[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                     FUNDING THE U.S. DEPARTMENT OF
                     VETERANS AFFAIRS OF THE FUTURE

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

                                HEARING

                               before the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 29, 2009

                               __________

                           Serial No. 111-16

                               __________

       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            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   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

                               __________

                             April 29, 2009

                                                                   Page
Funding the U.S. Department of Veterans Affairs of the Future....     1

                           OPENING STATEMENTS

Chairman Bob Filner..............................................     1
    Prepared statement of Chairman Filner........................    44
Hon. Steve Buyer, Ranking Republican Member......................     2
    Prepared statement of Congressman Buyer......................    44
Hon. Harry E. Mitchell, prepared statement of....................    45

                               WITNESSES

Congressional Research Service, Library of Congress, Sidath 
  Viranga Panangala, Analyst in Veterans Policy..................    24
    Prepared statement of Mr. Panangala..........................    58
U.S. Department of Health and Human Services, Jessica Banthin, 
  Ph.D., Director of Modeling and Simulation, Center for 
  Financing, Access, and Cost Trends, Agency for Health Care 
  Research and Quality...........................................    25
    Prepared statement of Dr. Banthin............................    60
U.S. Government Accountability Office, Randall B. Williamson, 
  Director, Health Care..........................................    27
    Prepared statement of Mr. Williamson and Ms. Irving..........    62
U.S. Department of Veterans Affairs, Hon. Eric K. Shinseki, 
  Secretary......................................................    34
    Prepared statement of Secretary Shinseki.....................    68

                                 ______

Harris, Katherine M., Ph.D., Study Director, Review and 
  Evaluation of the VA Enrollee Projection Model, RAND 
  Corporation....................................................    22
    Prepared statement of Dr. Harris.............................    53
Partnership for Veterans Health Care Budget Reform:
    Joseph A. Violante, National Legislative Director, Disabled 
      American Veterans..........................................     4
        Prepared statement of Mr. Violante.......................    45
    Steve Robertson, Director, National Legislative Commission, 
      American Legion............................................     6
        Prepared statement of Mr. Robertson......................    49
    Carl Blake, National Legislative Director, Paralyzed Veterans 
      of America.................................................     8
        Prepared statement of Mr. Blake..........................    51

                       SUBMISSION FOR THE RECORD

Coalition of Former VA Officials, joint statement................    71

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:
    Hon. Bob Filner, Chairman, Committee on Veterans' Affairs to 
      Hon. Eric K. Shinseki, Secretary, U.S. Department of 
      Veterans Affairs, letter dated May 13, 2009, and VA 
      responses..................................................    73


                     FUNDING THE U.S. DEPARTMENT OF
                     VETERANS AFFAIRS OF THE FUTURE

                              ----------                              


                       WEDNESDAY, APRIL 29, 2009

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

    The Committee met, pursuant to notice, at 10:06 a.m., in 
Room 334, Cannon House Office Building, Hon. Bob Filner 
[Chairman of the Committee] presiding.

    Present: Representatives Filner, Snyder, Michaud, Herseth 
Sandlin, Hall, Halvorson, Perriello, Teague, McNerney, Walz, 
Adler, Buyer, Stearns, Moran, Brown of South Carolina, Boozman, 
Bilirakis, and Buchanan.

              OPENING STATEMENT OF CHAIRMