for 
excellence and innovation. While VVA remains extremely concerned about 
recent breaches that compromised veterans' personal data, VVA 
appreciates the fact that VA has put together a computerized system of 
medical records that sets the standard for modern healthcare delivery. 
These achievements are to be celebrated.
    Yet these advances have not come without cost. For years, the 
veterans' healthcare system has been falling behind in meeting the 
healthcare needs of some veterans. At the beginning of 2003, the former 
Secretary of Veterans Affairs made the decision to bar so-called 
priority 8 veterans from enrolling. In most cases, these veterans are 
not the well-to-do--they are working class veterans or veterans living 
on fixed incomes whose incomes are as little as $28,000 a year. It's 
not uncommon to hear about such veterans choosing between getting their 
prescription drug orders filled and paying their utility bills. The 
decision to bar these veterans is still standing, and it is still 
troubling to thoughtful Americans.
    In addition to the current bar on healthcare enrollment, in recent 
years VA has sent Congress a budget that requires more cost sharing 
from veterans, and eliminates options for their care--particularly long 
term care. We appreciate that VA's proposal this year has not presumed 
enactment of some of the cost-sharing legislative proposals Congress 
has opposed in the past. This may allow Congress more leeway to augment 
its request in concrete ways rather than merely filling deficits left 
by the Administration presuming that revenues and savings from these 
unpopular initiatives will be realized.
    Congress is to be commended for turning back many legislative 
requests for enrollment fees and outpatient cost increases, which would 
have jeopardized hundreds of thousands of veterans' access to 
healthcare. Hard-fought Congressional add-ons, such as the $3.6 billion 
for fiscal year 2007 currently being debated as part of the continuing 
resolution, have kept the system afloat. The budget recommended by VVA 
in addition to the enactment of some assured funding mechanism will 
enable a robust healthcare system to meet the needs of all eligible 
veterans--now and in the future.
Medical Services
    For medical services for fiscal year 2008, VVA recommends $34.5 
billion including collections. This is approximately $5 billion more 
than the Administration's request for fiscal year 2008. VVA is making 
its budget recommendations based on re-opening access to the millions 
of veterans disenfranchised by the Department's policy decision of 
early 2003, that was supposed to be ``temporary.'' The former Ranking 
Member of this Committee, Lane Evans, discovered that a quarter million 
priority 8 veterans had applied for care in fiscal year 2005. Similar 
numbers of veterans have likely applied in each of the years since 
their enrollment was barred. Our budget allows 1.5 million new priority 
7 and 8 veterans to enroll for care in their healthcare system. While 
this may sound like too great a lift for the system, use rates for 
priority 7 and 8 veterans are much lower than for other priority 
groups. Based on our estimates, it may yield only an 8% increase in 
demand at a cost of about $1.5 billion to the system for additional 
personnel, supplies and facilities.
    The budget ax has fallen hard on long-term care programs in the VA. 
About a decade ago, there was a major policy shift throughout the 
healthcare industry including with VA, which encouraged programs to 
deliver as much care as possible outside of beds. In many cases this 
has been a productive policy. Veterans value the convenience of using 
nearby community clinics for primary care needs, for example.
    However, the change took a great toll on the neuro-psychiatric and 
long-term care programs that housed and cared for thousands of 
veterans, often keeping them institutionalized for years. Instead of 
developing the significant community and outpatient infrastructures 
that would have been necessary to adequately replace the care for these 
most vulnerable veterans, the resources were largely diverted to other 
purposes.
    Where have these vets gone? The fiscally challenged Medicaid 
program supports many of those who need long-term care, adding an 
additional burden to the states. State homes play an important role in 
remaining the only VA-sponsored setting that provides ongoing, rather 
than rehabilitative or restorative, long-term care. VA's mental health 
programs--some of the finest in the nation--as well as significant 
advances in pharmaceuticals continue to serve and allow many veterans 
to recover. However, what are in fact increasing waiting times for 
mental health programs and the lack of treatment options often 
contribute to incarceration and homelessness for the most vulnerable of 
these veterans. Sadly, we hear increasing numbers of stories of 
veterans of Iraq and Afghanistan whose inability to deal with 
readjustment post-deployment have lead them to the streets or even 
suicide.
    Mr. Chairman, Vietnam Veterans of America's founding principle is: 
Never again will one generation of veterans abandon another. This is 
why we are imploring this Committee to ensure that VA has the 
imperative and the resources to bolster the mental health programs that 
should be readily available to serve our young veterans from Iraq and 
Afghanistan. Experts from within the Department of Defense estimate 
that as many as 17% of those who serve in Iraq will have issues 
requiring them to seek post-deployment mental health services and 
recent studies have shown that four out of five of the veterans who may 
need post-deployment care are not properly referred to such care. There 
is good reason to believe that even the rates forecast by DoD may be 
too low.
    VA has not made enough progress in preparing for the needs of 
troops returning from Iraq and Afghanistan--particularly in the area of 
mental healthcare. Its own internal champions--the Committee on Care of 
the Seriously Mentally Ill and the Advisory Committee on Post Traumatic 
Stress Disorder, for example, have expressed doubts about VA's mental 
healthcare capacity to serve these newest vets. As recently as last 
March, VHA's Undersecretary for Health Policy Coordination told one 
Commission that mental health services were not available everywhere, 
and that waiting times often rendered some services ``virtually 
inaccessible.'' The doubts about capacity to serve new veterans have 
reverberated in reports done by the Government Accountability Office 
(GAO). In addition, one recent working paper by Linda Bilmes of the 
John F. Kennedy School of Government at Harvard University estimates 
that in a ``moderate'' scenario in 2008 VA will require $1.8 billion to 
treat the veterans returning from Iraq and Afghanistan--much of this 
funding would be used to augment mental healthcare to properly serve 
these veterans. VA has projected that approximately 260,000 Global War 
on Terrorism (GWOT) veterans will use the VA healthcare system in FY 
2008. VVA and others believe that more than 300,000 ``new'' veterans 
will use the VHA system in FY 2008.
    A further reason that VA has underestimated the need for medical 
services is that they continue to use the same formula that they use 
for CARES, which is a civilian-based model. Mr. Chairman, VVA has 
testified many times that the VHA must be a veterans' healthcare system 
and not a general healthcare system that happens to see veterans. The 
model VA uses was designed for middle-class people who can afford HMOs 
or other such programs. It projects only one to three ``presentations'' 
(things wrong with) patients as opposed to the five to seven that is 
the average at VHA for veterans. Obviously one using the VA model will 
continually underestimate overall resources needed to care for the 
veterans who come to the system by using this civilian formula. 
Further, VHA has been consistent in underestimating the number of GWOT 
returnees who will seek services from the system in each of the last 4 
years. VVA has corrected these errors in our projections.
    In addition to the funds VVA is recommending elsewhere, we 
specifically recommend an increase of an additional billion dollars to 
assist VA in meeting the long term care and mental healthcare needs of 
all veterans. These funds should be used to develop or augment with 
permanent staff at VA Vet Centers (Readjustment Counseling Service or 
RCS), as well as PTSD teams and substance use disorder programs at VA 
Medical Centers and CBOC, which will be sought after as more troops 
(including demobilized National Guard and Reserve members) return from 
ongoing deployments. In addition, VA should be augmenting its nursing 
home beds and community resources for long term care, particularly at 
the State veterans' homes.
    To assist in developing these programs and augmenting all areas of 
veterans' care, VVA recommends funding to approximate the staff-to-
patient ratio VA had in place before so much of its neuro-psychiatric 
and long-term care infrastructure was dismantled. This would allow VA 
to better ensure timely access to care and services. Studies have shown 
that inadequate staffing--particularly of nurses involved in direct 
care--is correlated with poorer healthcare outcomes in all medical 
disciplines. To allow the staffing ratios that prevailed in 1998 for 
its current user population, VA would have to add more than 20,000 
direct care employees--MDs and nurses--at a cost of about $2.2 billion.
    The $2.2 billion funding for the staff shortfalls identified by VVA 
closely corresponds to the funding from unspecified so-called 
``management efficiencies'' VA has had to shoulder throughout this 
Administration. It is important to realize that the effect of leaving 
these funding deficiencies unfulfilled is cumulative. That is, each 
year VA is forced to live with a greater hole in its budget. GAO has 
joined VSOs and Congress in questioning the extent to which VA has been 
able to identify and realize the so-called ``savings'' created by such 
proposed efficiencies. VA officials have advised GAO that the 
efficiencies identified in at least two recent budget proposals--FY 
2003 and 2004--were developed to allow VA to meet its budget guidance 
rather than by detailed plans for achieving such savings (GAO-06-359R). 
In other words, the savings were justified only by the need to meet the 
Administration's ``bottom line.'' I hope Congress agrees that this is 
no way to fund our veterans' healthcare system.
    Finally, VVA believes Congress did a grave injustice to Vietnam-era 
veterans. For decades, veterans exposed to Agent Orange and other 
herbicides containing dioxin had been granted healthcare for conditions 
that were presumed to be due to this exposure. This special eligibility 
expired at the end of 2005 and, despite our request, Congress did not 
reauthorize it. Had Congress simply reauthorized existing authority, VA 
would have realized no new costs. Now we have heard that the 
Congressional Budget Office estimates that it will cost more than $300 
million to restore this eligibility. Why this eligibility was allowed 
to expire seems more a matter of dollars than sense to VVA, given the 
ever mounting body of research that clearly points to conditions such 
as diabetes being linked to dioxin exposure. However, the pressing need 
now is to reinstate veterans with these conditions for the higher 
priority access to services that they deserve.
Medical Facilities
    For medical facilities for fiscal year 2008, VVA recommends $5.1 
billion. This is approximately $1.5 billion more than the 
Administration's request for fiscal year 2008. Maintenance of the 
healthcare system's infrastructure and equipment purchases are often 
overlooked as Congress and the Administration attempt to correct more 
glaring problems with patient care. In FY 2006, in just one example, 
within its medical facilities account VA anticipated spending $145 
million on equipment, yet only spent about $81 million. (The rest of 
the funds went just to meet operating costs to keep the facilities open 
and operating.) However, these projects can only be neglected for so 
long before they compromise patient care, and employee safety in 
addition to risking the loss of outside accreditation. The remainder of 
the funding was apparently shifted to other more immediate priority 
areas (i.e., keeping facilities operating in the short run).
    VA undertook an intensive process known as CARES (Capital Asset 
Realignment to Enhance Services) to ``right size'' its infrastructure, 
culminating in a May 2004 policy decision that identified approximately 
$6 billion in construction projects. While for the reasons noted above 
the VA has consistently underestimated future needs by using a fatally 
flawed formula, thus far Congress and the Administration have only 
committed $3.7 billion of this all-too-conservative needed funding.
    We believe the CARES estimate to be extremely conservative given 
that the models projecting healthcare utilization for most services 
were based on use patterns in generally healthy managed care 
populations rather than veterans and that the patient population base 
did not include readmitting Priority 8 veterans, or significant 
casualties from the current deployments. Notwithstanding our concerns 
about the methods used in CARES, very few of the projects VA agrees are 
needed have been funded since this time. Non-recurring maintenance and 
capital equipment budgets have also been grievously neglected as 
administrators have sought to shore up their operating funds.
    In a system in which so much of the infrastructure would be deemed 
obsolete by the private sector (in a 1999 report GAO found that more 
than 60% of its buildings were more than 25 years old), this has and 
may again lead to serious trouble. We are recommending that Congress 
provide an additional $1.5 billion to the medical facilities account to 
allow them to begin to address the system's current needs. We also 
believe that Congress should fully fund the major and minor 
construction accounts to allow for the remaining CARES proposals to be 
properly addressed by funding these accounts with a minimum of 
remaining $2.3 billion.
Medical and Prosthetic Research
    For medical and prosthetic research for fiscal year 2008, VVA 
recommends $460 million. This is approximately $50 million more than 
the Administration's request for fiscal year 2008. VA research has a 
long and distinguished portfolio as an integral part of the veterans' 
healthcare system. Its funding serves as a means to attract top medical 
schools into valued affiliations and allows VA to attract distinguished 
academics to its direct care and teaching missions.
    VA's research program is distinct from that of the National 
Institutes of Health because it was created to respond to the unique 
medical needs of veterans. In this regard, it should seek to fund 
veterans' pressing needs for breakthroughs in addressing environmental 
hazard exposures, post-deployment mental health, traumatic brain 
injury, long-term care service delivery, and prosthetics to meet the 
multiple needs of the latest generation of combat-wounded veterans.
    Further, VVA brings to your attention that VA Medical and 
Prosthetic Research is not currently funding a single study on Agent 
Orange or other herbicides used in Vietnam, despite the fact that more 
than 300,000 veterans are now service-connected disabled as a direct 
result of such exposure in that war. This is unacceptable.
    Mr. Chairman, finally I urge this Committee to at long last urge 
your colleagues on the Appropriations Committee to use the power of the 
purse to compel VA to obey the law (Public Law 106-419) and conduct the 
long-delayed National Vietnam Veterans Longitudinal Study. VVA asks 
that you specifically request report language in the Appropriations 
bill for Military Construction, Veterans Affairs, and Related Areas 
that compels VA to advise the Appropriators and the Authorizers as to 
how VA plans to complete this study properly within 2 years, as a 
comprehensive mortality and morbidity study.
Assured Funding for Veterans Health Care
    Once this Congress provides a budget that shores up VA medical 
services and facilities, it will need to ensure that VA continues to be 
funded at a level that allows it to provide high-quality healthcare 
services to the veterans that need them. That is where enactment of 
assured funding will come in. Once enacted, an assured funding 
mechanism will ensure that, at a minimum, annual appropriations cover 
the cost of inflation and growth in the number of veterans using VA 
healthcare. It will allow VA administrators some predictability in both 
how much funding it will receive and when it will be received resulting 
in higher quality and ultimately more cost-effective care for our 
veterans.
Veterans Benefits Administration
    The Veterans Benefits Administration (VBA) is in even more acute 
need of additional resources and enhanced accountability measures now 
than they were a year ago. VVA recommends an additional 400 over and 
above the roughly 470 new staff members that are requested in the 
President's proposed budget for all of VBA.
Compensation & Pension
    VVA recommends adding one hundred staff members above the level 
requested by the President for the Compensation & Pension Service (C&P) 
specifically to be trained as adjudicators. Further, VVA strongly 
recommends adding an additional $60 million dollars specifically 
earmarked for additional training for all of those who touch a 
veterans' claim, institution of a competency based examination that is 
reviewed by an outside body that shall be used in a verification 
process for all of the VA personnel, veteran service organization 
personnel, attorneys, county and state employees, and any others who 
might presume to at any point touch a veterans' claim.
Vocational Rehabilitation
    VVA recommends that you seek to add an additional three hundred 
specially trained vocational rehabilitation specialists to work with 
returning servicemembers who are disabled to ensure their placement 
into jobs or training that will directly lead to meaningful employment 
at a living wage. It is clear that the system funded through the 
Department of Labor simply is failing these fine young men and women 
when they need assistance most in rebuilding their lives.
    VVA has always held that the ability to obtain and sustain 
meaningful employment at a living wage is the absolute central event of 
the readjustment process. Adding additional resources and much, much 
greater accountability to the VA Vocational Rehabilitation process is 
absolutely essential if we as a nation are to meet our obligation to 
these Americans who have served their country so well, and have already 
sacrificed so much.
Accountability at VA
    So much of what VVA and the Congress find wrong or disturbing at 
the VA revolves around the pervasive issue of little or no 
accountability, or imprecise fixing of authority commensurate with 
accountability mechanisms that are meaningful (and vice versa) in all 
parts of the VA.
    Within the past year VA has finally made significant progress in 
meeting the minimum goal of at least 3% of all contracts and 3% of all 
subcontracts being let to service disabled veteran businessowners. 
Secretary Nicholson, and Deputy Secretary Mansfield, is to be commended 
on setting the pace for the Federal Government. It is instructive in 
this discussion, however, that the action directed by the Secretary to 
put achievement or substantial real progress toward meeting or 
exceeding the 3% minimum into the performance evaluation of each 
Director of the twenty-one Veterans Integrated Service Networks (VISNs) 
was a key element in VA to be the first large agency to reach the goal 
mandated by law. (Eighty-five percent of all VA procurement is through 
VHA, primarily through the VISNs) was the key element in this 
achievement.
    All people (particularly people with a great deal of responsibility 
who work long hours) care about what they feel they have to care about. 
Putting it in the performance evaluations means that those managers who 
ignore a requirement do not get an outstanding or superior rating, and 
hence no bonus. VVA, and now the VA in at least this one instance, has 
always found that it is amazing how reasonable almost all people can be 
when you have their full attention.
    There is no excuse for the dissembling and lack of accountability 
in so much of what happens at the VA. It can be cleaned up and done 
right the first time, if there is the political will to hold people 
accountable for doing their job properly.
    Lastly, there is no excuse for the continuation of the practice of 
VHA to ``lose'' tens of millions (sometimes hundreds of millions) of 
taxpayer dollars that are appropriated to VHA for specific purposes, 
whether that purpose be to restore organizational capacity to deliver 
mental health services, particularly for PTSD and other combat trauma 
wounds, or to conduct outreach to GWOT veterans as well as de-mobilized 
National Guard and Reserves returnees from war zone deployments. There 
is a consistent pattern of VA, particularly VHA, to either really not 
know what happened to large sums of money given to them for specific 
reasons, or they are not telling the truth to the Congress and the 
public. In either case, it is unacceptable, and cannot be tolerated any 
longer.
    In the proposed budget submittal, VVA struggled with accounting for 
the dollars footnoted in the President's submittal as ``Adjusted for 
IT.'' We could not find an accurate accounting. When we asked in the 27 
hours we had to prepare this submittal, it turns out that no one else 
that we have spoken to, including the VA officials, can fully explain 
at least $200(+) million of this ``adjustment'' either. And this is 
before they get their hands on the dollars. VVA urges this Committee 
and your colleagues on Appropriations to make this the year that this 
sloppy nonsense and dissembling is stopped once and for all. 
Accountability will only come about when the Congress absolutely 
demands that these folks be fully accountable for performance, and for 
accounting for each and every taxpayer dollar.
    Thank you again, Mr. Chairman. We look forward to working with you 
and this distinguished Committee to obtain an excellent budget for VA 
in this fiscal year, and to ensure the next generation of veterans' 
wellbeing by enacting assured funding. I will be happy to answer any 
questions you and your colleagues may have.
                  PRE-HEARING QUESTIONS FOR THE RECORD
Questions from Hon. Bob Filner, Chairman, Committee on Veterans' Affairs
 , to Hon. R. James Nicholson, Secretary, U.S. Department of Veterans 
                                Affairs

                                     Committee on Veterans' Affairs
                                                     Washington, DC
                                                   January 25, 2007

Honorable R. James Nicholson
Secretary
Department of Veterans Affairs
Washington, DC 20420

Dear Mr. Secretary:

    In preparation for the Committee's consideration of the President's 
Budget for Fiscal Year 2008, we have developed the attached questions. 
If we do not get to all of them in the hearing, please respond in 
writing by February 16, 2007.

            Sincerely,
                                                         BOB FILNER
                                                           Chairman
Enclosures

Benefits:

    Question 1: The President has called for an increase in troops to 
Iraq. In light of the fact that the VA already has a 600,000 claims 
backlog, please describe in detail how the escalation of the war in 
Iraq will impair the VA's ability to provide benefits. Also, does the 
Administration's budget request for FY 2008 reflect this increased 
demand of VA services that will result from the additional troops 
serving in Operation Iraqi Freedom (OIF)? If yes, in what areas and in 
what amounts has the budget been altered to reflect the so-called 
``surge''?

    Response: The 600,000 number referenced in your question represents 
total pending claims whether or not they require a disability rating 
decision. As of December 2006, there were 395,539 claims pending that 
required a rating decision.
    The vast majority of the non-rating issues pending are not likely 
to be affected by the current escalation in the war since they 
primarily deal with maintenance of veterans' accounts that are already 
in receipt of benefits. Additionally many of these issues involve non-
service connected disability and death pension. While we receive a high 
volume of non-rating issues, generally, they require minimal external 
development and are resolved quickly.
    There are several factors relating to increasing the size of 
Operation Iraqi Freedom (OIF) forces that may affect our ability to 
handle claims volume resulting from any increase in the number of 
troops deployed as part of OIF. Included in these are the following:

    1.  The single strongest predictor of claim activity is the size of 
the active force. If the forces used for the ``surge'' are drawn from 
existing personnel serving on active duty, we believe that the 
downstream impact on claims will be less than if they are drawn from 
reserve component forces which would increase the size of the active 
force.
    2.  The number of deployments impact claims activity. Multiple 
deployments increase the likelihood a service member will suffer from 
combat related disabilities such as post traumatic stress disorder. 
Additionally, there is an increased incidence of non-combat related 
disabilities based on the mere fact that the service member is on 
active duty for a longer duration.
    3.  The duration of the deployment will also affect claim activity 
in the future. Lengthened tours expose soldiers to increased potential 
for injury.

    The Department of Veterans Affairs' (VA) fiscal year (FY) 2008 
budget submission does not reflect increased demand for benefits due to 
the surge since this strategy had not been decided when the budget was 
prepared. If the surge in forces in the combat theaters is drawing from 
existing active duty and already planned activation of Guard and 
reserve forces, we believe that we have already accounted for the surge 
in our 2008 projections. If not, we would anticipate some increase in 
claims receipts in FY 2008.

    Question 2: Since the VA has previously failed to adequately 
predict the demand of services from returning veterans from OIF/
Operation Enduring Freedom (OEF) what new methodology is the VA using 
to properly estimate need and services for these returning veterans? 
How does the FY 2008 budget reflect this new methodology?

    Response: We believe that we have accurately projected disability 
claims receipts since the beginning of combat operations in Afghanistan 
and Iraq. The table below shows our projections and actual receipts.


------------------------------------------------------------------------
                                                   Receipts
             Fiscal Year             -----------------------------------
                                          Projected          Actual
------------------------------------------------------------------------
      2004                                 767,051           771,115
------------------------------------------------------------------------
      2005                                 794,248           788,298
------------------------------------------------------------------------
      2006                                   811,947*          798,382*
------------------------------------------------------------------------
* These figures reflect the core rating receipts and do not include
  estimated/actual receipts due to the six state outreach effort.


    We believe that our current methodology is accurate. VA will be 
able to adjust its projections once the nature of the surge effort is 
known.

    Question 3: Please provide data concerning the number of claims 
received from veterans who served in the theater of operations for OIF/
OEF and their survivors and the disposition (grant, denial) of such 
claims for compensation, pension, DIC and death pension.

    Response: Available data is based on a match between Department of 
Defense data on service members deployed in support of the Global War 
on Terrorism (GWOT) for the period September 11, 2001, through 
September 30, 2006, and VA data covering September 11, 2001, through 
August 30, 2006.
    This data reflects summary counts of compensation and pension (C&P) 
benefit activity among veterans deployed overseas in support of GWOT. 
This data match only identifies deployed GWOT veterans who have also 
filed a VA disability claim either prior to or following their GWOT 
deployment. Many GWOT veterans had earlier periods of service, and had 
filed for and received VA disability benefits before being reactivated.
    The Veterans Benefit Administration's (VBA) computer systems do not 
contain any data that would allow us to attribute veterans' 
disabilities to a specific period of service or deployment.
    For the period covered, 176,111 of nearly 634,000 GWOT veterans 
have filed a claim for disability benefits either prior to or following 
their GWOT deployment (approximately 28 percent). This includes 
survivors' claims for dependency and indemnity compensation (DIC) and 
death pension. VA has processed nearly 2,000 DIC claims for survivors 
of Operation Enduring Freedom/Operation Iraqi Freedom (OEF/OIF) service 
members who died in service.

    Question 4: With respect to question number three, what was the 
breakdown among Active Duty, Reservists and National Guard claimants? 
What percentages of claims were denied for each component? It has been 
reported that while 37% of Active Duty veterans have filed for service-
related disability claims, only 20% of those in the National Guard or 
Reserves have filed similar claims. However, 18% of the claims filed by 
National Guard members and Reservists are denied, while only 8% of 
Active Duty claims are denied.

    Response: The following chart displays the disposition of claims 
filed by all identified GWOT veterans.


----------------------------------------------------------------------------------------------------------------
                                                                Reserves         Active Duty          Total
----------------------------------------------------------------------------------------------------------------
Deployed Servicemembers                                             371,974            952,445        1,324,419
----------------------------------------------------------------------------------------------------------------
Deployed Veterans                                                   339,498            294,369          633,867
----------------------------------------------------------------------------------------------------------------
Claims Filed                                                         68,623            107,488          176,111
----------------------------------------------------------------------------------------------------------------
                                                                        20%                37%              28%
----------------------------------------------------------------------------------------------------------------
Claims Processed                                                     50,953             85,343          136,296
----------------------------------------------------------------------------------------------------------------
                                                                        74%                79%              77%
----------------------------------------------------------------------------------------------------------------
Claims Granted                                                       41,744             78,716          120,460
----------------------------------------------------------------------------------------------------------------
                                                                        82%                92%              88%
----------------------------------------------------------------------------------------------------------------
Claims Denied                                                         9,209              6,627           15,836
----------------------------------------------------------------------------------------------------------------
                                                                        18%                 8%              12%
----------------------------------------------------------------------------------------------------------------
Claims Pending                                                       17,670             22,145           39,815
----------------------------------------------------------------------------------------------------------------
                                                                        26%                21%              23%
----------------------------------------------------------------------------------------------------------------


    The following definitions are provided to assist in understanding 
this data:

      Claims Denied: None of the veterans' conditions meet 
eligibility requirements for service connection. This category includes 
a small number of veterans receiving nonservice-connected disability 
pension.
      Claims Filed: The sum of ``Claims Granted,'' ``Claims 
Denied,'' and ``Claims Pending.''
      Claims Granted: At least one claimed condition meets 
eligibility requirements for service connection. For veterans who filed 
for more than one condition, this category includes full grants of all 
conditions as well as all combinations of disabilities granted and 
denied. It includes grants of all service-connected disabilities, from 
0 to 100 percent, regardless of whether the veteran receives monetary 
compensation.
      Claims Pending: VA is reviewing these veterans' claims 
for compensation or pension benefits. This category includes appeals.
      Claims Processed: The total of ``Claims Granted'' and 
``Claims Denied.'' This does not include ``Claims Pending.''

    VA makes absolutely no distinctions in processing claims from 
active duty or reserve personnel. All claims are considered using the 
same laws and regulations to determine entitlement to benefits and 
disability evaluations, and our goal is to ensure all veterans receive 
the benefits they have earned in service to this nation. We continue to 
examine the differences in this data for active duty and reserve 
veterans. While we do not yet fully understand the differences, we 
believe a significant factor may be length of service. The majority of 
service-related disabilities are chronic diseases or disabilities that 
develop over time. Generally, reserve service is shorter than regular 
active duty service, resulting in a reduced likelihood that these 
veterans developed chronic service-related disabilities.

    Question 5: With respect to individuals residing outside of the 
United States, please provide data concerning the number of claims 
received from veterans and their survivors and the disposition (grant, 
denial) of such claims for compensation, pension, DIC and death 
pension. Also, how many individuals living in the Philippines received 
VA benefits and what was the total amount? How many of these 
individuals do you expect to file for benefits in FY 2008 and what is 
the predicted amount?

    Response: Claims for individuals residing outside the United States 
are processed based on their country of residence. The Houston Regional 
Office processes claims for those residing in Mexico, the Caribbean and 
Central and South America. Claims from residents of Canada are 
processed by the White River Junction, Vermont Regional Office. The 
Pittsburgh Regional Office processes claims from all other 
international claimants. VA does not separately maintain data on the 
number of claims received or the disposition of those claims for 
individuals residing outside the United States.
    In January 2007, VA benefits totaling $12,655,000 were paid to 
14,968 residents of the Philippines, during FY 2005, the last year for 
which data is available. VA does not project numbers of expected claims 
or benefit amounts based on place of residence. Rather, budget 
projections are based on national projections of expected workload and 
other factors.

    Question 6: Please provide the breakdown of each insurance program 
under the jurisdiction of the VA. How many of these programs are self 
funded through premiums? What insurance programs and at what percent 
and amount derive funds from the Servicemembers Group Life Insurance 
(SGLI) program?

    Response: The insurance program administers six life insurance 
programs and supervises two additional programs for the benefit of 
servicepersons, veterans, and their beneficiaries.
    Self-Supporting Insurance Programs--The United States Government 
Life Insurance (USGLI), National Service Life Insurance (NSLI), 
Veterans' Special Life Insurance (VSLI) and Veterans' Reopened 
Insurance (VRI) are fully self-supporting programs with the exception 
of a small amount of funding in the NSLI program which is paid from 
appropriated funds for the costs of claims traceable to the extra 
hazards of service in the armed forces. Appropriated funds were 
$886,000 in 2006. These programs are no longer open to new issues and 
were established to meet the insurance needs of veterans at the time of 
their service. Each of these funds is operated in basically the same 
manner. Obligations are financed from offsetting collections and 
redemption of investments in U.S. Treasury securities. Expenses 
associated with the administration of each of these programs are 
financed from excess revenues of each fund.
    Service-Disabled Insurance Programs--The Service-Disabled Veterans' 
Insurance (S-DVI) and Veterans' Mortgage Life Insurance (VMLI) require 
annual subsidies to support these programs. The S-DVI program requires 
a subsidy because it provides life insurance protection to veterans 
with service-connected disabilities at standard premium rates and is, 
therefore, not self-supporting. Similarly, the VMLI program requires a 
subsidy because it provides mortgage protection life insurance at 
standard premium rates to disabled veterans who have received a grant 
for specially adapted housing. The subsidy required from appropriated 
funds for the S-DVI program in 2006 was $37.2 million. The VMLI program 
required $7.8 million of appropriated funds in 2006.
    Service Members' Group Life Insurance (SGLI)--The SGLI program 
provides low cost group life insurance protection to persons on active 
duty and reservists in the military service. Service personnel 
separated from active duty and the reserves have the right to convert 
their SGLI coverage to renewable term insurance coverage offered by the 
VGLI program. SGLI also offers Family Service Members' Group Life 
Insurance coverage for a service member's spouse and children if the 
service member is on active duty or in the reserves. Maximum coverage 
for spouses is $100,000, or the amount of the service member's SGLI, 
whichever is less. All dependent children are insured for $10,000 at no 
charge. The SGLI program is supervised by VA and administered, under a 
contractual agreement, by Prudential Financial through the Office of 
Service Members' Group Life Insurance (OSGLI). The SGLI program is 
entirely self-supporting, except for any costs resulting from excess 
mortality traceable to the extra hazard of duty in the uniformed 
services. The extra hazard costs are reimbursed to the SGLI program by 
the Department of Defense (DoD). Extra hazard costs received from DoD 
were $405.2 million in 2006.
    Traumatic Injury Protection TSGLI--TSGLI is a traumatic injury 
protection rider under SGLI that provides for payment between $25,000 
and $100,000 (depending on the type of injury) to any member of the 
uniformed services covered by SGLI who sustains a traumatic injury 
resulting in certain severe losses. The premium charged for this 
coverage is $1 per month from each service member insured under SGLI. 
This premium covers only the civilian incidence of such injuries with 
any excess program costs above the premiums collected to be paid by 
DoD. Public Law 109-13 established the TSGLI program as a rider under 
the SGLI program effective December 1, 2005. This law also contains a 
retroactive provision that provides a service member who suffered a 
qualifying loss on or after October 7, 2001, through and including 
November 30, 2005, with a benefit under TSGLI if the loss was a direct 
result of a traumatic injury incurred in OEF or OIF. DoD reimbursed the 
TSGLI program $202.7 million dollars in 2006, which was comprised of 
$28.0 million in startup funds for the TSGLI program, $157.6 for 
retroactive TSGLI claims, and $17.1 million for prospective TSGLI 
claims.

    Question 7: Last year, Congress required that Vet Centers provide 
bereavement counseling to ``all'' immediate family members of a member 
of the Armed Forces who dies while on Active Duty. Will this new 
requirement significantly impact the VA? Does the VA need to hire 
additional bereavement counselors to handle this increased mission 
requirement?

    Response: VA has addressed the need for Vet Center support in 
anticipation of OIF/OEF requirements.
    Since the inception of the Vet Center bereavement program in FY 
2004, the families of over 900 military casualties have received 
bereavement services. Of these 900 cases, almost 75 percent of the 
casualties were from Operation Enduring Freedom and Operation Iraqi 
Freedom. The number of visits provided to families is approximately 
6,500 and the cost for the services is approximately $600,000. The 
capacity for the increase in current workload was factored into the 
current budget. The VA is providing these services; increases were 
anticipated and included in the current Vet Center budget estimate.
    In response to the growing numbers of veterans returning from 
combat in OEF/OIF, the Vet Centers have hired additional staff and 
opened new centers. In February 2004, 50 global war on terrorism (GWOT) 
veterans were hired to augment the Vet Center existing staff. VA 
authorized a new 4-person Vet Center in Nashville, Tennessee in 
November 2004. An additional 50 GWOT veterans were hired in April 2005 
to further enhance services to veterans returning from combat in 
Afghanistan and Iraq. VA established two new Vet Centers (Atlanta, 
Georgia and Phoenix, Arizona) in April 2006.
    In February 2007 a major expansion of the Vet Center program was 
announced, 23 new vet centers have been announced to be located in 
Montgomery, Alabama; Fayetteville, Arkansas; Modesto, California; Grand 
Junction, Colorado; Orlando, Fort Myers, and Gainesville, Florida; 
Macon, Georgia; Manhattan, Kansas; Baton Rouge, Louisiana; Cape Cod, 
Massachusetts; Saginaw and Iron Mountain, Michigan; Berlin, New 
Hampshire; Las Cruces, New Mexico; Binghamton, Middletown, Nassau 
County and Watertown, New York; Toledo, Ohio; Du Bois, Pennsylvania; 
Killeen, Texas: and Everett, Washington.

    Question 8: Pursuant to section 5313 of title 38, the VA limits the 
amount of VA compensation that may be paid to a veteran who is 
incarcerated in a ``Federal, State or local penal institution'' for 
more than 60 days for conviction of a felony. In FY 2006, what was the 
total amount of funds withheld under this statute? This statute was 
amended last year to include penal facilities run by private entities. 
What total amount of funds is the VA expected to withhold because of 
this change in law in FY 2008?

    Response: VA does not track funds withheld. We track overpayments, 
which are the amounts erroneously paid to beneficiaries who are 
incarcerated. For FY 2005, overpayments from the prison match with 
Social Security totaled approximately $23,786,000. Data is not yet 
available for FY 2006.
    VA does not separately track overpayments resulting from 
incarcerations in penal facilities run by private entities. However, VA 
withheld benefits, even prior to this legislation, if the privately 
operated penal facility was under contract to a governmental entity. We 
do not believe this change in law will significantly impact the amount 
of withholdings or overpayments due to incarceration in FY 2008.

    Question 9: Please provide for FY 2005 through 2006, the number of 
claims processed in each regional office in each year for each separate 
program: compensation (provide separate data concerning the number of 
claims involving 8 or more issues and 7 issues or less); dependency and 
indemnity compensation (DIC); disability pension; pension based upon 
age and death pension.

    Response: The attached spreadsheets contain the data requested. 
Disability pension includes veterans who have established eligibility 
based on age. VA does not track separately disability and age-based 
pension recipients. The specific claim types reported are:

      Original compensation claims with one to seven issues
      Original compensation claims with eight or more issues
      Reopened compensation claims
      All other rating related claims
      Original pension claims
      Reopened pension claims
      Claims for death pension
      Claims for dependency and indemnity compensation (DIC)

    Question 10: Please provide for each regional office and the 
Appeals Management Center the number of remanded appeals pending as of 
September 30, 2006, the date the Notice of Disagreement was filed, the 
date of each remand by the Board of Veterans Appeals and the current 
status of the claim.

    Response: VBA and the Board of Veterans Appeals are currently 
gathering the data to respond to this request. We will provide this 
information when it becomes available.

    Question 11: Please provide the methodology and rationale for 
allocating resources to the six regional offices with the highest ratio 
of pending claims to full time employee equivalents (FTEE) and the six 
regional offices with the lowest ratio of pending claims to FTEE. 
Please include data on the number and type of FTEE at these offices, 
the number of pending claims and the total number of new claims (by 
type, compensation, pension, DIC, and death pension) for each such 
office in FY 2006.

    Response: VBA's compensation and pension resource allocation model 
does not allocate staffing based on pending work, or on the ratio of 
pending work to full time employee equivalents (FTEE) levels. Doing so 
would have the undesirable consequence of rewarding offices who are 
unable to reduce their pending inventories. Rather, the model is based 
on the following four factors: (1) receipts of incoming work, (2) 
accuracy, (3) timeliness, and (4) appellate work. Receipts are given 
the greatest weight as the single most important factor driving 
staffing requirements in regional offices and the factor least under an 
office's control. The use of accuracy and timeliness measures balance 
one another, ensuring that staffing decisions are based on both output 
and accuracy. However, additional FTE is distributed to ROs who 
demonstrate high levels of quality and productivity. The appellate 
factor is derived from both output and timeliness measures, rewarding 
offices that effectively manage their appellate workload. To minimize 
large variations in staffing allocations from year to year, the model 
employs a 2-year average for each of these factors.
    The methodology is intended to allocate more resources to offices 
that receive a greater share of the workload, and process claims more 
efficiently and accurately. However, it is not viewed as an absolute 
standard for final staffing decisions. VBA leaders use the model as a 
guide, but then make some adjustments for special circumstances or 
unique missions performed by a regional office. To assist regional 
offices experiencing workload difficulties, VBA brokers claims that are 
ready for a decision to designated resource centers and to offices with 
higher capacity to finalize claims.

    Question 12: Please provide information concerning the number of 
FTEE assigned to the Board of Veterans Appeals and the Group 7 staff 
assigned to represent the Secretary at the Board and the ratio of staff 
to pending appeals at the Board and the Court respectively.

    Response: The Board of Veterans' Appeals (Board) will be authorized 
437 FTEE in FY 2007 upon passage of the FY 2007 Military Construction 
and Veterans Affairs and Related Agencies Appropriations Act. Under the 
third continuing resolution for FY 2007, the Board is authorized 427 
FTEE. On September 30, 2006, there were 40,265 appeals pending before 
the Board. The number of appeals pending before the Board includes the 
number of appeals physically at the Board (31,707), plus those appeals 
still in the field that the field offices have identified as ready for 
a Board hearing (8,558). Accordingly, the ratio of staff to pending 
appeals at the Board is 1 to 92.1, based on 437 FTEE, and 1 to 94.3, 
based on 427 FTEE. There are 97 FTEE, in the Office of General Counsel, 
currently assigned to Professional Staff Group VII (PSG VII), the 
Veterans Court Appellate Litigation Group. During FY 2006, PSG VII 
received a total of 4,906 new cases. That number was comprised of 3,656 
new appeals from Board decisions, 79 new petitions for extraordinary 
relief, and 1,171 new applications for attorney fees under the Equal 
Access to Justice Act. During the first quarter of FY 2007, PSG VII 
received an additional 1,942 new cases, which consisted of 1,555 new 
appeals from Board decisions, 18 new writ petitions, and 369 new 
applications for attorney fees. As of December 31, 2006, the latest 
date for which we have complete data, there were 5,183 cases pending 
before the Veterans Court. Accordingly, the ratio of staff (97) to 
pending cases (5,183) is approximately 1 to 53 at the moment.


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Lowest Ratio of Pending Claims to Full Time Employee Equivalents (FTEE)
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                          Original
                                                                   Ratio of                                         VSR/Claims                  Clerk/    Compen-      Original    Initial Death/
                                                                   Pending       Division        DRO      RVSR      Examiner/          LIE/    Claims      sation      Pension      DIC Claims
                                                                  Claims to  Level Managers                      Supervisory VSR      FE       Asst.       Claims       Claims       Received
                                                                     FTE                                                                                  Received     Received
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Salt Lake City                                                       22.29               1        2        48                53          2         19       10,686          281             112
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jackson                                                              23.93               2        5        26                57          6         15        2,689          527             398
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Muskogee                                                             25.29               2        8        62               100         11         28        4,344          574             856
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Columbia                                                             26.78               3        3        47               101          9         28        4,057          990             586
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fargo                                                                31.15               1        2         7                19          2          2        1,060          173              90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sioux Falls                                                          32.53               1        1         8                16          3          5          812          167              90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Highest Ratio of Pending Claims to Full Time Employee Equivalents (FTEE)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                          Original
                                                                  Ratio of                                                 VSR/Claims                             CompeOriginal         Initial
                                                                   Pending        Division                            Examiner/                      Clerk/ sation      Pension        Death/DIC
                                                                          Claims     Level                          Supervisory                      Claims       Claims       Claims          Claims
Station                                                             to FTE        Managers      DRO      RVSR               VSR     LIE/FE      Asst.     Received     Received        Received
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Atlanta                                                              68.76               2       12        43               128         11         40        6,838        1,358           1,024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New York                                                             68.91               2        6        27                58         10         24        3,395          735             418
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Montgomery                                                           75.37               3        8        30                91          7         28        4,600        1,575             809
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Detroit                                                              78.23               2       10        33                85          8         30        5,404          811             463
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Chicago                                                              84.07               2       10        33                85          8         30        5,404          877             463
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Des Moines                                                           85.13               1        4        10                31          3         12        2,354          670             200
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


    Question 13: Please provide a list of the number of cases in which 
the Secretary requested more than one extension of time for the same 
specific filing (such as record on appeal, brief or motion) in the 
United States Court of Appeals for Veterans Claims for cases which were 
filed in FY 2006.

    Response: Our data reflect that the Secretary sought more than one 
extension of time for a specific pleading in a total of 1,527 cases 
during FY 2006. It is worthy to note, however, that under the Court's 
Rules of Practice and Procedure a party is not permitted to seek more 
than 45 days of extension time for a specific pleading, absent 
extraordinary circumstances. Thus, even when the Secretary sought more 
than one extension of time, the total extension time for that pleading 
rarely consumed more than 45 days. The Secretary filed a total of 
27,238 pleadings during FY 2006, or an average of approximately 2,270 
pleadings per month.

    Question 14: Please provide an update to the National Cemetery 
Administration's strategic plan concerning national cemetery repair and 
maintenance efforts, including costs for activities completed in Fiscal 
Year 2006 and cost estimates for activities anticipated for Fiscal Year 
2008.

    Response: The Millennium Act Report to Congress (Volume 2, National 
Shrine Commitment), issued in August 2002 provides a comprehensive 
assessment of the condition of VA's national cemeteries. This 
information is used in the National Cemetery Administration's (NCA) 
planning process to assist in prioritizing national shrine projects 
over a multi-year period. The report identified the need for 928 repair 
projects at an estimated cost of $280 million to ensure a dignified and 
respectful setting appropriate for each national cemetery. NCA is using 
the information and data provided in the report to plan and accomplish 
the repairs needed at each cemetery. Through FY 2006, NCA completed 
work on 269 projects, and initiated work on additional projects, with 
an estimated cost of $99 million. These projects account for about 44 
percent of the deficiencies identified in the Millennium Act report.
    Repairs to address repair/maintenance needs are addressed in a 
variety of ways. Gravesite renovation projects to raise, realign, and 
clean headstones and markers and to repair sunken graves are addressed 
through NCA's operations and maintenance (O/M) account. Infrastructure 
improvements to buildings, roads, irrigation systems, and historic 
structures are addressed with capital expenditures through the major 
and minor construction programs. In addition, cemetery staff are used 
to complete some repairs.
    The 2008 budget includes $9.1 million in NCA's O/M account and $2 
million in the minor construction request for national shrine projects. 
Future budget requests tied specifically to the shrine commitment will 
be prioritized within the context of Departmental priorities. For 
example, critical gravesite expansion projects require our immediate 
focus in order to keep existing cemeteries open and to ensure continued 
service to our nation's veterans and their families.
    In addition to specific national shrine projects, a commitment to 
enhancing the appearance of the national cemeteries underlies all NCA 
activities. Over 30 percent of NCA's operating budget is used for 
routine tasks such as mowing, trimming, and other maintenance work. 
These functions are equally critical to providing an enduring memorial 
to those we serve.
    NCA has also established an organizational assessment and 
improvement (OAI) program to ensure regular and consistent assessment 
of performance against established standards. Each national cemetery 
will be evaluated through site visits conducted on a cyclical basis. A 
total of 47 national cemeteries have been reviewed under OAI since the 
program's inception in 2004. In addition, NCA has developed additional 
performance metrics that will be used to improve the appearance of its 
national cemeteries. Baseline data was collected in 2004 for three new 
performance measures designed to assess the condition of individual 
gravesites, including the cleanliness and proper alignment of 
headstones and markers. With this baseline data, NCA has identified the 
gap between current performance and the strategic goal for each 
measure.

    Question 15: Please provide data concerning the State Cemetery 
Grant Program, including the number of grants awarded in fiscal year 
2006, total grant amounts, average grant amounts, and award locations.

    Response: In FY 2006, VA spent $17.8 million for grants associated 
with four projects to establish, expand, or improve State veterans 
cemeteries. The average grant award was $4.4 million. Grant funding was 
provided at the following locations:

        Anderson, South Carolina ($5.2 million--New Cemetery)
        Radcliff (Ft. Knox), Kentucky ($8.5 million--New Cemetery)
        Redding, California ($300,000--New Cemetery)
        Wrightstown, New Jersey ($3.8 million--Cemetery Expansion)

    The FY 2007 and 2008 budget requests include $32 million for this 
program in each year. There is sufficient State interest in the grant 
program to use these funds.

    Question 16: For fiscal years 2006 and 2007, the VA's Education 
Service was allocated $19 million from the Readjustment Benefits 
Account to enter into contracts with State Approving Agencies for 
purposes of approving courses of education under the Montgomery GI Bill 
and other related activities. Per section 301 of P.L. 103-330 at the 
end of fiscal year 2007, the SAA funding will decrease to $13 million. 
Does the VA plan to request resources to maintain funding at the fiscal 
year 2007 levels?

    Response: VA does not plan to request resources to maintain funding 
at FY 2007 level.

    Question 17: If not why not, and what is the Education Service's 
plan to maintain program and outreach services, as well as fraud 
prevention and general oversight over the Montgomery GI Bill programs 
without the full complement of SAA personnel?

    Response: VA deeply values the outreach services performed by the 
State Approving Agencies (SAA). SAA's are able to travel to many 
institutions across the United States and fulfill outreach efforts as 
well as their supervisory and approval functions.
    VA will assume their outreach duties, but has not yet had an 
opportunity to truly evaluate the impact of the reduction in SAA 
program funding. VA will evaluate the impact in the coming months if it 
becomes apparent that some necessary outreach is not being 
accomplished, we will reallocate resources.

    Question 18: Does the VA expect to hire additional Education 
Service staff?

    Response: In FY 2007, 32 direct FTEE are added for the Education 
program and another 14 FTEE will be added in FY 2008.

    Question 19: What are the current pending claim workloads for the 
following Montgomery GI Bill education programs: Ch. 30, Ch. 1606, Ch. 
1607 and Ch. 35?

    Response: As of the end of January 2007, the numbers were as 
follows:

        Chapter 30:                      33,620
        Chapter 1606:                    10,734
        Chapter 1607:                     3,213
        Chapter 35:                      11,807

    Question 20: Please provide FTEE data with respect to all of VBA's 
business lines, including any projected plans to increase or decrease 
in fiscal year 2008.

    Response: The table below depicts VBA FTEE data for 2006-2008 for 
our five business lines: (1) compensation & pensions (C&P) including 
burial, (2) education, (3) vocational rehabilitation & employment, 
(VR&E) (4) housing, and insurance. Increases to direct C&P, Education, 
and VR&E FTE levels will allow us to better address increasing workload 
and improve timeliness of claims processing.


----------------------------------------------------------------------------------------------------------------
                                            2006 FTE Levels (Actuals)
-----------------------------------------------------------------------------------------------------------------
                                                   C&P        Edu        VR&E       Hsg        Ins        VBA
----------------------------------------------------------------------------------------------------------------
Direct                                             7,858        726        948        747        397     10,676
----------------------------------------------------------------------------------------------------------------
IT                                                   439         73         44        147         30        732
----------------------------------------------------------------------------------------------------------------
Support                                              989         91        119        148         55      1,402
----------------------------------------------------------------------------------------------------------------
    Totals                                         9,286        889      1,110      1,042        482     12,810
----------------------------------------------------------------------------------------------------------------



----------------------------------------------------------------------------------------------------------------
                                           2007 FTE Levels (Projected)
-----------------------------------------------------------------------------------------------------------------
                                                   C&P        Edu        VR&E       Hsg        Ins        VBA
----------------------------------------------------------------------------------------------------------------
Direct                                             7,863        758      1,063        762        422     10,868
----------------------------------------------------------------------------------------------------------------
IT                                                   488         66         44        102         30        730
----------------------------------------------------------------------------------------------------------------
Support                                            1,094        106        148        107         51      1,506
----------------------------------------------------------------------------------------------------------------
    Totals                                         9,445        930      1,255        971        503     13,104
----------------------------------------------------------------------------------------------------------------



----------------------------------------------------------------------------------------------------------------
                                           2008 FTE Levels (Requested)
-----------------------------------------------------------------------------------------------------------------
                                                   C&P        Edu        VR&E       Hsg        Ins        VBA
----------------------------------------------------------------------------------------------------------------
Direct                                             8,320        772      1,102        762        408     11,364
----------------------------------------------------------------------------------------------------------------
IT                                                   154        621         14         32          0        221
----------------------------------------------------------------------------------------------------------------
Support                                            1,085        101        144         99         51      1,506
----------------------------------------------------------------------------------------------------------------
    Totals                                         9,559        894      1,260        893        459     13,065
----------------------------------------------------------------------------------------------------------------
Note: In the 2008 budget request, 509 information technology (IT) FTEE have been transferred to the IT
  appropriation.


    Question 21: Please provide the Committee with any relevant data 
concerning fines, sanctions, penalties or fees assessed, pending or in 
negotiation thereof with a contractor concerning the Loan Guaranty 
Service's property management program.

    Response: On December 19, 2006, VA notified Ocwen Loan Servicing 
LLC, VA's property management service provider, of the intention to 
impose a penalty for deficiencies in performance during three different 
quarters. The penalty being assessed is in the amount of $1,322,001.43. 
Ocwen is filing an appeal of the proposed penalty; this appeal process 
is authorized by the contract. VA will consider the appeal and issue a 
decision upon completing its review of the documentation provided by 
Ocwen.

    Question 22: Please provide the total number of VR&E participants 
for each of the last three fiscal years, including the Independent 
Living program; additionally, please provide the VR&E caseload for each 
Regional Office for each of the last 3 fiscal years; and finally, what 
is the amount needed to fully implement the VR&E Five Track Program 
throughout all the Regional Offices?

    Response: The table below represents the number of participants in 
the VR&E program, which represents all veterans actively involved in 
the program at the end of each fiscal year. The participants can be in 
any of the following case statuses: applicant, evaluation planning, 
extended evaluation, independent living, rehabilitation to 
employability, job ready status, and interrupted.


------------------------------------------------------------------------
                                                           Number of
                     Fiscal Year                         Participants
------------------------------------------------------------------------
      2006                                                       89,791
------------------------------------------------------------------------
      2005                                                       92,703
------------------------------------------------------------------------
      2004                                                       94,851
------------------------------------------------------------------------


    The following table illustrates the average caseload for VR&E 
counselors at each of the regional offices (RO) for the last 3 fiscal 
years. These figures do not reflect any impact of contractor support, 
which varies from RO to RO. A VR&E counselor's workload may vary among 
ROs depending on their use of contractors for specialized services.


----------------------------------------------------------------------------------------------------------------
                                                                                 FY04        FY05        FY06
       Station Number                                                           Average     Average     Average
                                                                               Caseload    Caseload    Caseload
----------------------------------------------------------------------------------------------------------------
340                                         Albuquerque Regional Office, NM         170         206         137
----------------------------------------------------------------------------------------------------------------
463                                                    Anchorage VAMROC, AK         148         168         242
----------------------------------------------------------------------------------------------------------------
316                                             Atlanta Regional Office, GA         210         133         122
----------------------------------------------------------------------------------------------------------------
313                                           Baltimore Regional Office, MD         150         149         164
----------------------------------------------------------------------------------------------------------------
301                                              Boston Regional Office, MA         135         124         118
----------------------------------------------------------------------------------------------------------------
307                                             Buffalo Regional Office, NY         179         165         207
----------------------------------------------------------------------------------------------------------------
328                                              Chicago Regional Office, IL        203         166         131
----------------------------------------------------------------------------------------------------------------
325                                           Cleveland Regional Office, OH         160         158         142
----------------------------------------------------------------------------------------------------------------
319                                            Columbia Regional Office, SC         159         161         137
----------------------------------------------------------------------------------------------------------------
339                                     Denver/Cheyenne Regional Office, CO         141         146         135
----------------------------------------------------------------------------------------------------------------
333                                          Des Moines Regional Office, IA          94         181         136
----------------------------------------------------------------------------------------------------------------
329                                             Detroit Regional Office, MI         149         172         150
----------------------------------------------------------------------------------------------------------------
437                                                        Fargo VAMROC, ND         107         129         139
----------------------------------------------------------------------------------------------------------------
436                                                Fort Harrison VAMROC, MT          91          94          96
----------------------------------------------------------------------------------------------------------------
308                                            Hartford Regional Office, CT         168         310         226
----------------------------------------------------------------------------------------------------------------
459                                                     Honolulu VAMROC, HI         116         112         103
----------------------------------------------------------------------------------------------------------------
362                                             Houston Regional Office, TX         204         217         145
----------------------------------------------------------------------------------------------------------------
315                                          Huntington Regional Office, WV         174         189         147
----------------------------------------------------------------------------------------------------------------
326                                        Indianapolis Regional Office, IN         212         254         173
----------------------------------------------------------------------------------------------------------------
323                                             Jackson Regional Office, MS         173         171         179
----------------------------------------------------------------------------------------------------------------
334                                                                        Lincoln R259onal Offi277 NE      198
----------------------------------------------------------------------------------------------------------------
350                                                                        Little Ro200Regional 161ice, AR  158
----------------------------------------------------------------------------------------------------------------
344                                                                        Los Angel285Regional 301ice, CA  186
----------------------------------------------------------------------------------------------------------------
327                                                                        Louisvill198egional O154ce, KY   167
----------------------------------------------------------------------------------------------------------------
373                                          Manchester Regional Office, NH          84          93         102
----------------------------------------------------------------------------------------------------------------
358                                     Manila Regional Office, Philippines         142         148         130
----------------------------------------------------------------------------------------------------------------
330                                           Milwaukee Regional Office, WI         123         111         108
----------------------------------------------------------------------------------------------------------------
322                                           Montgomery Regional Office, AL        145         128         110
----------------------------------------------------------------------------------------------------------------
351                                            Muskogee Regional Office, OK         139         135         110
----------------------------------------------------------------------------------------------------------------
320                                           Nashville Regional Office, TN         156         190         147
----------------------------------------------------------------------------------------------------------------
321                                           New Orleans Regional Office, LA       195         169         162
----------------------------------------------------------------------------------------------------------------
306                                            New York Regional Office, NY         175         164         141
----------------------------------------------------------------------------------------------------------------
309                                              Newark Regional Office, NJ         314         197         194
----------------------------------------------------------------------------------------------------------------
343                                             Oakland Regional Office, CA         206         228         201
----------------------------------------------------------------------------------------------------------------
310                                        Philadelphia Regional Office, PA         145         154         145
----------------------------------------------------------------------------------------------------------------
345                                             Phoenix Regional Office, AZ         151         163         198
----------------------------------------------------------------------------------------------------------------
311                                          Pittsburgh Regional Office, PA         114         131         131
----------------------------------------------------------------------------------------------------------------
348                                            Portland Regional Office, OR         156         208         143
----------------------------------------------------------------------------------------------------------------
304                                          Providence Regional Office, RI         132          95         133
----------------------------------------------------------------------------------------------------------------
354                                                Reno Regional Office, NV         188         131         160
----------------------------------------------------------------------------------------------------------------
314                                             Roanoke Regional Office, VA         293         270         164
----------------------------------------------------------------------------------------------------------------
341                                                                   Salt Lake City101gional Of 87e, UT    112
----------------------------------------------------------------------------------------------------------------
377                                           San Diego Regional Office, CA         167         171         137
----------------------------------------------------------------------------------------------------------------
355                                            San Juan Regional Office, PR         111         111         108
----------------------------------------------------------------------------------------------------------------
346                                             Seattle Regional Office, WA         122         151         137
----------------------------------------------------------------------------------------------------------------
438                                                  Sioux Falls VAMROC, SD         167         184         150
----------------------------------------------------------------------------------------------------------------
331                                                                    St. Louis Reg121al Office169O        149
----------------------------------------------------------------------------------------------------------------
335                                            St. Paul Regional Office, MN         245         192         143
----------------------------------------------------------------------------------------------------------------
317                                       St. Petersburg Regional Office, FL        163         155         119
----------------------------------------------------------------------------------------------------------------
402                                                        Togas VAMROC, ME         148         347         221
----------------------------------------------------------------------------------------------------------------
349                                                Waco Regional Office, TX          90         185         147
----------------------------------------------------------------------------------------------------------------
372                                          Washington Regional Office, DC         194         247         152
----------------------------------------------------------------------------------------------------------------
405                                         White River Junction VAMROC, VT          79          69          79
----------------------------------------------------------------------------------------------------------------
452                                                      Wichita VAMROC, KS         133         138         127
----------------------------------------------------------------------------------------------------------------
460                                                   Wilmington VAMROC, DE         151         154         162
----------------------------------------------------------------------------------------------------------------
318                                       Winston-Salem Regional Office, NC         223         224         179
----------------------------------------------------------------------------------------------------------------


    The VR&E Five-Track to Employment Model has been fully deployed and 
implemented throughout all the regional offices.

    Health

    Question 1: The VA has been operating under a continuing resolution 
since the start of the fiscal year on October 1, 2006. P.L. 109-383 
(H.J. Res. 102) provided the VA with the legal authority to transfer up 
to $683,970,000 from other accounts to the Medical Services Account.

    Question 1(a): On September 30, 2006, what unobligated funds were 
available to the VA? Please detail specific amounts for specific 
accounts. Please list unobligated balances at the start and end of FY 
2006, FY 2005, and FY 2004 and please explain why the amounts available 
as unobligated were greater or less than the amounts from the previous 
two fiscal years.

    Response: The chart below shows start of year and end of year 
unobligated balances for FY 2004-FY 2006 for the total of the three 
medical care appropriations.


------------------------------------------------------------------------
                                           (Dollars in Thousands)
       Unobligated Balances       --------------------------------------
                                     FY 2004      FY 2005      FY 2006
------------------------------------------------------------------------
Start of Year                        $823,282      $710,682  $1,149,225
------------------------------------------------------------------------
End of Year                          $710,682   $1,149,225      $590,611
------------------------------------------------------------------------


      VA reported to Treasury (via the SF 133) that the FY06 
EOY unobligated balance was $589,863, or 748K lower than the amount 
shown above; please verify that $590,611 is the correct amount and 
whether the first quarter FY07 SF 133 SOY balance will reflect the 
higher amount.
      The FY 2006 start of year unobligated balance was greater 
than FY 2004 and FY 2005 due to resources provided by the budget 
amendment (P.L. 109-54) and Hurricane supplemental received in late FY 
2005 and increased collections.
      The FY 2006 end of year unobligated balance was less than 
FY 2004 and FY 2005 due to a higher level of expenditures supporting 
veterans' healthcare.

    Question 1(b): As of September 30, 2006, please list all 
``carryover'' funding available to the VA. Please detail specific 
amounts for specific accounts as well as listing which amounts were 
provided as 2-year funding as well as noting for which fiscal year 
amounts, or portions of these amounts, were first provided.

    Response: The chart below lists all carryover funding available to 
the three medical care appropriations as of September 30, 2006.


------------------------------------------------------------------------
                                                           Dollars in
                                                            Thousands
------------------------------------------------------------------------
Medical Services:
------------------------------------------------------------------------
No-Year                                                        $227,745
------------------------------------------------------------------------
2-Year                                                         $139,617
------------------------------------------------------------------------
Hurricane Supplemental                                          $34,389
------------------------------------------------------------------------
    Total                                                      $401,751
------------------------------------------------------------------------
Medical Administration:
------------------------------------------------------------------------
2-Year                                                         $145,543
------------------------------------------------------------------------
Hurricane Supplemental                                           $5,924
------------------------------------------------------------------------
    Total                                                      $151,467
------------------------------------------------------------------------
Medical Facilities:
------------------------------------------------------------------------
No-Year                                                          $1,227
------------------------------------------------------------------------
2-Year                                                           $3,592
------------------------------------------------------------------------
Hurricane Supplemental                                          $32,574
------------------------------------------------------------------------
    Total                                                       $37,393
------------------------------------------------------------------------
Grand Total:
------------------------------------------------------------------------
No-Year                                                        $228,972
------------------------------------------------------------------------
2-Year                                                         $288,752
------------------------------------------------------------------------
Hurricane Supplemental                                          $72,887
------------------------------------------------------------------------
    Total                                                      $590,611
------------------------------------------------------------------------


    Question 1(c): As of January 26, 2007, have you made any transfers 
pursuant to your authority under P.L. 109-383? Please provide detailed 
information if you have used this transfer authority, including from 
which accounts funds were transferred, and the amounts of any such 
transfers.

    Response: As of January 26, 2007, no transfers have been made 
pursuant to VA's authority under Public Law 109-383.

    Question 1(d): Does the VA anticipate using this authority between 
January 26, 2007 and February 5, 2007?

    Response: The Department has not used and does not anticipate using 
this authority between January 26, 2007 and February 5, 2007.

    Question 1(e): What consequences, by specific account, do you 
foresee operating under a continuing resolution will have on VA 
activities at the end of FY 2007 and the start of FY 2008?

    Response: The proposed funding level of $32.7 billion approved by 
the House (H.J. Res. 20) on January 29, 2007, would fully fund medical 
care for veterans this fiscal year. If however, Congress were to hold 
us to the 2006 funding level VA would be short approximately $3 billion 
of the funding needed to meet the estimated demand for care in FY 2007. 
A shortage of this magnitude would have serious implications in all 
three accounts--existing employment levels could not be sustained, 
patient waiting times would increase dramatically, and healthcare 
operations could not be sustained at their current levels for the 
remainder of FY 2007.

    Question 2: CBOCs--Please provide a detailed list regarding the 
number of Community-Based Outpatient Clinics (CBOCs) which were 
approved in FY 2006 and FY 2005, as well as those approved for FY 2007 
through January 26, 2007. Please also provide a detailed list regarding 
the facilities approved and whether or not they have been activated. Of 
those activated, please provide detailed estimates as to the costs of 
each activation and the funding source, by account, of each activation.

    Response: Table 1 below depicts the Community-Based Outpatient 
Clinics (CBOCs) approved and activated FY 2005 and FY 2006. Table 2 
below depicts CBOCs approved and not yet activated. No CBOCs have been 
activated in FY 2007.


                                               Table 1:  CBOCs Approved and Activated FY 2005 and FY 2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 Type of
                                                                                                                                 Clinic:       Cost To
                                VISN                                           CBOC Name                  City          State    Contract     Establish
                                                                                                                                (C) or VA      Clinic
                                                                                                                                   (VA)
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
   3                                                                            Eastern Dutchess         Pine Plains      NY            V      $247,490
--------------------------------------------------------------------------------------------------------------------------------------------------------
   4                                                                                  Gloucester              Sewell      NJ            V       $54,525
--------------------------------------------------------------------------------------------------------------------------------------------------------
   4                                                                          Northampton County              Bangor      PA            V      $198,853
--------------------------------------------------------------------------------------------------------------------------------------------------------
   4                                                                                      Warren        North Warren      PA            V      $183,438
--------------------------------------------------------------------------------------------------------------------------------------------------------
   4                                                                                   Uniontown           Uniontown      PA            V        $6,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
   4                                                                                     Venango            Oil City      PA            V      $156,685
--------------------------------------------------------------------------------------------------------------------------------------------------------
   7                                                                                 Goose Creek    North Charleston       SC           V      $101,087
--------------------------------------------------------------------------------------------------------------------------------------------------------
   8                                                                  The Villages/Sumter County        The Villages      FL            V      $500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
   9                                                                                      Dupont                    LouisvKYle          V             $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
   9                                                                            Standiford Field                    LouisvKYle          V             $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
   9                                                                        Memphis-South Clinic             Memphis      TN            V    $1,050,717
--------------------------------------------------------------------------------------------------------------------------------------------------------
   9                                                                                   Covington             Memphis      TN            V      $183,852
--------------------------------------------------------------------------------------------------------------------------------------------------------
   9                                                                                   Vine Hill           Nashville      TN            V      $120,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
  10                                                                            New Philadelphia    New Philadelphia      OH            V    $1,939,553
--------------------------------------------------------------------------------------------------------------------------------------------------------
  10                                                                                      Marion              Marion      OH            V      $487,166
--------------------------------------------------------------------------------------------------------------------------------------------------------
  10                                                                                     Ravenna             Ravenna      OH            V    $1,372,455
--------------------------------------------------------------------------------------------------------------------------------------------------------
  15                                                                       Hanson/Hopkins County              Hanson      KY            V       $71,539
--------------------------------------------------------------------------------------------------------------------------------------------------------
  16                                                                     Galveston County Site 1    Galveston Island      TX             C     $123,227
--------------------------------------------------------------------------------------------------------------------------------------------------------
  16                                                                     Galveston County Site 2    Galveston Island      TX             C     $123,277
--------------------------------------------------------------------------------------------------------------------------------------------------------
  18                                                                            Anthem/New River              Anthem      AZ            V      $114,117
--------------------------------------------------------------------------------------------------------------------------------------------------------
  19                                                                                Rock Springs        Rock Springs      WY            V      $250,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
  21                                                                  Sail Bruno/North San Mateo           San Bruno        CA          V      $597,258
                                                                                          County
--------------------------------------------------------------------------------------------------------------------------------------------------------
   7                                                                                      Athens              Athens      GA            V    $1,222,893
--------------------------------------------------------------------------------------------------------------------------------------------------------
  16                                                                                     Slidell             Slidell      LA            V      $260,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
  16                                                                                            LaPlace/St. John*   LaPlacLA            V    $2,260,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
  16                                                                                    Hammond*             Hammond      LA            V    $2,260,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs to establish a clinic include all non-recurring startup costs such as equipment, furniture, IT needs and any lease buildout or construction costs.
  The costs do not include annual expenditures such as salary.
* Startup costs are high due to having to purchase modular buildings.



                 Table 2:  Approved and To Be Activated
------------------------------------------------------------------------
                VISN                                              State
------------------------------------------------------------------------
  4                                                      Dover       DE
------------------------------------------------------------------------
  6                                                    Hickory        NC
------------------------------------------------------------------------
  6                                                           LynchbuVA
------------------------------------------------------------------------
  6                                                    Norfolk       VA
------------------------------------------------------------------------
  6                                                   Franklin        NC
------------------------------------------------------------------------
  6                                                     Hamlet        NC
------------------------------------------------------------------------
  7                                                   Bessemer       AL
------------------------------------------------------------------------
  8                                        Eastern Puerto Rico       PR
------------------------------------------------------------------------
  9                                              Morehead City       KY
------------------------------------------------------------------------
  9                                                     Hazard       KY
------------------------------------------------------------------------
  9                                         Morristown/Hamblen       TN
------------------------------------------------------------------------
 16                                                  Eglin AFB       FL
------------------------------------------------------------------------
 17                                                     Conroe       TX
------------------------------------------------------------------------
 17                                                   NE Bexar       TX
------------------------------------------------------------------------
 18                                                Globe/Miami       AZ
------------------------------------------------------------------------
 18                                                  NW Tucson       AZ
------------------------------------------------------------------------
 18                                                  SE Tucson       AZ
------------------------------------------------------------------------
 18                                                Thunderbird       AZ
------------------------------------------------------------------------
 20                                                 Metro East       OR
------------------------------------------------------------------------
 20                                              Canyon County       ID
------------------------------------------------------------------------
 20                                         Central Washington       WA
------------------------------------------------------------------------
 20                                                 Metro West       OR
------------------------------------------------------------------------
 21                                             American Samoa       HI
------------------------------------------------------------------------
 21                                                     Fallon       NV
------------------------------------------------------------------------
 22                                                Orange City         CA
------------------------------------------------------------------------
 23                                                    Bemidji       MN
------------------------------------------------------------------------
 23                                                   Holdrege       NE
------------------------------------------------------------------------
 23                                                    Spirit Lake   IA
------------------------------------------------------------------------
 23                                          Western Wisconsin       WI
------------------------------------------------------------------------


    Question 3: Non-Recurring Maintenance--Please list total 
expenditures for non-recurring maintenance from the Medical Facilities 
Account, by month, for FY 2006. Please explain any variance from spend-
out rates from the previous two fiscal years.

    Response: The table below presents non-recurring maintenance (NRM) 
expenditures, by month, for the past 3 fiscal years. The variance in 
first half of FY 2004 relates to the implementation of the new three-
appropriation structure directed in the appropriations act. The other 
variances between months are due to execution timing of NRM projects.


------------------------------------------------------------------------
             NRM by Month (Cumulative) (Dollars in Millions)
-------------------------------------------------------------------------
                                     FY 2004      FY 2005      FY 2006
------------------------------------------------------------------------
Oct                                        $0           $5          $16
------------------------------------------------------------------------
Nov                                        $0          $10          $20
------------------------------------------------------------------------
Dec                                        $0          $18          $27
------------------------------------------------------------------------
Jan                                        $0          $26          $35
------------------------------------------------------------------------
Feb                                        $0          $37          $45
------------------------------------------------------------------------
Mar*                                       $1          $49          $53
------------------------------------------------------------------------
Apr                                       $14          $57          $68
------------------------------------------------------------------------
May                                       $32          $73          $80
------------------------------------------------------------------------
Jun                                       $67          $90          $93
------------------------------------------------------------------------
Jul                                      $103         $102         $119
------------------------------------------------------------------------
Aug                                      $154         $146         $168
------------------------------------------------------------------------
Sep                                      $360         $475         $412
------------------------------------------------------------------------
* Represents establishment of the three medical care appropriation
  accounting structure in FY 2004.


    Question 4: Priority 8 Veterans--Please provide VA estimates as to 
the number of veterans affected by the Administration's decision in 
January 2003 to end enrollment of new Priority 8 veterans. Please 
provide a total number, as well as the number by fiscal year. Please 
also provide an estimate as to amount of resources required to lift the 
enrollment ban, as well as the estimated amount contributed to the 
Medical Care Collection Fund (MCCF) per Priority 8 veteran per fiscal 
year.

    Response: The following table shows the impact of Priority 8 
suspension on unique enrollment by fiscal year.


----------------------------------------------------------------------------------------------------------------
                                   2004 Cu-      2005 Cu-      2006 Cu-        2006         2007         2008
      2003 Cu- mulative\1\        mulative\2\   mulative\3\   mulative\4\  Estimate\5\  Estimate\5\  Estimate\5\
----------------------------------------------------------------------------------------------------------------
   Total                               Total         Total         Total        Total        Total        Total
----------------------------------------------------------------------------------------------------------------
    93,228                           192,419       263,257       331,754      830,203    1,254,460    1,570,503
----------------------------------------------------------------------------------------------------------------
\1\ Totals are cumulative and do not include enrollees who were initially denied enrollment and subsequently
  enrolled in an eligible priority.
\2\ Does not include ineligible enrollees who died prior to FY 2004.
\3\ Does not include ineligible enrollees who died prior to FY 2005.
\4\ Does not include ineligible enrollees who died prior to FY 2006.
\5\ FY 2006-2008 data represent estimated cumulative impact of Priority 8 suspension--``pent-up demand.''
Data Source: ADUSH End of Year/Fiscal Year to Date Enrollment Files--Sep03, Sep04, Sep05, Sep06.
March 2006 Model Enrollment Projections (BdgE1F0D0R0A0M5)


    Reopening Priority 8 enrollment in FY 2008 is estimated to increase 
enrollment in Priority 8 by approximately 1.6 million and require an 
increase in funding of $1.7 billion. If the suspension on Priority 8 
enrollees were lifted, the revenue associated with use by new Priority 
8 enrollees for Medical Care Collections Fund (MCCF) first party co-
payments and third party collections is estimated to be $591 million in 
FY 2008. VA has serious concerns that this additional demand will 
strain VA's capacity to provide timely, quality care for all enrolled 
veterans and lead to longer waits for care. VA must also consider the 
impact of this policy in future years. In 2017, this policy would 
increase Priority 8 enrollment by an estimated 2.4 million and would 
require an additional $4.8 billion. Over the next 10 years, resumption 
of Priority 8 enrollment would require $33.3 billion in funding 
requirements.

    Question 5: OIF/OEF Veterans--Your estimate for the numbers of 
returning OIF/OEF veterans for FY 2006 was substantially off from the 
demand that you experienced. In addition, your estimates of the average 
medical care costs per returning servicemember were higher than what 
you experienced. Please provide us with the numbers of returning 
servicemembers you saw in FY 2006 as well as the total number of these 
veterans per priority group and the average cost per servicemember.

    Response: The chart below provides FY 2006 data for OEF/OIF 
veterans.


------------------------------------------------------------------------
                     FY 2006 OIF/OEF Unique Patients
-------------------------------------------------------------------------
                  Priority Group                       Unique Patients
------------------------------------------------------------------------
        1                                                        16,360
------------------------------------------------------------------------
        2                                                        17,891
------------------------------------------------------------------------
        3                                                        29,500
------------------------------------------------------------------------
        4                                                           677
------------------------------------------------------------------------
        5                                                        49,461
------------------------------------------------------------------------
        6                                                        20,040
------------------------------------------------------------------------
        7                                                         2,799
------------------------------------------------------------------------
        8                                                        18,544
------------------------------------------------------------------------
Total Patients                                                  155,272
------------------------------------------------------------------------
Obligations ($000)                                             $404,840
------------------------------------------------------------------------
Cost Per Patient                                                 $2,607
------------------------------------------------------------------------


    Oversight

    Question 1: Testimony at previous Budget Hearings indicates that VA 
projects its budget requirements based on planned utilization of 
services by veterans. Budgeting problems arose in previous years when 
the Administration used improper projections to plan for its budget 
requirements in the ``out years.'' How do the ongoing military efforts 
in Iraq and Afghanistan affect VA's budget projections? What ``in-
country''--in harm's way--troop levels are used for this projection? 
What is the source or rationale for these troop level and veterans 
service needs estimates?

    Response: VA does not use ``in-country'' troop levels in budget 
projections. VA has made every effort to account for the needs of OEF/
OIF veterans within the actuarial model. The model has had several key 
methodological improvements, including development of separate 
enrollment, morbidity, and reliance assumptions for OEF/OIF veterans 
based on their actual enrollment and usage patterns. However, many 
unknowns can impact the number and type of services that VA will need 
to provide OEF/OIF veterans, including the duration of the conflict, 
when OEF/OIF veterans are demobilized, and the impact of our enhanced 
outreach efforts.
    The number of veterans returning from Afghanistan being treated in 
the VA healthcare system is relatively small compared to the overall 
number of veterans already accessing VA healthcare and benefits (over 
5.3 million).

    Question 2: In post-hearing questions following the February 8, 
2006 budget hearing in response to ``Efficiency'' question ``1.f,'' 
concerning a lack of proper documentation for claimed savings, the 
Department advised the Committee that it had just begun to review the 
major process to establish policies and procedures to assure proper 
documentation is identified and control systems are developed to 
adequately track, monitor, validate, and record authentic instances of 
bona fide management savings throughout the 157 medical centers for 
which it is responsible. What is current ability for VA to adequately 
track, monitor, validate, and record authentic instances of bona fide 
management savings? What time and expense has been expended in 
designing and implementing this tracking, monitoring, validating, and 
recording system?

    Response: Management efficiencies are no longer included in the 
budget estimates and other assumptions and calculations are verified to 
enhance the fundamental quality of the estimates. VA has taken steps to 
improve its overall quality control and made technical changes to 
strengthen the accuracy of its formulation methodologies and 
assessments of cost savings in the FY 2007 and future budgets.
    During the execution year, VA is also monitoring budget performance 
with monthly reports to VA senior leaders and to the Office of 
Management and Budget (OMB), as well as with quarterly reports to 
Congress.

    Question 3: In post-hearing questions following the February 8, 
2006 budget hearing in response to questions regarding VA's Management 
Analysis/Business Process Reengineering (MA/BPR) program, VA advised 
the Committee that it was embarking on two pilot studies under MA/BPR. 
VA's response provided a listing of items for monitoring and 
measurement beginning with ``(1) baseline costs and Key Performance 
Indicators (KPIs)'' and ending with ``(4) costs to conduct the study 
and implement the MEO.'' Please provide this information for each of 
the two pilot studies to the Committee for review.

    Response: The information requested is not yet available. Under the 
MA/BPR design, baseline operational costs and key performance 
indicators are established no later than the ANALYZE phase. For the 
pilot studies, VA's objective is to complete the ANALYZE phase on or 
about July 31, 2007, at which time this information should be available 
for the majority of the sites being studied. Costs to conduct the 
study, which are considered part of the costs to implement the most 
efficient organization (MEO), are recorded cumulatively through the 
completion of each phase. Accordingly, information on pilot study costs 
accumulated through completion of the ENVISION phase should be 
available about April 30, 2007. Accumulated study costs through all 
phases should be available by VA's target date for completion of the 
pilot studies, which is December 31, 2007 for the majority of sites. 
Other costs to implement the MEO, such as the purchase of new capital 
equipment, are reported as part of actual operational costs incurred 
during the SUSTAIN phase, which is the ongoing operation of the 
approved MEO after the study has been completed. Information on such 
costs is recorded and available when incurred.

    Question 4: Last year VA advised the Committee that the offices of 
the VA Inspector General were staffed at the lowest ratio--OIG FTE to 
Parent Agency FTE--among all statutory Inspectors General in the 
Federal Government. The Committee acknowledges VA's previous estimates 
that the VA OIG returns 15-20 dollars for each dollar invested in the 
OIG through fines, and other means. What was the rate of return for 
funds invested in the OIG in both FY 2005 and 2006 and what is the 
projected rate of return for FY 2007? What would be the impact of 
increasing the staffing of the VA OIG in terms of total dollars 
``returned''?

    Response: In FY 2005 and 2006, the Office of the Inspector General 
(OIG) returned 30:1 and 13:1 for each dollar invested, respectively, 
through audit and inspection recommendations on the better use of 
funds; fines, penalties, restitution, savings and cost avoidance, and 
civil judgments as a result of criminal and administrative 
investigations; and $21.7 million in actual dollar contract review 
recoveries for the 2-year period--funds deposited back into VA's Supply 
Fund. OIG estimates its return in FY 2007 will approximate 10:1 for 
each dollar invested, and will include an estimated $11 million in 
actual dollar recoveries from contract reviews going back into the 
Supply Fund. The decline in cost-benefit ratio for FY 2007 is partially 
attributed to a 40 FTEE reduction from the previous year. We would 
expect additional staffing resources to continue providing similar 
incremental returns.
                 POST-HEARING QUESTIONS FOR THE RECORD
Questions from Hon. Bob Filner, Chairman, Committee on Veterans' Affairs
 , to Hon. R. James Nicholson, Secretary, U.S. Department of Veterans 
                                Affairs

                                     Committee on Veterans' Affairs
                                                     Washington, DC
                                                      March 5, 2007

Honorable R. James Nicholson
Secretary
Department of Veterans Affairs
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our Full Committee hearing on the VA Fiscal Year 
2008 budget on February 8, 2007, I would appreciate it if you could 
answer the enclosed hearing questions by the close of business on March 
30, 2007.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.

            Sincerely,
                                                         BOB FILNER
                                                           Chairman

    Projected Costs for OEF/OIF Veterans (Bilmes Study)--Linda Bilmes 
of the John F. Kennedy School of Government at Harvard, in a paper 
released in January entitled ``Soldiers Returning From Iraq and 
Afghanistan: The Long-Term Costs of Providing Veterans Medical Care and 
Disability Benefits,'' has estimated that 255,000 returning 
servicemembers will seek VA healthcare in 2007 at a total cost of $1.4 
billion. Bilmes further estimates that this number will increase to 
308,000 in 2008 and cost $1.8 billion. The VA is estimating 209,000 
returning servicemembers in 2007 and 263,000 in 2008. Bilmes estimates 
that the total costs of providing care to these veterans will be $315 
billion by 2014.

    Question 1(a): In light of this study do you stand by your 
estimates concerning the number of returning OEF/OIF veterans?

    Response: In fiscal year (FY) 2008, the Department of Veterans 
Affairs (VA) estimates that it will treat over 263,000 Operation 
Enduring Freedom/Operation Iraqi Freedom (OEF/OIF) veterans at a cost 
of approximately $752 million. This estimate is based on the actual 
enrollment rates, age, gender, morbidity, and reliance on VA healthcare 
services of the enrolled OEF/OIF population. OEF/OIF veterans have 
significantly different VA healthcare utilization patterns than non-
OEF/OIF enrollees, and this is reflected in the estimates above. For 
example, when modeling expected demand for post traumatic stress 
disorder (PTSD) residential rehab services for the OEF/OIF cohort, the 
model reflects the fact that they are expected to need three times the 
number of these services than non-OEF/OIF enrollees. The model also 
reflects their increased need for other healthcare services, including 
physical medicine, prosthetics, and outpatient psychiatric and 
substance abuse treatment. On the other hand, experience indicates that 
OEF/OIF enrollees seek about half as much inpatient acute medicine and 
surgery care from the VA as non-OEF/OIF enrollees.

    Question 1(b): Do you believe these cost estimates are accurate, 
and what is the VA currently doing to meet the increased costs and 
demands on the healthcare system that these veterans represent?

    Response: Many unknowns will influence the number and type of 
services that VA will need to provide OEF/OIF veterans, including the 
duration of the conflict, when OEF/OIF veterans are demobilized, and 
the impact of our enhanced outreach efforts. VA has estimated the 
healthcare needs of OEF/OIF veterans based on what we currently know 
about the impact of the conflict. To ensure that we are able to care 
for all returning OEF/OIF veterans, we have made additional investments 
in our medical care budget.

    State Approving Agencies/Montgomery GI Bill--State Approving 
Agencies have partnered with the VA in the administration of veterans 
educational and training programs for nearly 60 years. Through the 
program approval and supervision process, they ensure that money spent 
on the Montgomery GI Bill is money well spent. Moreover, SAAs provide a 
critical assist in reducing the opportunities for fraud, waste and 
abuse throughout the system. For FY 2006 and 2007 the VA's Education 
Service was allocated $19 million from the Readjustment Benefits 
Account to enter into contracts with State Approving Agencies for 
purposes of approving courses of education under the Montgomery GI Bill 
and other related activities. Per section 301 of P.L. 103-330 at the 
end of fiscal year 2007, the SAA funding will decrease to $13 million.

    Question 2(a): Does the VA plan to request resources to maintain 
funding at the fiscal year 2007 levels?

    Response: VA does not plan to request resources to maintain funding 
at FY 2007 level.

    Question 2(b): If not why not, and what is the Education Service's 
plan to maintain program and outreach services, as well as fraud 
prevention and general oversight over the Montgomery GI Bill programs 
without the full complement of 8M personnel?

    Response: VA will assume the outreach duties performed by the State 
Approving Agencies (SAA). VA will evaluate the impact in the coming 
months. If it becomes apparent that some necessary outreach is not 
being accomplished, we will reallocate resources. Additionally, VA will 
continue to monitor the performance of SAAs in conducting program 
approvals, fraud prevention, and general oversight. If SAAs operating 
at the new funding levels are unable to perform these services, then 
the Department will reallocate existing VA staff and resources to cover 
the services previously provided by the SAAs. Our ultimate concern is 
always for the effective administration of educational benefits to our 
veterans.

    Mental Health Spending--The VA's FY 2008 budget submission requests 
an additional $56 million, for a total of $360 million, for the VA's 
Mental Health Initiative. The GAO reported in November that you failed 
to fully allocate the resources you had pledged for the Mental Health 
Initiative in FY 2005 and FY 2006.

    Question 3: Will the VA fully allocate the $306 million for this 
initiative in FY 2007, and the $360 million sought in FY 2008?

    Response: Yes. More than 95 percent of the funds for FY 2007 have 
been committed. We are closely monitoring the use of the funds in the 
field. We are prepared to recover those funds that may go unspent as a 
result of delays in hiring and to reinvest them in meritorious projects 
proposed by the Veterans Integrated Service Networks (VISN).
    Funds for FY 2008 will be committed for continuation of programs 
initiated in FY 2007.

    VA Mental Health Effort--According to the VA's FY 2008 budget 
submission, the VA ``plans to spend a total of $3 billion to continue 
our efforts to improve access to mental health services across the 
country.'' The GAO report on spending on the Mental Health Initiative 
from November stated that for FY 2006, the VA was ``expected to spend 
more than $2 billion on mental health services.'' The FY 2008 budget 
submission includes $360 million for the Mental Health Initiative, and 
$311 million for outpatient mental health.

    Question 4(a): Can you provide details concerning the remainder of 
your mental health spending for FY 2008?

    Response: For efficiency, the allocation of FY 2007 and FY 2008 
funds were combined. A number of programs will be implemented and 
expanded during FY 2007, and continued during FY 2008 to ensure 
spending of the total amount of funding for the 2 years. The allocation 
of FY 2008 funds to specific programs is outlined in the table as 
follows.


------------------------------------------------------------------------
   FY 2007 and FY 2008 Proposed
Mental Health Initiative Spending    FY 2007      FY 2008       Change
               Plan
------------------------------------------------------------------------
Continuation of FY 2005 and FY
 2006 Recurring
  Initiated Activities             166,296,744  166,296,744            0
------------------------------------------------------------------------
Primary Care/Mental Health          38,380,506   55,691,153   17,310,647
 Integration
------------------------------------------------------------------------
Suicide prevention coordinators      8,624,890   16,249,780    7,624,890
 (156 sites)
------------------------------------------------------------------------
Psychosocial Rehabilitation (PSR)   15,138,061   23,587,385    8,449,324
------------------------------------------------------------------------
Mental Health Intensive Case
 Management
  (MHICM): Rural, multiple teams,   10,185,091   12,345,644    2,160,553
 etc.
------------------------------------------------------------------------
Homeless Program Initiatives        17,556,002   17,342,238     -213,764
------------------------------------------------------------------------
Substance Use Disorders              4,624,702    9,096,072    4,471,370
------------------------------------------------------------------------
Mental Health staff in Community
 Based Out-
  patient Clinics (CBOCs)           15,290,157   21,883,139    6,592,982
------------------------------------------------------------------------
Operation Enduring Freedom/
 Operation Iraqi
  Freedom (OEF/OIF) in reach         3,490,567    5,102,231    1,611,664
------------------------------------------------------------------------
Post Traumatic Stress Disorder
 (PTSD), including
  Dual Diagnosis and Military
 Sexual Trauma
  (MST) Resource program             4,979,157    5,115,401      136,244
------------------------------------------------------------------------
Telemental Health                    7,018,000    3,100,000   -3,918,000
------------------------------------------------------------------------
EES training                           600,000      600,000            0
------------------------------------------------------------------------
Centers of Excellence                3,000,000    4,950,000    1,950,000
------------------------------------------------------------------------
Gulf Coast market survey               196,659            0     -196,659
------------------------------------------------------------------------
Vet Center staff enhancement         3,379,923   10,531,046    7,151,123
------------------------------------------------------------------------
TBI Transitional Housing             2,500,000    5,000,000    2,500,000
------------------------------------------------------------------------
Other activities including
 training in evidence-
  based psychotherapy                4,849,541    3,109,167   -1,740,374
------------------------------------------------------------------------
    TOTAL                          306,110,000  360,000,000   53,890,000
------------------------------------------------------------------------


    Question 4(b): Although your budget states that you are spending $3 
billion on mental health, is this enough to meet the needs of veterans? 
In what areas, given additional resources, do you believe the VA should 
be doing more?

    Response: The total budget of $3 billion is adequate both to meet 
the needs of returning veterans and those from prior eras. It will 
allow expansion of access for veterans entering the VA, and expansion 
of programs for veterans from prior eras. One area in which VA could be 
doing more is in working with families of veterans with mental health 
problems. It would be useful for VA mental health providers to work 
with families, even before the veteran came to VA for care. Providers 
could meet with families, help to evaluate symptoms they report, 
educate them about care needs and available resources, counsel them 
about how to manage symptoms, and collaborate with them to get the 
veteran into treatment. VA does provide bereavement counseling to 
families of servicemembers killed in action.

                                 
Questions from Hon. John Salazar to Hon. R. James Nicholson, Secretary, 
                  U.S. Department of Veterans Affairs

    Question 1: Mr. Secretary, I represent Colorado's 3rd Congressional 
District.
    Colorado's 3rd makes up over 50 percent of the State of Colorado. 
Much of which is rural.
    There are approximately 75,000 veterans that live in my district. 
Many of these veterans must travel as much as 5 hours through winding 
mountain roads to reach the VA Center in Denver. Can you tell me how 
you plan to address the issue of access to healthcare services for our 
veterans living in rural areas and can you please tell me the status of 
the CBOC proposed for Craig, Colorado?

    Response: VA plans to establish an outreach clinic in the Craig, 
Colorado area this fiscal year. An Outreach Clinic is a part-time, VA-
staffed clinic that will provide access to healthcare services for 
veterans living in rural Colorado.

    Question 2: In the past, you have opposed allowing VA to contract 
for services in rural areas. Do you plan to oppose similar legislation 
if it's introduced again and why?

    Response: VA contracts for services on a case by case basis in 
rural (and urban) settings when VA does not have the capability, 
capacity, or expertise to provide the necessary service within a 
defined service area. VA also has contracted for care for extraordinary 
hardship or humanitarian reasons. VA does not support a general policy 
of contracting out all care for patients in rural settings.

                                 
      Questions from Hon. Steve Buyer, Ranking Republican Member,
 Committee on Veterans' Affairs, to Hon. R. James Nicholson, Secretary,
                  U.S. Department of Veterans Affairs
                                     Committee on Veterans' Affairs
                                                     Washington, DC
                                                  February 20, 2007

Honorable R. James Nicholson
Secretary
Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our Committee hearing of February 8, 2007, I would 
appreciate your response to the enclosed additional questions for the 
record by close of business Wednesday, March 14, 2007.
    It would be appreciated if you could provide your answers 
consecutively on letter size paper, single spaced. Please restate the 
question in its entirety before providing the answer.
    Thank you for your cooperation in this matter.

            Sincerely,

                                                        Steve Buyer
                                          Ranking Republican Member

    Question 1: In January, the House passed H.R. 4, which would 
eliminate the prohibition on the Department of Health and Human 
Services (HHS) from interfering in setting prescription drug prices and 
require HHS to negotiate prices charged under Medicare prescription 
drug plans. What impact would this change in law have on VA's ability 
to negotiate favorable discounts from pharmaceutical companies and VA's 
prescription drug costs?

    Response: H.R. 4 amends the Medicare Modernization Act by removing 
the noninterference language which prevents the Secretary of the 
Department of Health and Human Services (HHS) from negotiating drug 
prices directly with pharmaceutical manufacturers and by requiring 
semi-annual reports to Congress on the impact of the negotiations. H.R. 
4 does not permit HHS to establish drug formularies as a negotiation 
tool.
    H.R. 4 itself, as currently proposed, is likely to have no negative 
financial impact on the Department of Veterans Affairs (VA) drug 
procurement costs because it does not reference in any way section 603 
of Public Law (P.L.) 102-585 which gives VA a 24 percent discount off 
commercial drug prices.

    Question 2: In recent years, VA has experienced significant cost 
escalation in the construction of medical facilities. For example, the 
estimate for the construction of a new medical facility in Denver has 
almost doubled, now topping over $646 million.

    Question 2(a): What are the causes for these increases?

    Response: The Department, along with other government agencies and 
private sector businesses and individuals, is experiencing a 
significant growth in the cost of construction as a result of the 
booming construction economy worldwide. The significant demand for 
contractors, labor and building materials has produced significant 
increases in pricing. This has been further exacerbated by higher 
petroleum prices on both petroleum based building products and fuel as 
well as construction related impacts of the hurricanes of 2004 and 2005 
including Katrina.

    Question 2(b): What steps has VA taken to prevent such escalation 
in the future?

    Response: In order to position the Department to best deal with 
this situation, VA has taken several steps. These include developing a 
more detailed market analysis of individual geographic location to 
ensure the best available information is used when establishing the 
escalation rates to be used in the cost estimate. There is 
consideration to market timing to the extent practical in order to bid 
the project at a time when there is the best opportunity to have the 
greatest competition by the contracting community. VA has also begun to 
employ more extensive preplanning before a project is placed in the 
budget to be sure that all issues relating to scope, building systems, 
and constructability have been identified and their costs identified.

    Question 2(c): What is the status of a possible collaborative 
arrangement in Denver between VA and 000 or the University of Colorado?

    Response: The University of Colorado Hospital has completed its 
plan for build-out for the Fitzsimons Campus. Sharing of space with VA 
is not included in their build-out plans. The possible areas for short 
term clinical collaboration remain much the same as they currently 
exist: buying and selling of services between the facilities. Once VA 
has relocated to the Fitzsimons Campus, other opportunities might arise 
for the buying and selling of services related to high technology 
equipment, specialized laboratory tests, and specialized patient 
treatments.
    The Department of Defense (DoD) has renewed its interest in sharing 
in the Denver VA facility replacement project and that option is being 
explored. The project initially included outpatient and administrative 
space for DoD that would be constructed by VA and then leased by DoD. 
The need for inpatient care was addressed by additional hospital beds 
that would be used to care for DoD patients. VA would charge DoD for 
inpatient care at a reduced cost. This option remains viable today but 
would increase the square footage and the cost of the current project.

    Question 3: In 2004, the Secretary agreed with the CARES 
Commission's recommendation that a new medical facility was needed in 
Orlando. However, almost 3 years later, this project has not advanced.

    Question 3(a): When will the site for the new Orlando facility be 
identified? (Originally, the site was scheduled to be identified last 
summer.)

    Response: The Secretary announced on March 1, 2007, the selection 
of Lake Nona as the site for the new Orlando facility.

    Question 3(b): What is the cause for delay?

    Response: A number of actions have taken place since the decision 
was made to construct a new VA medical center in Orlando. These have 
included:

      a study to determine whether the site of the existing 
clinic would be adequate to support a new medical center (it was 
determined that a new site was required);
      appointment of a site selection board by the Secretary to 
recommend the best site for the new medical center;
      advertisement for new sites;
      a comprehensive technical evaluation of proposed sites;
      a public hearing with veterans and other stakeholders;
      an environmental assessment of the two preferred sites: 
Lake Nona and International Corporate Park; and
      publication of a finding of no significant impact (FONSI) 
and notice of availability.

    These many actions were required to assure the best site was 
selected for the new Orlando medical center, and to satisfy Federal 
land acquisition requirements.

    Question 3(c): How will this impact the cost of and time table for 
constructing a new facility?

    Response: As site selection was underway, VA also contracted for 
preliminary studies and schematic design. As a result preliminary 
studies, work on schematic design, and studies to define space 
requirements are underway. By performing site selection and schematic 
design concurrently, VA has minimized the impact on cost and time for 
the project.

    Question 4: VA was required to submit to Congress a master plan for 
the West Los Angeles campus in 1998. To date, a master plan has not 
been submitted.

    Response: To comply with section 707 of the Veterans Programs 
Enhancement Act of 1998 (P.L. 105-368), a 25 year master plan was 
developed for the West Los Angeles campus in April 2001. The master 
plan was completed and involved public meetings and the formation of a 
land use action committee. The master plan also included an 
environmental assessment. The master plan was shelved due to 
overwhelming public comments against the plan. Numerous letters were 
written opposing adoption of the proposed master plan.

    Question 4(a): What is the cause for the delay in developing a 
master plan for West Los Angeles?

    Response: After the 2001 master plan was shelved, the decision was 
made to develop a master plan as part of the Capital Asset Realignment 
for Enhanced Services (CARES) initiative. The CARES initiative would 
set some of the parameters about functions and probable locations of 
healthcare facilities on the campus that could be used to develop a new 
master plan. This approach seemed to fit best with the overall intent 
of CARES, which is to determine the best use of VA's assets and the 
best configuration of these assets. Once these decisions on assets are 
made, the local communities can interact with VA through publicly held 
CARES local advisory panel meetings.

    Question 4(b): When do you expect to issue a final decision on the 
options for reusing excess land at West Los Angeles?

    Response: The final Stage 2 CARES Report for West Los Angeles will 
be completed in July 2007. It will provide information to the Secretary 
on the advantages and disadvantages of each option selected for 
detailed study.

    Question 5: As part of the President's Management Agenda, the 
Executive Brand Management Scorecard is used to track how well agencies 
are executing governmentwide initiatives. VA achieved ``green'' status 
on the scorecard for the Federal Government's real property initiative 
in 2006. What is VA doing to maintain this ``green'' status?

    Response: VA continues to move forward aggressively on the Federal 
Government's real property initiative with a true capital investment 
life cycle approach. Real property is managed from planning/investment 
through performance monitoring and disposal.

Planning/Investment

    The Department will continue to work toward achieving the goals, 
objectives, and milestones laid out in the VA Asset Management Plan, 5-
Year Capital Plan, disposal plans, and sustainment model (used to 
maintain VA infrastructure at the current level). Development will 
continue through (1) implementation of VA's CARES program and (2) focus 
on deferred maintenance.

    CARES Implementation Status

       A total of 36 CARES projects are in process. One project, an 
enhanced-use lease in Chicago, is complete. Two projects are new; the 
status of the remaining 33 is as follows:

            Construction documents prepared--6
            Construction begun--14
            Schematics/design development in process--13

       Eighteen sites were selected for further independent study. The 
one in Gulfport has been eliminated due to its loss during Hurricane 
Katrina.

CARES Business Plan Studies

    Along with previous CARES projects selected in FY 2006 and FY 2007 
for implementation, there are a number of sites where further study is 
required to determine suitability for future healthcare and re-use 
activities. These studies will include evaluating outstanding 
healthcare issues to recommend healthcare delivery options, developing 
capital plans, as well as determining the highest and best use for 
unneeded VA property. Completion of the studies going into more 
detailed analyses (Stage 2) is anticipated by the end of 2007.
    Firms have been awarded the contract to assist the Secretary in 
reaching final healthcare decisions and re-use options. CARES planning 
data have been updated with FY 2003 actual use and refinement in 
planning assumptions for categories of care, including long-term and 
mental healthcare. This improved data will be utilized in the 
validation of construction plans and the annual strategic planning 
process.
    The following table identifies the locations being studied and 
their current status:


----------------------------------------------------------------------------------------------------------------
           Health Care, Capital Plan and Re-Use Studies            Comprehensive Capital Plan and Re-Use Studies
----------------------------------------------------------------------------------------------------------------
Study current in Stage 2:                                                       Study pending Stage 1 decision:
 
   Boston, MA                                                                             West Los Angeles, CA
 
Completed studies:                                                                Studies currently in Stage 2:
 
   New York--Reject consolidation of 2 VA                                        Canadaigua, NY
    medical centers                                                                                    Lexington, KY
   Louisville, KY--Study validated need for                                                    Livermore, CA
    replacement hospital                                                      Montrose/Castle Point, NY
   Big Spring, TX--Keep existing service in
    Big Spring; use Planning process to                                                      Completed studies:
    explore contracting and/or expansion in
    market including domiciliary                                          White City, OR--Construct new
   Walla Walla, WA--Construct new ambu-                                                     domiciliary
    latory care center contract inpatient care                             St. Albans--Replace existing
                                                                                                     facilities
    in capital planning process                                        with nursing home outpatient clinics and
   Montgomery, AL--Maintain inpatient                           domiciliary; VA to develop capital plan
    services; major modernization                                      for new construction on site and a re-use
   Waco, TX--Retain all current services                                            plan for the campus
   Muskogee, OK--Keep facility and imple-                       Perry Point, MD--Upgrade entire
    ment increase in psychiatric beds                                      campus, continue and complete re-use
                                                                                                          plan.
 
                                                                      Removed from the study due to damage from
                                                                                             Hurricane Katrina:
 
                                                                                           Gulfport, MS
 
----------------------------------------------------------------------------------------------------------------
 
Financial Analysis Study
 
            Poplar Bluff--Keep facility; is cost effective to provide inpatient care
 
----------------------------------------------------------------------------------------------------------------


    At Walla Walla, St. Albans, Louisville, Perry Point and Montgomery 
VA medical centers (VAMC), capital investment proposals were developed 
for consideration in the next (FY 2009-2014) 5-year capital plan. For 
the new Louisville VAMC, a site selection committee has been 
established by the Under Secretary for Health.
    The Secretary decided to retain all current services at Waco, 
Texas, and establish a center of excellence for post-traumatic stress 
disorder as part of VA's internal planning process. Waco will also 
pursue reuse of vacant buildings and land through VA's enhanced-use 
lease program.
    The Secretary directed the VAMC in Walla Walla, Washington, to use 
existing contracting authority to provide inpatient and nursing home 
care and to explore partnerships and other opportunities to better use 
the historic campus.
    In White City, Oregon, the Secretary directed that a capital plan 
be developed that (1) combines new construction and renovation; (2) 
replaces several domiciliary buildings through new construction; and 
(3) expands ambulatory specialties and outpatient mental health 
services. The master plan is also to consider enhanced-use leasing 
opportunities, which are currently being reviewed by the ``reuse'' 
contractor under Phase 3 reuse/redevelopment. For St. Albans, New York, 
the Secretary directed that a capital plan for new construction be 
developed for a new nursing home, domiciliary and outpatient clinic. 
The VAMC is leading the effort, designing the new medical components of 
the campus, and the reuse contractor has developed the Phase 3 Reuse/
Redevelopment report.

Deferred Maintenance

    VA will continue to fund construction to upgrade and replace 
existing facilities and fund repairs needed to improve VA-owned 
buildings.

Performance Monitoring

    VA will continue to integrate its efforts on real property with 
VA's energy program. Real property management focuses on the inventory 
of assets, their mission alignment, use, condition and cost. The energy 
program is implementing metering, energy sustainability and a renewable 
program. Goals include reducing energy use in both existing and planned 
buildings, and increasing the use of renewable energy as a percent of 
facility electricity use. These programs are mutually supportive and 
together provide a global strategy for improved real property 
performance management.
    VA will continue to monitor real property performance in each of 
the areas noted above, reporting to the Office of Management and Budget 
(OMB) and VA Management Performance Review Board. Analysis will be 
conducted and actions identified for improved performance.

Disposal and Enhanced Use Leases

    Lastly, VA will continue to use disposal and enhanced use lease 
(EUL) authority to relieve the Department of its responsibility for non 
mission-dependent, underused and vacant space. In FY 2006, VA was no 
longer responsible for 77 buildings. VA used the following methods to 
transfer responsibility: 6 buildings via sales, 19 buildings via 
demolition, and 52 buildings via enhanced-use lease. In FY 2007, 4 
buildings (18,000 square feet) have been disposed of; an additional 99 
buildings (including Gulfport and Marlin) and over 2.2 million gross 
square feet are planned for disposal or EUL by the end of the year.

    Question 6: To your knowledge, are you or the Under Secretary for 
Health or any of your staff pursuing a proposal to standardize self 
monitoring blood glucose supplies and equipment at this time? Is the 
Department continuing to pursue a proposal to standardize self 
monitoring blood glucose equipment through a single national contract, 
even though the FY 2006 VA Appropriations Act specifically prohibits VA 
from replacing the current system by which VISNs select and contract 
for blood glucose testing supplies and monitoring equipment?

    Response: VA, to include the Secretary, Under Secretary for Health 
or any of the staff, is not pursuing a national proposal to standardize 
self monitoring blood glucose (SMBG) supplies and equipment at this 
time. The Military Quality of Life and Veterans Affairs and Related 
Agencies Appropriations Act of 2006 prohibits VA from pursuing new 
contracts. Specifically, section 220 ``prohibits the expenditure of any 
funds available to the Department on implementation of a national 
standardization contract for diabetes monitoring systems.''
    Decisions on which SMBG products are offered to veterans cannot be 
made at the national level and now must be made at the Veterans 
Integrated Service Network (VISN) level.

    Question 7: I understand that in March of 2006, the Deputy Under 
Secretary of Health for Operations and Management sent a memo to the 
VISN directors notifying them of enacted legislation prohibiting VA 
from replacing the current system by which VISNs select and contract 
for blood glucose testing supplies and monitoring equipment. However, 
it has been reported that some VISN directors are continuing to prepare 
for a national standardization of diabetes monitoring supplies and 
equipment. Are you aware of any correspondence to the VISN directors on 
this topic since last year?

    Response: The memo entitled ``Termination of Proposal to 
Standardize Blood Glucose Devices'' dated March 17, 2006 is still in 
effect. No other direction has been given to the field to reverse or 
change this memorandum. VISN field sites continue to use VISN 
procedures to select and contract for these supplies and equipment.

    Question 8: I understand that notwithstanding Congressional actions 
that prohibit VA from moving forward with the standardization of blood 
glucose testing supplies, vendor competition has produced VA savings on 
the purchase of such supplies. Please provide me with VA's purchasing 
costs for blood glucose testing supplies and the annual savings the 
Department has achieved since September 2005?

    Response: Vendor competition has not produced meaningful savings on 
blood glucose testing supplies. With the exception of a $0.01 price 
reduction for one low volume blood glucose testing strip, VA's unit 
prices have remained unchanged for the period September 2005 through 
December 2006. VA's expenditures during this time period were 
$77,346,967. Without the $0.01 reduction, VA's costs would have been 
$77,440,347. Therefore, VA saved a modest $93,380 (0.1 percent) from 
the price reduction from September 2005 through December 2006.

                                 
  Questions from Hon. Henry E. Brown, Jr. to Hon. R. James Nicholson, 
             Secretary, U.S. Department of Veterans Affairs

    Question 1: Mr. Secretary, you budget request $40 million for 
advance planning under the Veterans Health Administration. Can you 
provide a breakdown of where the Department plans to dedicate those 
funds?

    Response: The FY 2008 advance planning funds will be used for 
several purposes including the early planning and design of projects 
expected to be included in the FY 2009 budget, support for the VISNs in 
developing the project capital asset applications for the FY 2010 
projects, development of space and design standards, environmental and 
other studies, as well as supporting our ongoing CARES projects design.

    Question 2: Mr. Secretary, I have reviewed the Department's 5-year 
capital plan and find only one mention, in passing, of the joint-use 
advanced planning at Johnson VAMC in Charleston. Is this because the VA 
was only authorized to conduct planning activities at the end of the 
109th Congress, or are there additional reasons why this 
important project was not included in the Department's 5-year plan or 
budget request?

    Response: The $36.8 million intended for advanced planning funds 
were authorized at the end of the 109th Congress, but not 
appropriated. The Veterans Health Administration (VHA) has many major 
construction projects that are identified in our 5-year capital plan 
that have a higher priority, based on significant safety and 
environmental quality concerns, for funding at this time.

    Question 3: Outside of the absence of advance planning for 
Charleston in this year's budget, are you continuing to support 
development of that project, and who are the new national VA leaders 
from VHA who are leading the effort for VA?

    Response: Replacement of the Ralph H. Johnson VA Medical Center in 
Charleston, SC is an undertaking that has a competitive disadvantage 
when viewed with the other major construction priorities of VA at this 
time. The Medical Center Director at Charleston, and the President of 
Medical University of South Carolina (MUSC), will continue to lead a 
local group who will explore collaboration options in Charleston 
between VA and MUSC.

    Question 4: Mr. Secretary, I understand that you have recently made 
favorable comments about the innovative plan for increased VA and 
university collaboration/integration being developed at Charleston 
between the Johnson VAMC and the Medical University of South Carolina. 
If Congress appropriates the funds to proceed with planning as 
authorized under last year's VA Authorization bill, will you proceed 
aggressively with that planning, given that Charleston is at high risk 
for hurricane damage? Can we make progress fast enough to avoid a New 
Orleans/Katrina-like catastrophe in Charleston?

    Response: VA and MUSC have long enjoyed a productive and mutually 
beneficial affiliation. The local group headed by the Medical Center 
Director and the President of MUSC, will continue to explore 
collaboration opportunities between VA and MUSC. An example of this 
collaboration is the procurement of high cost medical equipment. 
Contracts for these arrangements are very close to being signed, and VA 
is poised to procure the equipment. VA will purchase the equipment and 
it will be placed in MUSC facilities. In return, veterans will receive 
free or significantly discounted clinical services up to the purchase 
price of the equipment. Veterans and the citizens of South Carolina 
will both benefit from this arrangement.
    Normally to deal with hurricanes, VA's policy is to harden, or 
hurricane strengthen. A VA study showed we would not need a new 
facility to do this, and the Johnson VAMC meets current hurricane 
structural standards. We still believe the priorities outlined in the 
President's Budget should be enacted into law. If, however, Congress 
funds a project not in the President's Budget and the President signs 
the bill into law, this would be considered direction and we would 
proceed. In such a scenario, where it would rise to a top priority, it 
is projected that it would take 5 to 6 years to build a hurricane-
strengthened facility.

                                 
Questions from Congressman Gus M. Bilirakis to Hon. R. James Nicholson, 
             Secretary, U.S. Department of Veterans Affairs
Tampa Parking Situation:

    The James Haley VA Medical Center (VAMC) in Tampa, Florida is one 
of the busiest, if not the busiest, medical centers in the country. 
Parking is a critical issue at the facility. Veterans complain about 
having to drive around for long periods of time looking for an 
available parking space. This issue has been highlighted in numerous 
paper stories in my local papers.

    Question 1: As part of the Fiscal Year 2007 budget submission, the 
Department included a project to ``improve patient parking'' at the 
Tampa VAMC as a potential future construction project. What is the 
status of this proposed project?

    Response: The 2007 Construction Budget Submission (5-Year Capital 
Plan) identified an effort to improve patient parking at the Tampa 
VAMC. Toward that end, VISN 8 submitted a major construction proposal 
for FY 2008 to expand the Tampa polytrauma unit that included a parking 
garage to increase access for these patients and relieve parking 
congestion at Tampa. While the project scored high, it was not funded 
due to other priorities ahead of it.
    VA is presently going through the major project application review 
and scoring cycle for the FY 2009 budget. The Tampa proposal, for 
polytrauma unit expansion to include a parking garage, has been revised 
and resubmitted as part of the FY 2009 budget planning cycle. It is 
currently going through the validity review process where it will again 
be scored to determine its standing in VHA's national prioritization 
list for FY 2009 major construction funding cycle.

    Question 2: What is the Department doing to address the parking in 
the interim?

    Response: The medical center currently leases parking spaces at a 
nearby mall and operates continuous shuttles for patients, visitors, 
and employees from approximately 6 a.m. to 9 p.m. Additionally, they 
participate in the North Tampa Transportation Initiative, which 
supports van pooling and public transportation. Through this 
initiative, they have established 10 van pools, thereby reducing the 
number of parking spaces needed for employees by 51. An additional 
acquisition proposed for FY 2007, is the Alpha property (3.6 acres) 
across the street from the Tampa VAMC, which will produce approximately 
650 parking spaces. A station level project will be required to address 
necessary grading and drainage of the property before parking can 
commence. The project to purchase this property is on the FY 2007 list 
for funding.

PVA Land Purchase:

    Question 3: The Tampa VA is also in the process of purchasing some 
land near the facility from a local Paralyzed Veterans of America (PVA) 
chapter. I've been told that the sale is just awaiting your signature 
to be finalized. When do you anticipate signing the approval papers?

    Response: The Secretary has approved the purchase and the offer to 
sell has been accepted, VA closed on March 12.

Coming Home to Work Program:

    Question 4: One issue that I am particularly interested in is 
helping our servicemembers returning from Operation Iraqi Freedom and 
Operation Enduring Freedom transition back into civilian life. Your 
testimony highlights the VA's ``Coming Home to Work'' initiative. How 
many veterans have taken advantage of this program?

    Response: Information for FY 2007 through the end of January shows 
that:

      16 service members are participating in active work 
experience programs with Federal agencies while awaiting discharge or 
return to duty orders;
      121 service members are receiving early intervention 
services in preparation for work experience programs, including 
vocational counseling, testing, and administrative support necessary 
for successful placement in a work experience program;
      108 veterans participating in the ``Coming Home to Work'' 
(CHTW) program at a military treatment facility were referred to their 
local regional office for continuation of Vocational Rehabilitation and 
Employment (VR&E) services;
      24 service members have returned to active duty following 
early intervention services; and
      7 veterans have been hired directly by their work 
experience employers upon discharge from active duty.

                                 
      Questions from Hon. John Boozman, Ranking Republican Member,
   Subcommittee on Economic Opportunity, to Hon. R. James Nicholson,
             Secretary, U.S. Department of Veterans Affairs
    Question 1: The Budget shows education performance goals as 25 and 
12 days for original and supplemental claims respectively and 
translates to reductions of 37.5% and 31%, based on the latest FY 2007 
performance reports. How do you propose to accomplish these very 
significant reductions with only 12 additional direct FTE and 
anticipated increase of claims by about 33,000?

    Response: We expect to make substantial progress toward these FY 
2008 goals by the end of FY 2007. In the first 5 months of FY 2007, we 
have reduced the average age of pending original claims by 30 percent, 
and the average age of supplemental claims by 39 percent. Our current 
targets for the end of FY 2007 are 35 days to process original claims 
and 15 days to process supplemental claims, leaving reductions of 10 
days for original claims and 3 days for supplemental claims to be 
achieved in FY 2008. In FY 2003, with similar resources, we achieved 
similar reductions: from 34 days to 23 days for original claims, and 
from 16 days to 12 days for supplemental claims.

    Question 2: In addition to having sufficient staff to meet 
performance goals, it is necessary to distribute those resources 
properly throughout the system. For example, there is significant 
difference in the time to determine eligibility for the voc rehab 
program ranging from about a month in San Diego to about 4 months here 
in DC, with other stations being only slightly more timely than the DC 
office. Several weeks ago, the staff asked for a report comparing the 
percentage of national workload and direct staff for each business line 
in each regional office. When do you anticipate we will receive that 
report?

    Response: One of the largest influences on timeliness of vocational 
rehabilitation and employment (VR&E) is the variance of services 
provided to service members and veterans at each regional office (RO). 
The San Diego RO and the Washington RO are good examples of how 
timeliness is affected due to the nature and scope of individualized 
services provided at each station. For example, San Diego supports an 
extensive Disabled Transition Assistance Program (DTAP), which is a key 
element in receiving completed claims with assigned disability ratings. 
Rapid claims processing through DTAP enables the San Diego VR&E office 
to provide immediate case management services to applicants of the 
program. Both organizations support their diversified case management 
needs by using a balance of vocational rehabilitation counselors and 
contractors.
    The attached spreadsheet compares the percentage of the national 
workload and direct staff for each business line in each regional 
office. The following information will further clarify the employee 
distribution for the compensation and pension programs.
    The compensation and pension resource allocation model is based on 
four factors: (1) receipts of incoming work, (2) appellate work, (3) 
accuracy, and (4) timeliness. Receipt of incoming work is given the 
greatest weight as the single most important factor driving staffing 
requirements. Receipts include the rating workload shown on the 
attached spreadsheet as well as the non-rating workload (income and 
dependency adjustments, burial claims, etc.), public contact and 
outreach activities, and work performed by the fiduciary staff. 
Factoring in accuracy and timeliness ensures that staffing decisions 
are based on both output and quality. To minimize large variations in 
staffing allocations from year to year, the model uses a 2-year average 
for each of these factors.
    Adjustments are made to the allocations developed by the model for 
special missions assigned to many of our ROs. The attached spreadsheet 
shows that compensation and pension staffing for FY 2006 was 7,377 full 
time employees (FTE). Of these, 431 FTE (6 percent) were allocated to 
stations with special claims processing missions. The largest segment 
of special mission staffing supports workload ``brokering.'' Cases are 
sent from offices with high inventories to one of 12 ROs staffed with a 
resource center to assist other ROs in developing and/or rating 
``brokered'' claims. These resource centers and the ``brokering'' 
strategy help to balance workload and staffing across all ROs.
    Beginning in 2006, rating work for Benefits Delivery at Discharge 
(BOD) claims was consolidated at the Salt Lake City and Winston-Salem 
ROs. There are currently 136 employees at Winston-Salem and Salt Lake 
City processing only BOD claims. Other consolidations of claims 
processing and related functions include, radiation exposure claims to 
Jackson; claims from residents of Mexico to Houston; foreign claims to 
Pittsburgh; and the Special Issues Helpline at St. Louis.
    Pension Maintenance Centers in Philadelphia, St. Paul, and 
Milwaukee are allocated a combined total of 448 employees to process 
pension maintenance actions, such as income and dependency adjustments. 
On the spreadsheet, these resources are shown under the heading of 
``Pension'' and are not included in the totals under the heading 
``Compensation.''
    The ``FY2007 Dee'' columns for FTE on the spreadsheet show the 
actual number of personnel on hand at each station. Most regional 
offices have hired subsequent to that date and are continuing to 
recruit additional claims processors and support personnel.

    Question 3: What is the level of funding proposed for The Expert 
Education System (TEES), and what major milestones will that funding 
accomplish, and when do you anticipate that application coming online, 
and what will be the total cost to develop and field that system?

    Response: The Expert Education System (TEES) comprises a suite of 
business applications engineered with a common architecture that work 
synergistically to achieve the goal of automated processing of 
education benefit claims with minimal human intervention. TEES 
incrementally delivers business improvements that will enable VA to 
provide educational benefits to veterans in a more timely and efficient 
manner. TEES will be accomplished in two distinct phases.
    The first phase comprises near-term delivery of business 
applications to replace aging stand-alone applications. This strategy 
enables VA to quickly target critical business functionality.
    The focus of phase two will be the development and deployment of 
the new education rules-based automated eligibility and award 
processing system. Incorporating rules-based technology will ensure 
consistency and accuracy of decisions rendered. The following are major 
milestones and associated levels of funding for TEES:

----------------------------------------------------------------------------------------------------------------
                                                                                                       FY 2008
                                                         Description                     Projected     Funding
                                                                                         Duration     (Millions)
----------------------------------------------------------------------------------------------------------------
Phase I
----------------------------------------------------------------------------------------------------
Business                                   Assess the continued development of TEES,   07/07-10/07
  Assessment                                   including reviewing the potential for
                                                integration with the Financial Award
                                                            Processing System (FAS).
----------------------------------------------------------------------------------------------------
Requirements                                 Gather and define business requirements   08/07-01/08
  Definition                                 associated with ECAP, Chapter 30 PC and
                                                                          Workstudy.
----------------------------------------------------------------------------------------------------------------
Design and Build                            Design and build ECAP, Chapter 30 PC and   10/07-09/08         $2.5
                                                                          Workstudy.
----------------------------------------------------------------------------------------------------------------
Test and Certify                        Test and certify the ECAP, Chapter 30 PC and   01/08-10/08         $0.5
                                                             Workstudy applications.
----------------------------------------------------------------------------------------------------------------
Implementation                           Deploy ECAP, Chapter 30 PC and Workstudy to   04/08-12/08         $0.5
                                                        Regional Processing Offices.
----------------------------------------------------------------------------------------------------------------
Phase 2
----------------------------------------------------------------------------------------------------
Requirements                                 Gather and define business requirements   07/07-09/08
  Definition                                for building a new rules-based automated
                                            eligibility and award processing system.
----------------------------------------------------------------------------------------------------
Data Conversion                                  Convert legacy Educational data and   10/08-09/11
                                             incorporating it into the new Education
                                                                             System.
----------------------------------------------------------------------------------------------------
Design and Build                                Design and build the new rules-based   10/08-09/11
                                          automated eligibility and award processing
                                                                             system.
----------------------------------------------------------------------------------------------------
Test and Certify                                Test and certify the new rules-based   10/08-09/11
                                          automated eligibility and award processing
                                                                             system.
----------------------------------------------------------------------------------------------------
Implementation                           Deployment of the new rules-based automated   10/08-09/11
                                            eligibility and award processing system.
----------------------------------------------------------------------------------------------------------------
FY 2008 Total                                                                                              $3.5
----------------------------------------------------------------------------------------------------------------


    Question 4: VA projects a 2.5% increase in Voc Rehab workload and 
is requesting about 40 additional staff to bring the total VR&E staff 
to 1,260 to meet that increase. The Independent Budget suggests you 
will need 1,375 FTE. First how do you estimate the workload increase? 
Second, what positions will the new FTE fill? And third, what will be 
the average caseload for your direct service staff at that manning 
level?

    Response: The workload for the Vocational Rehabilitation & 
Employment (VR&E) program, which dictates staffing levels, is projected 
to increase based on factors such as the Global War on Terrorism, the 
economy, and the processing rate of claims. The national workload at 
the beginning of FY 2007 was 89,126, with 621 counselors. This yields 
an average caseload per counselor of 144. VR&E service estimates the 
workload for FY 2008 will increase to 93,865 cases. To manage the 
increase in workload, the FY 2008 budget submission includes an 
additional 59 FTE, including 5 contract specialists, 5 employment 
coordinators, 4 FTE to support the new FY 2008 process consolidation 
initiative, and 45 vocational rehabilitation counselors (VRCs). VR&E 
service recommends that the ROs with the highest workload to counselor 
ratios be allocated the majority of the additional VRCs. This would 
balance the caseload ratio at each RO and bring the average caseload 
per counselor to 141. VR&E service uses contract professionals to meet 
the needs of variances in caseloads. Contract professionals augment 
VR&E staff by conducting initial evaluations, program case management, 
and job readiness and employment services.

    Question 5: VA has had significant problems fielding new computer 
systems to support the Department's missions. To this point, the 
Veterans Affairs Committee has given VA a relatively free hand in 
developing and fielding new systems. I believe it is time that we do an 
annual authorization of VA IT programs just as we do for construction. 
What is The Department's position on an annual authorization for IT 
systems?

    Response: Committee on Veterans' Affairs has encouraged the 
Department over the past year to centralize the management of 
information technology (IT). The VA Chief Information Officer (CIO) now 
has control over the development of IT systems and solutions, and has 
begun to implement rigorous standards and processes for articulating IT 
needs and managing IT development projects. These process improvements 
will result in outcome improvements in the delivery and fielding of IT 
solutions. IT is a demanding and challenging environment. As such, the 
VA CIO needs flexibility to meet rapidly changing requirements as well 
as respond to unforeseen circumstances. VA does not believe use of an 
annual authorization process will lead to better planning and execution 
of IT efforts. VA would look forward to in-depth discussions during the 
year with Members and staff on the direction and challenges VA is 
facing with critical projects. VA believes this would better serve the 
development and implementation of the necessary IT systems to support 
delivery of services to the Nation's veterans. This would ensure an 
ever changing environment that the VA CIO would have the flexibility to 
address issues within programs.

    Question 6: How many veterans are currently waiting to enter the 
Independent Living program? If Congress removed the 2,500 limitation on 
new entrants into the independent living, how many additional FTE and 
other costs would be needed?

    Response: No veterans are currently waiting to enter the 
Independent Living (IL) program. The count of veterans who have entered 
the program begins on the first day of each fiscal year. Action must 
usually be taken in early August to prevent exceeding the statutory 
limit of 2,500 new cases. From then until the end of the fiscal year on 
September 30, veterans may experience a delay in entering the program.
    VR&E anticipates that there will be a steady increase of new IL 
cases over the next 10 years based on historical data and the need for 
increased IL by Operation Enduring Freedom/Operation Iraqi Freedom 
(OEF/OIF) veterans. It is anticipated that the steady increase will 
occur given that disabilities worsen over time and the need for IL may 
arise several years after discharge.
    The following table provides a 10-year projection of the number of 
cases over the 2,500 cap for each year, the costs associated with the 
extra cases, and the FTE needed over the current staffing level.
    The first year cost is $2,095,500. The cost over 5 years is 
$26,598,145. The 10-year cost is $76,765,365. We estimate that there 
will be a growth rate of 10 percent in 2008 and 2009, and that this 
rate will diminish to 5 percent in 2010 and reach a normal growth rate 
of around 2 percent beginning in 2011, assuming that the OEF/OIF 
conflicts have ended.


----------------------------------------------------------------------------------------------------------------
                                                                        $ Increase over      FTE Increase over
                    Fiscal Year                       # Above Limit      Current Limit*      Current Staffing**
----------------------------------------------------------------------------------------------------------------
  2008                                                          250            2,095,500                      5
----------------------------------------------------------------------------------------------------------------
  2009                                                          525            4,505,025                     11
----------------------------------------------------------------------------------------------------------------
  2010                                                          676            5,940,012                     14
----------------------------------------------------------------------------------------------------------------
  2011                                                          739            6,649,552                     15
----------------------------------------------------------------------------------------------------------------
  2012                                                          804            7,408,056                     16
----------------------------------------------------------------------------------------------------------------
  2013                                                          870            8,216,280                     17
----------------------------------------------------------------------------------------------------------------
  2014                                                          937            9,070,160                     19
----------------------------------------------------------------------------------------------------------------
  2015                                                        1,006            9,981,532                     20
----------------------------------------------------------------------------------------------------------------
  2016                                                        1,076           10,942,920                     22
----------------------------------------------------------------------------------------------------------------
  2017                                                        1,147           11,956,328                     23
----------------------------------------------------------------------------------------------------------------
* An economic assumption for the President's budget cost-of-living increase was used in the calculations for FY
  2008 through 2017.
** Assuming caseloads of 50 IL-only cases per counselor, rounded to whole FTE.


    Question 7: Much is made about the backlog in disability claims. 
Would you describe for the Members what happens to a cohort of 1,000 
claims as they work through the system from the regional office to the 
Court of Appeals for Veterans claims?

    Response:

Rating Process

    When a veteran submits a claim, a claim file is established or 
requested from storage and the file is placed under control. The 
Veterans Claims Assistance Act (VCAA) requires VA to provide written 
notice to claimants of the evidence required to substantiate a claim 
and of which party (VA or the claimant) is responsible for acquiring 
that evidence. Under VCAA, VA's duty to assist the claimant in 
perfecting and successfully prosecuting his or her claim extends to 
obtaining government and private records, and obtaining all necessary 
medical examinations and medical opinions. The claimant has 60 days to 
respond to VA's request for information or submit substantiating 
evidence. As a claim progresses, additional notifications to the 
veteran may be required. After the evidence is received or after all 
notice periods have ended, the claim and evidence are reviewed. A 
rating decision is then prepared and the award or denial is processed.

Appeal Process

    Veterans can appeal decisions denying service connection for any 
conditions claimed. They may also appeal the effective date of an award 
and the evaluation assigned to a disability. An appeal is initiated 
when the veteran files a Notice of Disagreement (NOD). Approximately 13 
percent of all rating decisions result in an NOD. For every 1,000 
rating decisions, 130 veterans on average would file a notice of 
disagreement.
    If the appeal cannot be resolved at the regional office, VA issues 
a Statement of the Case (SaC). The veteran may then perfect the appeal 
and have it sent to the Board of Veterans' Appeals (Board) by filing a 
VA Form 9. About 50 percent of veterans who initially file an NOD 
formalize an appeal. This means around 65 of the 130 veterans appeal to 
the Board.
    If the veteran submits new evidence that does not resolve the 
appeal, VA will issue a Supplemental Statement of the Case (SSOC). 
After the regional office issues an SSOC, the claims file is reviewed 
for completeness and is certified as ready for the Board. The regional 
office then transfers the record to the Board. The Board reviews the 
appeal and decides to grant the appeal, deny the appeal, or remand the 
appeal to the regional office or the Appeals Management Center for 
additional development and processing.
    If the veteran disagrees with the Board's decision, he or she has 
120 days from the date of the final Board decision to file an appeal to 
the Court of Appeals for Veterans Claims (CAVC). The CAVC may grant, 
deny, dismiss, or remand the appeal. Less than 1 percent of all 
regional office decisions are appealed to the CAVC.

Growth of Disability Claims Workload

    The number of veterans filing initial disability compensation 
claims and claims for increased benefits has increased every year since 
FY 2000. Disability claims from veterans of all periods increased from 
578,773 in FY 2000 to 806,382 in FY 2006. For FY 2006 alone, this 
represents an increase of nearly 228,000 claims or 38 percent over the 
2000 base year.
    The primary factors leading to the sustained high levels of claims 
activity are: Operation Enduring Freedom/Operation Iraqi Freedom (OEF/
OIF); more beneficiaries on the rolls, with resulting additional claims 
for increased benefits; improved and expanded outreach to active-duty 
service members, guard and reserve personnel, survivors, and veterans 
of earlier conflicts; and implementation of combat related special 
compensation (CRSC) and concurrent disability and retired pay (CDRP) 
programs by the Department of Defense (DoD).
    The number of veterans receiving compensation has increased by 
almost 400,000 since 2000--from just over 2.3 million veterans to 
nearly 2.7 million in 2006. This increased number of compensation 
recipients, many of whom suffer from chronic progressive disabilities 
such as diabetes, mental illness, and cardiovascular disabilities, will 
continue to stimulate more claims for increased benefits in the coming 
years as these veterans age and their conditions worsen.
    VA is committed to increased outreach efforts to active-duty 
personnel. These outreach efforts result in significantly higher claims 
rates. Original claim receipts increased from 111,672 in FY 2000 to 
217,343 in FY 2006--a 95 percent increase.
    The Veterans' Claims Assistance Act (VCAA) has significantly 
increased both the length of time and the specific requirements of 
claims development. VA's notification and development duties increased 
as a result of VCAA, adding more steps to the claims process and 
lengthening the time it takes to develop and decide a claim. Since 
enactment, we are required to review the claims at additional points in 
the decision process.
    The greater number of disabilities veterans now claim, the 
increasing complexity of the disabilities being claimed, and changes in 
law and Court decisions affecting the decision process pose additional 
challenges to timely processing the claims workload. As the number of 
claimed conditions increases, the potential for additional unclaimed 
but secondary, aggravated, and inferred conditions increases as well. 
The increasing number of claimed conditions also significantly 
increases the potential for appeal.

    Question 8: Housing construction costs are escalating rapidly and 
the average adapted housing grant is bumping up against the maximum 
$50,000 limit. The budget request does not include additional funding 
for an increase in the limit. Does the Department intend to submit a 
legislative request to improve this important program to improve the 
lives of our most seriously disabled veterans?

    Response: VA intends to consider such a legislative proposal during 
the upcoming FY 2009 legislative cycle.

    Question 9: How many FTE are needed to administer the chapter 1606/
1607 education programs, what are the other costs such as equipment, 
and does 000 reimburse VA for those costs?

    Response: We estimate that both of these programs combined will 
represent approximately 20 percent of the students receiving benefits 
in FY 2008. The same percentage of claims processing FTE will be needed 
to administer these programs, equating to 80 FTE, plus equipment needs 
(PCs, printers, etc.).
    Chapters 1606 and 1607 are processed using VBA's existing Benefits 
Delivery Network (BON). We have not distributed the costs of operating 
and maintaining the BON by benefit program. There are other 
administrative costs involved with these programs such as direct 
mailing, outreach, etc.
    DoD reimburses VA for the actual benefit moneys that are disbursed 
but not for the administrative costs.

    Question 10: Your goal for veteran home ownership is 104% of the 
non-veteran ownership rate. The U.S. Census lists the national home 
ownership for the general population at 68.9%. What is the current 
veteran home ownership rate?

    Response: Our goal is for veteran home ownership to be 104 percent 
of the home ownership rate of the general population. The U.S. Census 
Bureau reports the home ownership rate for the general population was 
68.9%, at the close of FY 2006. The corresponding figure for veteran 
home ownership was 82 percent.

                                 
   Questions from Hon. Ginny Brown-Waite to Hon. R. James Nicholson, 
             Secretary, U.S. Department of Veterans Affairs

    Question 1: What has the VHA done to correct the serious 
malpractice of data storage that endangers all veterans' data in VA 
research facilities?

    Response: Recent events both inside and outside VA have highlighted 
the potential vulnerability of sensitive information, including patient 
data in research studies. VA is committed to protecting this sensitive 
information, and on February 6, 2007, implemented a comprehensive 
Security and Privacy Review of all VA research activities. The review 
consists of new training requirements and a project-by-project 
certification process focused on research data storage and security for 
all VA research. In response to the data incident at the Birmingham 
VAMC, on January 25, 2007, all research at the Birmingham VAMC Health 
Services Research and Development (HSR&D) Research Enhancement Award 
Program (REAP) was suspended. A formal review by the Office of 
Inspector General and the Office of Research Oversight is ongoing. As a 
precaution, on February 16, 2007, all research at the other six HSR&D 
REAP sites was suspended, pending a site visit assessment by the Office 
of Information and Technology accompanied by the Office of Research and 
Development and VHA Privacy Office.

    Question 2: The FY2008 IT cyber-security budget requests $70.1 
million. What are the specific initiatives by line item that this money 
purchases?

    Response: The IT cyber security program includes 18 initiatives, as 
follows:


------------------------------------------------------------------------
                                                                FY 2008
------------------------------------------------------------------------
Cyber Security Management                                        $28.7M
------------------------------------------------------------------------
Certification & Accreditation                                       7.5
------------------------------------------------------------------------
Identity Safety and Risk Management                                 6.0
------------------------------------------------------------------------
Policy Development and Maintenance                                  5.7
------------------------------------------------------------------------
Training, Awareness and Education                                   5.4
------------------------------------------------------------------------
FISMA Reporting                                                     2.3
------------------------------------------------------------------------
Security Inspection                                                 1.8
------------------------------------------------------------------------
Field Security Operations                                        $41.4M
------------------------------------------------------------------------
Enterprise Encryption and Data Protection                           7.0
------------------------------------------------------------------------
Maintenance/Support Services                                        6.5
------------------------------------------------------------------------
Enterprise Framework                                                5.5
------------------------------------------------------------------------
Antivirus                                                           5.4
------------------------------------------------------------------------
Vulnerability Assessment and Penetration                            4.0
------------------------------------------------------------------------
Patch Management                                                    3.4
------------------------------------------------------------------------
Encryption                                                          2.7
------------------------------------------------------------------------
Testing                                                             2.2
------------------------------------------------------------------------
Intrusion Prevention                                                1.9
------------------------------------------------------------------------
E-Authentication                                                    1.9
------------------------------------------------------------------------
Media Disposal                                                      0.5
------------------------------------------------------------------------
COOP                                                                0.4
------------------------------------------------------------------------
    Total                                                       $70.10M
------------------------------------------------------------------------


    Question 3: When will the Department fully deploy the Education 
Expert System?

    Response: The projected date to fully deploy TEES is September 
2011. The phased approach of delivering discrete modules of business 
functionality enables VA to target priority business functionality and 
benefit from their incorporation into the business process as more 
strategic modules are developed.

    Question 4: The budget requests $35 million in FY2008 for the FLITE 
program, which is the rebranding of the failed debacle of the CoreFLS 
program. How much was spent on the CoreFLS program before it bellied 
up?

    Response: The core financial and logistics system (coreFLS) project 
was designed to provide VA with a state-of-the-art integrated financial 
and logistical capability that would eliminate existing material 
weaknesses, and replace legacy financial and logistic applications. 
However, unexpected technical and programmatic challenges forced VA to 
shut down coreFLS and reexamine our approach. As a result, VA is now 
pursuing the development and implementation of the FLITE program which 
will also provide an integrated financial/logistics management solution 
that will satisfy the Federal Financial Management Improvement Act and 
related regulatory requirements. More importantly, FLITE will expand 
upon the work completed under coreFLS by refining the list of business 
requirements and interface specifications, standardizing business 
processes, and incorporating lessons learned into program and risk 
management plans associated with the creation of a simple, high 
performance, cost effective financial management component. FLITE is 
different from coreFLS because VA is engaged in more upfront planning, 
communication and coordination across the administrations. Out year 
budget request will enable VA to complete development and integration 
of these components and deploy the system accordingly. The total 
expended on the coreFLS project was $233.5 million.

    Question 5: Please provide a line-by-line authorization of each 
modernization project and a hard date of implementation.

    Response: VA modernization projects are defined as those 
initiatives currently planned or underway to: (1) move applications off 
the benefits delivery network (BON) platform and/or (2) move legacy 
client-server applications to the One VA ``to be'' enterprise 
architecture. These projects are:


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
VETSNET                                                    Compensation and       August 2007--complete
  Development                                       Pension Maintenance and                        compensation
                                                  Operations OMB Exhibit 300    February 2008--Survivor
                                                                                                       Benefits
                                                                               August 2008--Income Based
                                                                                                Pension
                                                                                May 2009--conversion of
                                                                                       all SON records complete
----------------------------------------------------------------------------------------------------------------
TEES                                                   TEES OMS Exhibit 300     Effort undergoing scope
                                                                                                            and
  Development                                                                                re-baseline review
----------------------------------------------------------------------------------------------------------------
BON Migration                                                  VA Computing    Effort in planning stage
                                                                                                         (rough
  Project                                         Infrastructure OMB Exhibit                          estimate)
                                                                        300              September 2011
----------------------------------------------------------------------------------------------------------------
YBA Application                                             YBA Application        FY 2008 initiative--
                                                                                                       planning
  Migration Pro-                                      Migration Project OMS                            estimate
  gram (VAMP)                                                   Exhibit 300                   July 2012
----------------------------------------------------------------------------------------------------------------


    Question 6: Development of the VHA scheduling application is over 
10 years old and still not implemented. Why? How much money has been 
spent on the scheduling project to date?

    Response: The purpose of the VA scheduling project, which began in 
May 2001, is to develop a future business model intended to support (1) 
improved access to care for veterans, (2) decreased wait times for 
appointments, and (3) increased provider availability all intended to 
improve patient care. Application development began in 2002 and has 
been underway for 5 years. VA is taking a phased approach to implement 
the application, as the move from a 25-year-old legacy system to a new 
infrastructure is understandably complex. This phased approach is part 
of the HealtheVet overarching strategic plan to modernize veterans 
health information systems and technology architecture (VistA) 
software. The scheduling project is now nearing development completion 
with costs to date (FY 2001 through FY 2006) totaling $66.5 million. 
Initial testing for both the application and new HealtheVet platform 
will be fielded at the first VA medical center in summer 2007.

                                 
   Questions from Hon. Michael R. Turner to Hon. R. James Nicholson, 
             Secretary, U.S. Department of Veterans Affairs

    Question 1: In the budget proposals reviewed by the House Veteran's 
Affairs Committee, two main categories of VA long-term care include 
Non-institutional Extended Care (which includes home care), and Nursing 
Home Care (which includes VA nursing facilities and contract 
facilities). VA nursing facilities allow our nation's veterans long-
term care often connected with a range of other medical services. It 
has been the policy of the VA that home care and contract facilities 
are used to supplement VA nursing home care. However, neither home care 
nor contract facilities are to be used as a substitute for traditional 
VA nursing facility when a VA nursing home facility is available and 
better suited to meet the veteran's needs. Does this continue to be the 
policy of the VA, and in light of the Administration's current budget 
request, how can the VA ensure that the use of home care and contract 
facilities won't undermine veteran's access to VA nursing facilities?

    Response: VA continues to hold to the philosophy, in keeping with 
practice patterns in the private sector, to provide patient-centered 
long-term care services in the least restrictive setting that is 
suitable for a veteran's medical condition and personal circumstances, 
and whenever possible in home and community-based settings. This 
approach honors veterans' preferences at the end of life and helps to 
maintain relationships with the veteran's spouse, family, friends, and 
faith community. Nursing home care should be reserved for situations in 
which the veteran can no longer be safely maintained in the home and 
community.
    The current budget request will support continued expansion of 
access to VA's spectrum of non-institutional home and community-based 
long-term care services while sustaining capacity in VA's own nursing 
home care units and the community nursing home program, and continuing 
to support modest growth in capacity in the State veterans home 
program. VA long-term care is comprised of a dynamic array of services 
provided in residential, outpatient, and inpatient settings that can be 
deployed as needed to meet a veteran's changing healthcare needs over 
time.
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 SOLDIERS RETURNING FROM IRAQ AND AFGHANISTAN: The Long-term Costs of 
        Providing Veterans Medical Care and Disability Benefits
                              Linda Bilmes
            Kennedy School of Government, Harvard University


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
  The views expressed in the KSG Faculty Research Working Paper Series are those of the author(s) and do not
necessarily reflect those of the John F. Kennedy School of Government or of Harvard University. Faculty Research
Working Papers have not undergone formal review and approval. Such papers are included in this series to elicit
feedback and to encourage debate on important public policy challenges. Copyright belongs to the author(s).
Papers may be downloaded for personal use only.
----------------------------------------------------------------------------------------------------------------


EXECUTIVE SUMMARY:

    This paper analyzes the long-term needs of veterans returning from 
the Iraq and Afghanistan conflicts, and the budgetary and structural 
consequences of these needs. The paper uses data from government 
sources, such as the Veterans Benefit Administration Annual Report. The 
main conclusions of the analysis are that:
    (a) the Veterans Health Administration (VHA) is already overwhelmed 
by the volume of returning veterans and the seriousness of their 
healthcare needs, and it will not be able to provide a high quality of 
care in a timely fashion to the large wave of returning war veterans 
without greater funding and increased capacity in areas such as 
psychiatric care;
    (b) the Veterans Benefits Administration (VBA) is in need of 
structural reforms in order to deal with the high volume of pending 
claims; the current claims process is unable to handle even the current 
volume and completely inadequate to cope with the high demand of 
returning war veterans; and
    (c) the budgetary costs of providing disability compensation 
benefits and medical care to the veterans from Iraq and Afghanistan 
over the course of their lives will be from $350-$700 Billion, 
depending on the length of deployment of U.S. soldiers, the speed with 
which they claim disability benefits and the growth rate of benefits 
and healthcare inflation.
    Key recommendations include: increase staffing and funding for 
veterans medical care particularly for mental health treatment; expand 
staffing and funding for the ``Vet Centers,'' and restructure the 
benefits claim process at the Veterans Benefit Administration.


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
  This paper was prepared for the Allied Social Sciences Association Meetings in Chicago, January, 2007. The
views expressed here are solely those of the author and do not represent any of the institutions with which she
is affiliated, now or in the past.
----------------------------------------------------------------------------------------------------------------


Introduction
    The New Year has brought with it the grim fact that 3,000 American 
soldiers have been killed so far in Iraq. A statistic that merits equal 
attention is the unprecedented number of U.S. soldiers who have been 
injured. As of September 30, 2006, more than 50,500 U.S. soldiers have 
suffered non-mortal wounds in Iraq, Afghanistan and nearby staging 
locations--a ratio of 16 wounded servicemen for every fatality.\1\ This 
is by far the highest killed-to-wounded ratio in U.S. history. For 
example, in the Vietnam and Korean wars there were 2.6 and 2.8 injuries 
per fatality, respectively. World Wars I and II had fewer than 2 
wounded servicemen per death.\2\
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    \1\ Department of Veterans Affairs, Office of Public Affairs, 
``America's Wars,'' September 30, 2006. This document shows that the 
number of non-mortal woundings in the Global War on Terror (combining 
Iraq, Afghanistan and surrounding duty stations) as of 9/30/06 was 
50,508 compared with 2,333 deaths in battle plus 707 other deaths in 
theater. The comparison numbers for previous conflicts are as follows: 
Desert Storm/Desert Shield: 1.2 wounded per fatality; Vietnam: 2.6 
wounded per fatality; Korea: 2.8 wounded per fatality; World War II: 
1.6 wounded per fatality; World War I: 1.8 wounded per fatality; Civil 
War (union): .7 wounded per fatality; War of 1812: .5 wounded per 
fatality; American Revolution: .7 wounded per fatality. Note: the VA 
defines non-mortal wounded as those who are ``medically evacuated from 
theatre.'' The Pentagon has several definitions, but the daily casualty 
reports on its website use a narrower definition referring to those 
wounded by shrapnel, bullets, and so forth. Using this narrow 
definition, the Iraq conflict has a ratio of 8 wounded per fatality--
still much higher than any previous war in U.S. history.
    \2\ Ibid.
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    While it is welcome news and a credit to military medicine that 
more soldiers are surviving grievous wounds, the existence of so many 
veterans, with such a high level of injuries, is yet another aspect of 
this war for which the Pentagon and the Administration failed to plan, 
prepare and budget. There are significant costs and requirements in 
caring for our wounded veterans, including medical treatment and long-
term healthcare, the payment of disability compensation, pensions and 
other benefits, reintegration assistance and counseling, and providing 
the statistical documentation necessary to move veterans seamlessly 
from the Department of Defense payroll into Department of Veterans 
Affairs medical care, and to process VA disability claims easily.
    To date, 1.4 million U.S. servicemen have been deployed to the 
Global War on Terror (GWOT), the Pentagon's name for operations in and 
around Iraq and Afghanistan.\3\ The servicemen who have been officially 
wounded are a small percentage of the veterans who will be using the 
veteran's administration medical system. Hundreds of thousands of these 
men and women will be seeking medical care and claiming disability 
compensation for a wide variety of disabilities that they incurred 
during their tours of duty.\4\ The cost of providing such care and 
paying disability compensation is a significant long-term entitlement 
cost that the U.S. will be paying for the next 40 years.\5\
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    \3\ As of September 30, 2006, 1,406,281 unique service members have 
been deployed to the wars in Iraq and Afghanistan, according to the 
Department of Defense, Defense Manpower Data Center, and ``Contingency 
Tracking System.'' The Veterans Health Administration (VHA) Office of 
Public Health and Environmental Hazards, November 2006 uses the number 
1.4 million (as of November 2006). The Veterans Benefits Administration 
(VBA) lists 1,324,419 unique servicemen deployed to GWOT as of May 2006 
(prepared by VBA/OPA&I, 7/20/06).
    \4\ Based on an analysis of the first Gulf War in 1991, using the 
Gulf War Veterans Information System (GWVIS August 2006, chart on 
``Gulf War Veteran Outpatient Stays''), there were 297,125 veterans 
from that conflict who used VA medical care, or 48.4%. If the same 
percentages of Iraq/Afghan veterans use VA medical care then VA should 
expect approximately 700,000 new patients from the 1.4 million existing 
servicemen. Increasing the number of unique servicemen deployed will 
increase medical and disability usage.
    \5\ Veterans' disability pay is an entitlement program, like 
Medicare and Social Security. Once a veteran has been approved to 
receive disability pay, he or she is entitled to receive an annual 
payment and cost-of-living adjustments. The average age of a servicemen 
is about 25 years of age, therefore given current life expectancy 
rates, 40 years is a reasonable amount of years to project payment of 
benefits, even assuming the veteran does not claim for some years 
following the period of service.
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    The objective of this paper is to examine the structural and 
budgetary requirements for caring for the returning war veterans from 
Iraq and Afghanistan, in terms of U.S. capacity to pay disability 
compensation, provide high quality medical care, and provide other 
essential benefits. The paper grew out of a previous paper that was co-
authored in January 2005 with Columbia University professor Joseph 
Stiglitz, in which the overall costs of the war in Iraq were estimated 
to exceed $2 trillion. One of the long-term costs cited in that paper 
was the cost associated with providing healthcare and disability 
benefits to veterans.\6\ This paper expands on that topic.
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    \6\ Bilmes, Linda and Stiglitz, Joseph, The Economic Costs of the 
Iraq War: An Appraisal Three Years After the Beginning of the Conflict, 
NBER Working Paper 12054 (http://www.nber.org/papers/w12054), February 
2006. The long-term budgetary costs associated with veterans health and 
disability cited in that paper ranged from $77bn to $179bn (depending 
on the length of the war), based on a population of 550,000 unique 
Iraqi war veterans. After we published this paper, a number of 
veteran's organizations including the American Legion and Veterans for 
America, contacted us in appreciation of our highlighting the needs of 
veterans. Veterans for America has particularly encouraged further 
research to understand the needs of the returning GWOT veteran's 
community.
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    Unlike the previous paper,\7\ this study does not differentiate 
between veterans returning from Iraq, or Afghanistan or adjacent 
locations (such as Kuwait, an important staging post for Iraq) in the 
GWOT, for three reasons. First, nearly one-third of the servicemen 
involved in the war have been deployed two or more times and many of 
them have served both in Iraq and Afghanistan, and/or other 
locations.\8\ Second, the data available from the VA does not 
distinguish between the wars in Iraq and Afghanistan. Third, for the 
purposes of estimating the long-term costs of taking care of the 
returning veterans it does not matter where they served. However it is 
worth noting that the overwhelming majority of the deaths and injuries 
incurred in the GWOT have been in Iraq. Among those listed as wounded 
on the Pentagon's casualty reports, more than 95% have been injured in 
Iraq.\9\
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    \7\ The Bilmes/Stiglitz cost of war paper did not include the costs 
of Afghanistan or other areas outside of Iraq in the GWOT. Had we 
included those costs, the total cost of war would have increased by 15-
20%.
    \8\ As of 9/30/06, some 421,206 (30%) of 1,406,281 unique service 
members had been deployed twice or more to the wars in Iraq and 
Afghanistan. Army Times, December 11, 2006, page 14, from the 
Department of Defense, Defense Manpower Data Center, ``Contingency 
Tracking System.''
    \9\ As of 12/28/06, the DoD website listed 22,565 wounded in 
Operation Iraqi Freedom and 1,084 wounded in Operating Enduring Freedom 
(Afghanistan). As noted previously, this is a narrower definition of 
injuries than the one used by the Veterans Administration, which lists 
50,508 non-mortal woundings as of 9/30/06.
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    This paper will analyze the following aspects of the returning 
veterans' needs.

    1. Disability compensation
        Projected Cost
        Backlog of Pending Claims
    2. Medical care
        Capacity issues
        Projected Cost
        Veterans Centers
        Transitioning from the Department of Defense to VA care
    3.  Overall assessment of U.S. readiness to meet its obligations to 
veterans
    4. Recommendations

Methodology
    All statistics used in this paper are from government sources, 
including publications of the Veterans Benefit Administration (VBA), 
Veterans Health Administration (VHA), and other VA offices, as well as 
from the Congressional Budget Office, the Government Accountability 
Office, the Department of Defense, and Congressional testimony. The 
numbers are based on the servicemen involved in Operation Iraqi Freedom 
(OIF) and Operation Enduring Freedom (OEF, Afghanistan) unless 
otherwise noted.
    The cost and structural requirements for returning veterans will 
depend on several factors, including the number of U.S. troops 
stationed in the region and how long they are deployed; the rate of 
claims and utilization of health resources by returning troops, and the 
rate of increase in disability payment and healthcare costs over time. 
The model developed allows the user to vary these assumptions and may 
be obtained with permission from the author's website. The current 
analysis has been performed under three ``base'' scenarios that 
reflect, broadly the three options now under consideration for the war.

  Low Scenario: The low scenario assumes that the U.S. begins 
withdrawing troops in 2007 and that all U.S. servicemen are home by 
2010. This pattern is roughly in parallel with the recommendations of 
the bipartisan Baker Commission that reported to President Bush in 
November 2006. This scenario assumes that we will not deploy any new 
troops beyond the 1.4 million already participating in the war. It 
assumes that 44% of U.S. troops will claim for disability payment over 
a period of years, with 87% of claims granted, following the same 
claims pattern as the first Gulf War in 1991.\10\ The low scenario 
assumes that soldiers will initially receive the VA's 2005 average 
recurring benefit and that the annual rate of increase will be 2.8% to 
reflect a cost-of-living adjustment only. (As opposed to the actual 
growth rate over the past 10 years which is 6.1%). The medical usage in 
this scenario is based on the lowest possible uptake of medical care 
and a rate of increase that is below the historical rate of healthcare 
inflation. In short, this scenario shows the absolute basement level--
the lowest possible cost of providing medical care and disability 
benefits to soldiers returning from Iraq and Afghanistan under the most 
optimistic assumptions.
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    \10\ Using the claims patterns from Gulf War I is almost certainly 
too conservative because that war was much shorter and relied primarily 
on aerial bombardment, whereas the current wars involve long 
deployments and ground warfare. However it provides a baseline for the 
current Iraq/Afghan wars.
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  Moderate Scenario: The moderate scenario is based on the 
current course of the war. This scenario uses the Congressional Budget 
Office's expected deployment figures, which would involve a gradual 
drawdown of troops but maintain a small U.S. force in the region 
through 2015. Under this scenario, the total unique servicemen involved 
in the conflict will be 1.7 million, that is, 300,000 additional troops 
rotated in over the period of years. Nearly 20,000 new troops are 
regularly deployed into the two war zones each month, before any 
``surge'' or escalation of the conflict is considered.\11\ This 
scenario uses the first Gulf War as the basis for predicting the level 
of troops who will claim disability benefits, the rate of approval of 
the claims, and the utilization of medical resources. However a growth 
rate of 4.4% is projected for claims benefits, half way between the 
base cost-of-living adjustment and the actual growth rate of 6.1%.
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    \11\ Footnote: Analysis of DMDC's Contingency Tracking System shows 
57,462 new first-time deployments between June 2006 and September 2006, 
an average 19,154 per month.
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  High ``Surge'' Scenario: This scenario assumes that troop 
levels will surge in 2007 and that the total participation in the war 
over time will eventually reach 2 million unique servicemen by 2016. It 
also models the potential that half the veterans claim disability 
payments, which is a reasonable possibility given the ferocity of the 
conflict and the number of second and third deployments. This model 
also looks at the impact of growth in claims benefit payments and 
healthcare costs based on the actual growth rates over the past 10 
years. If the U.S. decides to increase troops and all trends on 
disability and healthcare continue as they have in the past, this model 
presents the resulting cost consequences.

    The costs estimated in this study are budgetary costs to the U.S. 
government directly associated with the payment of disability benefits 
and medical treatment for returning OIF/OEF war veterans. The costs do 
not include the interest payments on the debt that is being incurred in 
borrowing money to finance the war. Future cash flows were discounted 
at a rate of 4.75% reflecting current long-term U.S. borrowing rates.
1. Disability Compensation
    There are 24 million living veterans, of whom roughly 11% receive 
disability benefits. Overall, in 2005 the U.S. currently paid $23.4 
billion in annual disability entitlement pay to veterans from previous 
wars, including 611,729 from the first Gulf War, 916,220 from Vietnam, 
161,512 Korean War veterans, 356,190 World War II veterans and 3 
veterans of World War I.\12\
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    \12\ Ibid, page 33, ``Benefits delivery network,'' RCS 20-0221.
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    All 1.4 million servicemen deployed in the current war effort are 
potentially eligible to claim some level of disability compensation 
from the Veterans Benefits Administration. Disability compensation is a 
monetary benefit paid to veterans with ``service-connected 
disabilities''--meaning that the disability was the result of an 
illness, disease or injury incurred or aggravated while the soldier was 
on active military service. Veterans are not required to seek 
employment nor are there any other conditions attached to the program. 
The explicit congressional intent in providing this benefit is ``to 
compensate for a reduction in quality of life due to service-connected 
disability'' and to ``provide compensation for average impairment in 
earnings capacity.'' The principle dates back to the Bible at Exodus 
21:25, which authorizes financial compensation for pain inflicted by 
another.\13\
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    \13\ See Veterans Benefits Administration ``Annual Benefits 
Report'' (ABR), 2005, page 17 for definition of disability compensation 
and see VA Disability Compensation Program, Legislative History, VA 
Office of Policy, Planning and Preparedness 2004 for principles behind 
the program.
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    Disability compensation is graduated according to the degree of the 
veteran's disability, on a scale from 0 percent to 100 percent, in 
increments of 10%. Annual benefits range from a low of $1,304 per year 
for a veteran with a 10% disability rating to about $44,000 in annual 
benefits for those who are completely disabled.\14\ The average benefit 
is $8,890 although this varies considerably; Vietnam veterans average 
about $11,670.\15\ Additional benefits and pensions are payable to 
veterans with severe disabilities. Once deemed eligible, the veteran 
receives the compensation payment as a mandatory entitlement for the 
remainder of their lives, like Medicare and Social Security.
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    \14\ Ibid, page 24, lists $1,304 for 10% and $31,611 for 100%, but 
those with 100% disability also receive additional payments that 
combined result in an annual payment of approximately $44,000.
    \15\ Ibid, page 33.
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    There is no statute of limitations on the amount of time a veteran 
can claim for most disability benefits. The majority of veteran's 
claims are within the first few years after returning, but some 
disabilities do not surface until years later. The VA is still handling 
hundreds of thousands of new claims from Vietnam era veterans for post-
traumatic stress disorder and cancers linked to Agent Orange exposure.
    The process for ascertaining whether a veteran is suffering from a 
disability, and determining the percentage level of a veteran's 
disability, is complicated and lengthy. A veteran must apply to one of 
the 57 regional offices of the Veterans Benefits Administration (VBA), 
where a claims adjudicator evaluates the veteran's service-connected 
impairments and assigns a rating for the degree to which the veteran is 
disabled. For veterans with multiple disabilities, the regional office 
combines the ratings into a single composite rating. If a veteran 
disagrees with the regional office's decision he or she can file an 
appeal to the VA's Board of Veterans Appeals. The Board makes a final 
decision and can grant or deny benefits or send the case back to the 
regional office for further evaluation. Typically a veteran applies for 
disability in more than one category, for example, a mental health 
condition as well as a skin disorder. In such cases, VBA can decide to 
approve only part of the claim--which often results in the veteran 
appealing the decision. If the veteran is still dissatisfied with the 
Board's decision to grant service connection or the percentage rating, 
he or she can further appeal it to two even higher levels of 
decisionmakers.\16\
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    \16\ GAO, ``Veterans Benefits Administration: Problems and 
Challenges Facing Disability Claims Processing,'' GAO Testimony before 
the Subcommittee on Oversight and Investigations, House Committee on 
Veterans' Affairs, May 18, 2000.
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    Most employees at VA are themselves veterans, and are predisposed 
to assisting veterans obtain the maximum amount of benefits to which 
they are entitled. However, the process itself is long, cumbersome, 
inefficient and paperwork-intensive. The process for approving claims 
has been the subject of numerous GAO studies and investigations over 
the years. Even in 2000, before the current war, GAO identified 
longstanding problems in the claims processing area. These included 
large backlogs of pending claims, lengthy processing times for initial 
claims, high error rates in claims processing, and inconsistency across 
regional offices.\17\ In a 2005 study, GAO found that the time to 
complete a veteran's claim varied from 99 days at the Salt Lake City 
regional office to 237 days at the Honolulu, Hawaii office.\18\
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    \17\ Ibid.
    \18\ ``Veterans Benefits: Further Changes in VBA's Field Office 
Structure could help improve disability claims processing,'' GAO-06-
149, December 2005.
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    The backlog of pending claims has been growing since 1996. In 2000, 
VBA had a backlog of 69,000 pending initial compensation claims, of 
which one-third had been pending for more than 6 months.\19\ Today, due 
in part to the surge in claims from the Iraq/Afghan wars, VBA has a 
backlog of 400,000 claims.\20\ VBA now takes an average of 177 days (6 
months) to process an original claim, and an average of 657 days 
(nearly 2 years) to process an appeal.\21\ This compares unfavorably 
with the private sector healthcare/financial services industry, which 
processes an annual 30 billion claims in an average of 89.5 days per 
claim, including the time required for claims that are disputed.\22\
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    \19\ Ibid.
    \20\ The VBA's backlog of pending claims was 399,751 as of December 
9, 2006 (VBA Monday Morning Workload Report).
    \21\ The average time to process a claim is 177 days as of 9/06 and 
average time to process an appeal is 657 days (VA Performance and 
Accountability Report FY 2006).
    \22\ Bearing Point, Health Care/Financial Services industry report, 
September 14, 2006.
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Projected Demand for Benefits among OIF/OEF Veterans
    It is difficult to predict with certainty the number of veterans 
from the two current wars who will claim for some amount of disability. 
The first Gulf War provides a baseline number although the Iraq and 
Afghanistan war has been longer and has involved more ground warfare 
than the Desert Storm conflict, which relied largely on aerial 
bombardment and 4 days of intense ground combat. However, in both 
conflicts, a number of veterans were exposed to depleted uranium that 
was used in anti-tank rounds fired by U.S. M1 tanks and U.S. A10 attack 
aircraft. Many disability claims from the first Gulf War stem from 
exposure to depleted uranium, which has been implicated in raising the 
risk of cancers and birth defects. Gulf War veterans also filed 
disability claims related to exposures to oil well fire pollution, low-
levels of chemical warfare agents, experimental anthrax vaccines, and 
experimental anti-chemical warfare agent pills called pyridostigmine 
bromide, the anti-malaria pill Lariam, skin diseases, and disorders 
from living in the hot climate,\23\ which are likely to be cited in the 
current conflict. However, the number of disability claims in the Iraq/
Afghan wars is likely to be higher due to the significantly longer 
length of soldier's deployments, repeat deployments, and heavier 
exposure to urban combat.
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    \23\ Veterans for America, interview with Paul Sullivan, program 
director, 11/06.
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    Following the Gulf War the criteria for receiving benefits were 
widened by Congress based on evidence of widespread toxic 
exposures.\24\ The same criteria for healthcare and benefits 
eligibility still apply to veterans of the Iraq and Afghanistan 
wars.\25\ Forty-four percent of those veterans filed disability claims 
for a variety of conditions and 87% were approved.\26\ The U.S. 
currently pays about $4 billion annually in disability payments to 
veterans of Desert Storm/Desert Shield.\27\
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    \24\ ``Veterans Benefits Improvement Act of 1994'' (Public Law 103-
446) and ``Persian Gulf War Veterans Act of 1998 (P.L. 105-277).
    \25\ In fact, the VA does not distinguish, for the purpose of 
claims processing, between the end of the first Gulf War and the 
present conflict (38 USC section 101(33) defines the Gulf War as 
starting on August 2, 1990, and continuing until either the President 
or the Congress declares an end to it and 38 CFR 3.317 defines the 
locations of the conflict).
    \26\ For Gulf War, the total claims filed to date are 271,192, of 
which 205,911 have been approved, 20,382 were denied and 34,899 are 
still pending (GWVIS, August 2006, p. 7: Granted Service Connection + 
Denied Service Connection + Claims Pending).
    \27\ Gulf War total annual payment $4.3 billion (Ibid., VBA, ABR 
2005 pp. 33).
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    Of the 1.4 million U.S. servicemen who have so far been deployed in 
the Iraq/Afghan conflicts, 631,174 have been discharged as of September 
30, 2006. Of those 46% are in the full-time military and 54% are 
reservists and National Guardsmen.\28\ Therefore the total population 
that is potentially eligible for disability benefits is this number 
(631,174). To date 152,669 servicemen have applied for disability 
benefits and of those, 104,819 have been granted, 34,405 are pending 
and 13,445 have been rejected. This implies an approval rate of 88% to 
date.\29\
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    \28\ VHA, Office of Public Health and Environmental Hazards, 
November 2006.
    \29\ VBA ``Compensation and Benefit Activity among Veterans 
Deployed to the GWOT,'' July 20, 2006, obtained under Freedom of 
Information Act by the National Security Archive at George Washington 
University.
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    We have estimated the cost of providing disability benefits to 
veterans under three scenarios. Under the low scenario, we expect that 
as in the first Gulf War, 44% of the current veterans will eventually 
claim disability, with an approval rate of 87%. We estimate that the 
remaining 900,000 troops will be discharged in equal installments over 
the next 4 years bringing all U.S. troops home by 2010. We expect the 
same percentage of these troops to claim for disabilities, with the 
same approval rate, within a further 5 years. We have assumed that on 
average, claims are lower than average rate, at the lower rate of new 
claimants from the first Gulf War of $6,506.\30\ This is probably an 
excessively conservative assumption because it projects the same rate 
of serious injuries as occurred in Gulf War I, when in fact we already 
know that more than the actual rate of serious injuries is much 
higher.\31\
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    \30\ Ibid, ABR 2005, p. 33.
    \31\ Of the 50,508 non-mortally wounded soldiers in OIF/OEF there 
are at least 10,000 serious injuries such as brain injuries, spinal and 
amputations, according to DoD sources. See also Wallsten and Kosec, 
AEI-Brookings Working Paper 05-19, September 2005, estimate of 20% 
serious brain injuries, 6% amputees and 24% other serious injuries.
---------------------------------------------------------------------------
    The moderate scenario assumes that the war continues through 2014 
with a total deployment of 1.7 million over the course of the war, and 
with gradually reduced deployment. It assumes that a slightly higher 
percentage of eligible veterans (50%) make claims, which is more 
realistic given deployment lengths. This scenario uses the actual 
average VA benefit payment of $8,890. It assumes the rate of increase 
in benefits is 4.4%, midway between the mandatory Cost of Living 
Adjustment and the actual 10-year growth rate of 6.1%. The high 
scenario models the impact of a surge in forces bringing the total 
unique deployments to 2 million. It assumes 50% of eligible forces 
claim benefits and a rate of 6.1% increase, which is the actual rate 
over the past 10 years. It further assumes a higher rate of medical 
inflation (10% vs. 8% in the low and moderate scenarios).


      Table 1:  Long-term Cost of Veterans Disability Benefits \32\
------------------------------------------------------------------------
                                          Low       Moderate      High
------------------------------------------------------------------------
Disability Benefits ($bn)                 67.63       109.98     126.76
------------------------------------------------------------------------


Backlog of Pending Disability Claims
    The issue is not simply cost but also efficiency in providing 
disabled veterans with their benefits. In addition to all the problems 
detailed above, the Iraq and Afghan war veterans are filing claims of 
unusually high complexity (see table 3). To date, the backlog of 
pending claims from these recent war veterans is 34,000, but the vast 
majority of servicemen from this conflict have not yet filed their 
claims. Even without the projected wave of claims, the VA has an 
overall backlog of 400,000, including thousands of Vietnam era claims. 
Including all pending claims and other paperwork, the VA's backlog has 
increased from 465,623 in 2004 to 525,270 in 2005 to 604,380 in 
2006.\33\
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    \32\ The figures in Table 1 represent the present value of 
disability benefits over 40 years for eligible veterans projected under 
the three scenarios described.
    \33\ VBA's ``Monday Morning Report'' of pending claims and other 
work performed at regional offices, cites: 11/25/06: 604,380; 11/26/05: 
525,270; 11/27/04: 465,623.
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    The fact that the VBA is largely sympathetic to the plight of 
disabled veterans should not obscure the fact that this system is 
already under tremendous strain. If only one-fifth of the returning 
veterans who are eligible claim in a given year, and the total claims 
reaches a high of 38% effective rate (44%-88% approval rate), the 
number of likely claims at the VBA over the next 10 years can be 
expected to rise from 104,819 to more than 600,000.\34\ (See table 2).
---------------------------------------------------------------------------
    \34\ This projection based on the moderate scenario described 
previously, based on 1.7 million unique servicemen and CBO troop 
deployment figures through 2014.


                      Table 2:  Projected Increase in Disability Claims (moderate scenario)
----------------------------------------------------------------------------------------------------------------
                                           2006      2007      2008      2009       2010       2011       2012
----------------------------------------------------------------------------------------------------------------
Discharged                                          118,758   118,758   118,758    118,758    118,758    118,758
cum                                                 118,758   237,517   356,275    475,034    593,792    712,551
 
Eligible claimants
  Existing discharged
    non-claimants                         526,355   526,355   526,355   526,355    526,355    526,355    526,355
  Newly discharged                             --   118,758   237,517   356,275    475,034    593,792    712,551
  Total potential claimants                         645,113   763,872   882,630  1,001,389  1,120,147  1,238,906
Claim rate                                    22%       22%       27%       33%        38%        44%        44%
  New claims                                   --   140,312   207,678   287,958    381,154    487,264    538,924
  Current beneficiaries                   104,819   104,819   104,819   104,819    104,819    104,819    104,819
  Total claims (number)                   104,819   245,131   312,497   392,777    485,973    592,083    643,743
                                        ------------------------------------------------------------------------
    Total claims ($bn)                       0.93      2.27      2.89      3.63       4.49       5.47       5.95
----------------------------------------------------------------------------------------------------------------


    If nothing is done to address the problem, the claims backlog will 
continue to grow throughout the period of the war, along with growing 
inequity between different regional offices. A key question is: what is 
a reasonable amount of time for the U.S. to make a disabled veteran 
wait for a disability check? This paper proposes several actions that 
could reduce the length of time for processing from zero to 90 days. 
(Described in more detail in section 4: Recommendations). These 
include: (a) greater use of the ``Vet Centers'' to provide assistance 
for veterans to file their claims, (b) automatically granting all or 
some of the claims, with subsequent audits to deter fraud, and (c) 
streamlining and technologically upgrading the claims system into a 
``fast track'' where veterans receive a quick decision on most claims.
2. Veterans Medical Care Shortfall
    The VA's Veterans Health Administration provides medical care to 
more than 5 million veterans each year. This care includes primary and 
secondary care, as well as dental, eye and mental healthcare, hospital 
inpatient and outpatient services. The care is free to all returning 
veterans for the first 2 years after they return from active duty; 
thereafter the VA imposes co-payments for various services, with the 
amounts related to the level of disability of the veteran.\35\
---------------------------------------------------------------------------
    \35\ 38 USC section 1710.
---------------------------------------------------------------------------
    The VA has long prided itself on the excellence of care that it 
provides to veterans. In particular, VA hospitals and clinics are known 
to perform a heroic job in areas such as rehabilitation. Medical staff 
is experienced in working with veterans and provides a sympathetic and 
supportive environment for those who are disabled. It is therefore of 
utmost importance that the quality of care be maintained as the demand 
for it goes up.
    However, the demand for VA medical treatment is far exceeding what 
the VA had anticipated. This has produced long waiting lists and in 
some cases simply the absence of care. To date, 205,097, or 32% of the 
631,174 eligible discharged OEF/OIF veterans have sought treatment at 
VA health facilities. These include 35% of the eligible active duty 
servicemen (101,260) and 31% of the eligible Reservists/Guards 
(103,837). To date, this number represents only 4% of the total patient 
visits at VA facilities--but it will grow. According to the VA, ``As in 
other cohorts of military veterans, the percentage of OIF/OEF veterans 
receiving medical care from the VA and the percentage of veterans with 
any type of diagnosis will tend to increase over time as these veterans 
continue to enroll for VA healthcare and to develop new health 
problems.'' \36\
---------------------------------------------------------------------------
    \36\ VHA, Office of Public Health and Environmental Hazards, 
November 2006, Ibid, p. 14.
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    The war in Iraq has been noteworthy for the types of injuries 
sustained by the soldiers. Some 20% have suffered brain trauma, spinal 
injuries or amputations; another 20% have suffered other major injuries 
such as amputations, blindness, partial blindness or deafness, and 
serious burns.
    However, the largest unmet need is in the area of mental 
healthcare. The strain of extended deployments, the stop-loss policy, 
stressful ground warfare and uncertainty regarding discharge and leave 
has taken an especially high toll on soldiers. Thirty-six percent of 
the veterans treated so far--an unprecedented number--have been 
diagnosed with a mental health condition. These include PTSD, acute 
depression, substance abuse and other conditions. According to Paul 
Sullivan, a leading veterans advocate, ``The signature wounds from the 
wars will be (1) traumatic brain injury, (2) post-traumatic stress 
disorder, (3) amputations and (4) spinal chord injuries, and PTSD will 
be the most controversial and most expensive.'' \37\ (See Table 3.)
---------------------------------------------------------------------------
    \37\ Paul Sullivan, Program Director of Veterans for America, 12/
23/06 interview.


          Table 3:  VHA Office of Public Health, November 2006
------------------------------------------------------------------------
  Frequency of Possible Diagnoses Among Recent Iraq and Afghan Veterans
-------------------------------------------------------------------------
                                                      (n = 205,097)
                                                ------------------------
                                                   Frequency *       %
------------------------------------------------------------------------
Infectious and Parasitic Diseases (001-139)              21,362    10.4
Malignant Neoplasms (140-208)                             1,584     0.8
Benign Neoplasms (210-239)                                6,571     3.2
Diseases of Endocrine/Nutritional/Metabolic              36,409    17.8
 Systems (240-279)
Diseases of Blood and Blood Forming Organs (280-          3,591     1.8
 289)
Mental Disorders (290-319)                               73,157    35.7
Diseases of Nervous System/Sense Organs (320-            61,524    30.0
 389)
Diseases of Circulatory System (390-459)                 29,249    14.3
Disease of Respiratory System (460-519)                  36,190    17.6
Disease of Digestive System (520-579)                    63,002    30.7
Diseases of Genitourinary System (580-629)               18,886     9.2
Diseases of Skin (680-709)                               29,010    14.1
Diseases of Musculoskeletal System/Connective            87,590    42.7
 System (710-739)
Symptoms, Signs and Ill Defined Conditions (780-         67,743    33.0
 799)
Injury/Poisonings (800-999)                              35,765    17.4
------------------------------------------------------------------------
* Hospitalizations and outpatient visits as of 9/30/2006; veterans can
  have multiple diagnoses with each healthcare encounter.
A veteran is counted only once in any single diagnostic category but can
  be counted in multiple categories, so the above numbers add up to
  greater than 205,097.


    Additionally, far more returning Iraqi war veterans (than those in 
previous conflicts) are likely to seek such help, in part due to 
awareness campaigns run by veteran's organizations through the press. 
There is no reliable data on the length of waiting lists for returning 
veterans, but even the VA concedes that they are so long as to 
effectively deny treatment to a number of veterans. In the May 2006 
edition of Psychiatric News, Frances Murphy, M.D., the Under Secretary 
for Health Policy Coordination at VA, said that mental health and 
substance abuse care are simply not accessible at some VA facilities. 
When the services are available, Dr. Murphy asserted that, ``waiting 
lists render that care virtually inaccessible.'' \38\
---------------------------------------------------------------------------
    \38\ Frances Murphy, May 2006, Psychiatric News.
---------------------------------------------------------------------------
    The VA curiously maintains that it can cope with the surge in 
demand, despite much evidence to the contrary. For the past 2 years, 
the VA ran out of money to provide healthcare. In FY 2006, the VA was 
obliged to submit an emergency supplemental budget request for $2 
billion, which included $677 million to cover an unexpected 2% increase 
in the number of patients (half of which were OIF/OEF patients), $600 
million to correct its inaccurate estimate of long-term care costs, and 
$400 million to cover an unexpected 1.2% increase in the costs per 
patient due to medical inflation. The previous year, (FY 2005), VA 
requested an additional $1 billion, of which one-quarter was for 
unexpected OIF/OEF needs and remainder was related to overall under-
estimation of patient costs, workload, waiting lists, and dependent 
care. The GAO analysis of these shortfalls concluded that they were due 
to the fact that VA was modeling its projections based on 2002 data, 
before the war in Iraq began.\39\
---------------------------------------------------------------------------
    \39\ GAO-06-430R, ``VA Health Care Budget Formulation,'' pp. 18-20.
---------------------------------------------------------------------------
    The budget shortfalls and the statement by Dr. Murphy suggest that 
the volume of veterans returning from Iraq and Afghanistan will not be 
able to obtain the healthcare they need, particularly for mental health 
conditions. Such veterans are at high risk for unemployment, 
homelessness, family violence, crime, alcoholism, and drug abuse, all 
of which impose an additional human and financial burden on the nation. 
In addition, many of these social services are provided by state and 
local governments which are already under tremendous strain.
Projected Medical Costs
    The number of veterans who will eventually require treatment can be 
estimated using a baseline of the utilization during the first Gulf 
War, in which the VA is providing medical care to 48% of veterans. The 
average annual cost of treating veterans in the system is now 
$5,000,\40\ although it is difficult to know whether the more grievous 
injuries and disabilities of the current conflict will drive up costs 
per patient.
---------------------------------------------------------------------------
    \40\ This amount is calculated by estimating the budget 2006 
supplemental budget request for OIF/OEF veterans per additional 
patient, using the GAO analysis in GAO-06-430R.
---------------------------------------------------------------------------
    The costs of providing medical care have been calculated under the 
three scenarios. Under the low scenario, under which the U.S. will 
deploy no new troops, the ceiling for medical care is 48% of OIF/OEF 
veterans. If half of all veterans eventually seek medical treatment 
from the VA that will produce a demand of some 700,000 veterans. 
However, due to the fact that veterans are eligible for free care 
during the first 2 years after discharge, we can expect a wave of 
returning war veterans within 2 years of their discharge date. 
Additionally, since active duty veterans claim medical care at a higher 
rate (than Guards/Reservists) and have been deployed in more of the 
most hazardous front-line task come home, we can expect that the 
average cost of treating such veterans increases as well as a high 
level of demand.\41\
---------------------------------------------------------------------------
    \41\ VHA, Office of Public Health and Environmental Hazards, Ibid.
---------------------------------------------------------------------------
    If the demand for medical care increases as projected to some 
700,000 or more veterans, there is a serious risk that the VA, which is 
already overwhelmed, will be unable to meet the medical needs of 
returning OIF/OEF veterans. Additional staff is needed in important 
areas such as brain trauma units and mental health. The VA also needs 
to expand systems such as triage nursing, to help leverage scarce 
medical resources.
    Even assuming that no more troops are deployed, the long-term cost 
of treating returning veterans will reach $208 billion. This however 
assumes that the supply of healthcare exists to treat them. If the 
number of troops continues to grow as in the moderate then cost of 
providing lifetime care rises to $315 billion. The annual budget 
payment under this scenario will reach $3bn by 2010 and more than 
double by 2014. (See Table 4.)


                                     Table 4:  Projected Cost of Providing VA Medical Care (moderate scenario) \42\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2006      2007      2008      2009       2010       2011       2012       2013       2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Discharged                                            631,174   749,932   868,691   987,449  1,106,208  1,224,966  1,343,725  1,462,483  1,581,242
% OIF/OEF veterans seeking
    care                                                     32.50%    33.96%    35.49%    37.09%     38.76%     40.50%     42.32%     44.23%     46.22%
  Total OIF/OEF veterans
    seeking care                                            205,132   254,696   308,305   366,224    428,731    496,123    568,711    646,827    730,822
Cost/medical claim                                          $ 5,000   $ 5,400   $ 5,832   $ 6,299  $    6,80  $    7,34  $    7,93  $    8,56  $    9,25
                                                                                                           2          7          4          9          5
  Total cost ($bn)                                              1.0       1.4       1.8       2.3        2.9        3.6        4.5        5.5        6.8
---------------------------------------------------------------------
NPV                                                         $315.23
--------------------------------------------------------------------------------------------------------------------------------------------------------


    However, these scenarios are conservative in assuming that only 
half of the returning veterans will eventually seek medical treatment 
from the VA and that the level of healthcare inflation will remain 
constant at 8%. Under a worst-case scenario, if troops levels rise to 2 
million and if health inflation rises to the double-digit levels 
experienced during the 1990s, we can expect the total cost of providing 
lifetime medical care to veterans to reach $600bn.\43\
---------------------------------------------------------------------------
    \42\ The NPV is calculated over 40 years, at a discount rate of 
4.75%, with a peak rate of 50% veterans claiming care by 2016.
    \43\ High scenario assuming 10% medical inflation rate.
---------------------------------------------------------------------------
Veterans Centers
    How can the VA possibly handle the number of returning troops who 
require care, as well as their families, especially for mental health 
conditions? Perhaps the most creative and successful innovation in the 
VA in the past two decades has been the introduction of the ``Vet 
Centers''--207 walk-in storefront centers where veterans or their 
families can obtain counseling and reintegration assistance. The 
centers, operated by VA's ``Readjustment Counseling Service'' are 
popular with veterans and their families and--at a total cost of some 
$100m per year--provide a highly cost-effective option for veterans who 
are not in need of acute medical care. The Vet Centers are particularly 
helpful for families, for example they provide a venue for a soldier's 
spouse to seek guidance if the veteran is showing mental distress but 
will not seek help. They also supply bereavement counseling to 
surviving families of those killed during military service. And they 
offer a friendlier environment often staffed with recent OEF/OIF combat 
veterans and other war veterans--unlike VA regional offices which tend 
to be stuffy, bureaucratic offices located in downtown locations.\44\
---------------------------------------------------------------------------
    \44\ Opinion based on conversations with veterans organizations.
---------------------------------------------------------------------------
    To date, 144,000 veterans have sought assistance at these 
centers.\45\ However the demand for their services is threatening their 
ability to provide care. Vet Center managers recently surveyed by 
Congress said that in 50% of the Centers, the increasing workload is 
affecting their ability to treat veterans. Some 40% of the Vet Centers 
have directed veterans for whom individualized therapy would be 
appropriate into group therapy, and more than one-quarter of the 
Centers have limited or plan to limit family therapy. Nearly 17% have 
established waiting lists (or are in the process of setting them 
up).\46\
---------------------------------------------------------------------------
    \45\ Vet Center costs document, page 3B-11.
    \46\ October 2006 report issued by the House Veterans Affairs 
Committee, testimony by Vet Center managers.
---------------------------------------------------------------------------
    Currently the centers do not assist veterans in filing disability 
claims, but provided that the facility had sufficient secure storage 
space to handle such documents, there is no reason why they could not. 
The VA has recommended hiring an additional 1,000 claims adjudicators--
who could be placed in the Vet Centers (an average of 5 each) to help 
veterans figure out how to claim. The cost of expanding the number of 
centers, hiring additional staff and placing more claims adjudicators 
in the centers is minimal.
Transition from DoD Payroll to VA Care
    One of the chief bottlenecks in the current system is the soldier's 
transition from the DoD payroll into the VA benefit system. There are 
three primary ways that a soldier makes this transition.
    A veteran who is discharged regularly, and has some level of 
disability will typically have to wait 6 months before receiving his or 
her disability check from the VA. This is a period during which the 
veterans, particularly those in a state of mental distress, are most at 
risk for serious problems, including suicide, falling into substance 
abuse, divorce, losing their job, or becoming homeless.
    A second route is to exit via the ``Benefits Delivery at 
Discharge'' (BDD) program. This successful program allows soldiers to 
process their claims up to 6 months prior to discharge, so they can 
begin receiving benefits as soon as they leave the military. However, 
the use of this route has become much more difficult due to the 
extended deployments, the use of ``stop-loss'' orders, and the 
resulting unpredictability about when a soldier will be discharged. 
Additionally, this program is not available to Reservists and 
Guardsmen, who comprise 40% of the forces in Iraq and Afghanistan. The 
VBA claim denial rate is twice as high for Reserve and Guard veterans, 
possibly due in part to their lack of access to BDD.\47\ Consequently 
the usage of this apparently better route has not been increasing as 
would have been expected.\48\
---------------------------------------------------------------------------
    \47\ Active Duty denial rate is 7.6 percent compared with National 
Guard and Reserve denial rate of 17.8 percent. See Footnote 28.
    \48\ Congressional testimony of Jack McCoy, VBA, March 16, 2006, 
http://www.va.gov/OCA/testimony/hvac/sdama/060316JM.asp and a VA fact 
sheet indicate 26,000 BDD claims in 2003, 39,000 in 2004, and 46,000 in 
2005. http://www1.va.gov/opa/fact/tranasst.asp.
---------------------------------------------------------------------------
    For veterans who are more seriously wounded, the process is more 
complicated as they transition from medical facilities run by DoD into 
medical facilities run by the VA. For example a wounded veteran may be 
treated initially at Walter Reed Army Hospital and then transferred to 
a VA facility. Veterans experience some difficulties in securing the 
maximum amount of disability benefits at discharge during such 
transitions, due to a lack of compatibility between the DoD and VA 
paperwork and tracking systems. The VA complains that the records they 
receive from DoD are delayed or contain errors, in many cases it is the 
situation where the data that is tracked is not compatible. This not 
only creates unnecessary problems in moving veterans through the system 
but it also makes it more difficult for the data to be analyzed in 
medical and other studies.
    Additionally there are the problems caused by the Pentagon's poor 
accounting system. GAO investigators have found that DoD pursued 
hundreds of battle-injured soldiers for payment of non-existent 
military debts--because DoD financial systems erroneously reported that 
they were indebted. For example, one Army Reserve Staff Sergeant, who 
lost his right leg below the knee, was forced to spend 18 months 
disputing an erroneously recorded debt of $2,231 which prevented him 
from obtaining a mortgage to purchase a home. Another staff sergeant 
who suffered massive brain damage and PTSD had his pay stopped and 
utilities turned off because the military erroneously recorded a debt 
of $12,000. Hundreds of injured soldiers may be in this situation.\49\
---------------------------------------------------------------------------
    \49\ GAO-06-494, ``Hundreds of Battle-Injured GWOT Soldiers Have 
Struggled to Resolve Military Debts.''
---------------------------------------------------------------------------
Overall Assessment and Cost
    Overall the U.S. is not adequately prepared for the influx of 
returning servicemen from Iraq and Afghanistan. There are three major 
areas in which it is not prepared: claims processing capacity for 
disability benefits; medical treatment capacity, in terms of the number 
of healthcare personnel available at clinics throughout the country, 
particularly in mental health; and third, there is no preparation for 
paying the cost of another major entitlement program.
    As discussed earlier, the backlog in claims benefit is already 
somewhere between 400,000 and 600,000. Unless major changes are made to 
this process, the number of claims pending and requiring attention will 
reach some 750,000 within the next 2 years and the pendency period will 
increase proportionately, resulting in more veterans falling though the 
cracks that could have been avoided. In addition, veterans whose claims 
reach different centers in different parts of the country will have 
widely different experiences, proving highly unfair to those who just 
happen to be located in areas of greater backlog.
    The quality of medical care is likely to continue to be high for 
veterans with serious injuries treated in VA's new polytrauma centers. 
However, the current supply of care makes it unlikely that all 
facilities can offer veterans a high quality of care in a timely 
fashion. Veterans with mental health conditions are most likely to be 
at risk because of the lack of manpower and the inability of those 
scheduling appointments to distinguish between higher and lower risk 
conditions. If the current trends continue, the VA is likely to see 
demand for healthcare rising to 750,000 veterans in the next few years, 
which will overwhelm the system in terms of scheduling, diagnostic 
testing, and visiting specialists, especially in some regions.\50\
---------------------------------------------------------------------------
    \50\ However, the availability of medical care may vary 
significantly by region.
---------------------------------------------------------------------------
    The cost of providing disability benefits and medical care, even 
under the most optimistic scenario that no additional troops are 
deployed and the claims pattern is only that of the previous Gulf War, 
would suggest that at a minimum the cost of providing lifetime 
disability benefits and medical care is $350 billion. If the number of 
unique troops increases by another 200,000 to 500,000 over a period of 
years, this number may rise to as high as nearly $700bn. (See Table 5.) 
The funding needs for veterans' benefits thus comprise an additional 
major entitlement program along with Medicare and Social Security that 
will need to be financed through borrowing if the U.S. remains in 
deficit. This will in turn place further pressure on all discretionary 
spending including that for additional veterans' medical care.


       Table 5:  Total Veterans Disability and Medical Costs \51\
------------------------------------------------------------------------
                                     LOW         MODERATE         HIGH
------------------------------------------------------------------------
Disability                            67.6             109.5      126.8
Medical                              282.2             315.2      536.0
  TOTAL ($Bn)                        349.8             424.7      662.8
------------------------------------------------------------------------


In the Context of the Overall Costs of the War
    Veteran's disability benefits and medical care are two of the most 
significant long-term costs of the war. As shown in our previous 
analysis of the costs of the war, the war has both budgetary and 
economic costs. This paper focuses only on the budgetary costs of 
caring for veterans. It does not take into account the value of lives 
lost, or effectively lost due to grievous injury. Nor does it take into 
account the economic impact of the large number of veterans living with 
disabilities who cannot engage in full economic activities.\52\
---------------------------------------------------------------------------
    \51\ Total lifetime costs over 40 years, discounted at 4.75% under 
scenarios described.
    \52\ This paper considers only the budgetary costs of veterans 
care. Standard economic theory would treat disability benefits as a 
transfer payment and deduct these from the economic and social loss 
associated with veteran's reduced economic lives. This was the 
methodology used in (stiglitz paper).
---------------------------------------------------------------------------
Recommendations
  (a) Medical Care
    The Veterans Health Administration will not be able to sustain its 
high quality of care without greater funding and increased capacity in 
areas such as psychiatric care and brain trauma units. In addition, 
more funding should be provided for readjustment counseling services by 
social workers at the Vet Centers. Even doubling the amount of funding 
for counseling at the Vet Centers is a small amount compared to the 
funds now being requested for additional recruiting of new soldiers.
  (b) Disability Claims Backlog
    There are at least three potential methods of reducing the number 
of pending claims. Perhaps the easiest would be to ``fast track'' 
returning Iraq and Afghan war veteran's claims in a single center 
staffed with a highly experienced group of adjudicators who could 
provide most veterans with a decision within 90 days. At a minimum, all 
simple claims could be dispatched in this manner. During the past 
decade, private sector health insurance companies have reengineered 
their processes and adopted technologies, such as new automated data 
capture and document processing systems that have dramatically improved 
their ability to handle large volumes of information. This has allowed 
the industry to bring the average claim processing time down to 89.5 
days. For example, the firm Noridian used technology to enable 
operators to process four to five times more claims in the same amount 
of time as under their old system, and to speed the form retrieval 
process for better customer service.\53\
---------------------------------------------------------------------------
    \53\ KM World, June 1999.
---------------------------------------------------------------------------
    The VA has proposed a more typically governmental solution of 
adding 1,000 more claims adjudicators. Even apart from the cost of $80m 
or so of adding these personnel, the question is whether adding 
additional personnel to a cumbersome system is the best possible way to 
speed up transactions and improve service. A better idea would be to 
expand the Vet Centers to offer some assistance in helping veterans 
figure out their disability claims. The 1,000 claims experts could be 
placed inside the Vet Centers (5 per center), thus enabling veterans 
and their families to obtain quick assistance for many routine claims. 
Vet Centers would only require minor modifications (secure storage 
space, additional computers and offices) to fill this role.
    The best solution might be to simplify the process--by adopting 
something closer to the way the IRS deals with tax returns. The VBA 
could simply approve all veterans' claims as they are filed--at least 
to a certain minimum level--and then audit a sample of them to weed out 
and deter fraudulent claims. At present, nearly 90 percent of claims 
are approved. VBA claims specialists could then be redeployed to assist 
veterans in making claims, especially at VA's ``Vet Centers.'' This 
startlingly easy switch would ensure that the U.S. no longer leaves 
disabled veterans to fend for themselves.
    The cost of any solution that reduced the backlog of claims is 
likely to be an increased number of claims, and a quicker pay-out. If 
88% of claims were paid within 90 days instead of the 6 months to 2 
years currently required, the additional budgetary cost is likely to be 
in the range of $500m in 2007.
Conclusions
    President Bush is now asking for more money to spend on recruiting 
in order to boost the size of the Army and deploy more troops to Iraq. 
But what about taking care of those same soldiers when they return home 
as veterans? The number of veterans who are returning home with 
injuries or disabilities is large and growing. We have not paid careful 
enough attention, or devoted sufficient resources, to planning for how 
to take care of these men and women who have served the nation.
    There has been a tendency in the media to focus on the number of 
U.S. deaths in Iraq, rather than the volume of wounded, injured, or 
sick. This may have led the public to underestimate the deadliness and 
long-term impact of the war on civilian society and the government's 
pocketbook. Were it not for modern medical advances and better body 
armor, we would have suffered even more loss of life.
    One of the first votes facing the new Democratic-controlled 
Congress will be yet another ``supplemental'' budget request for $100+ 
billion to keep the war going. The last Congress approved a dozen such 
requests with barely a peep, afraid of ``not supporting our troops.'' 
If the new Congress really wants to support our troops, it should start 
by spending a few more pennies on the ones who have already fought and 
come home.
Limitations of Data
    This paper has been prepared based on the best available data from 
VA sources, CBO, GAO, and veterans organizations. Reconciling this data 
has therefore been done to try to generate realistic estimates, but is 
not precise. It is also difficult to predict with certainty the uptake 
in the military of benefits and medical care. In all cases this study 
has been done conservatively, for example it is entirely possible that 
after the length and grueling nature of this war, that a much higher 
number--perhaps \2/3\ of returning veterans--would seek disability 
benefits and/or healthcare and the estimates in this paper prove too 
low.
Issues Not Addressed
    This paper has not attempted to address the cost of taking care of 
wounded and disabled Iraqi soldiers in Iraq. A number of studies have 
estimated the fatalities in Iraq, but there are few studies of the 
number of injuries among the Iraqi military. As the U.S. continues to 
place an emphasis on developing the Iraqi military to replace it, it is 
worth asking what the cost to that country will be of providing medical 
care and any kind of long-term benefits to those who are fighting. This 
study excludes VBA benefits such as education, insurance, vocational 
rehabilitation, and home loan guaranty programs. This study also 
excludes private, state, and local healthcare, disability, and 
employment benefits for returning veterans.
Acknowledgements
    This paper was prepared with the invaluable assistance of Tony 
Park, a student at the Kennedy School of Government, and Paul Sullivan, 
Director of Research and Analysis at Veterans for America. Their 
contributions are gratefully acknowledged.

                                 
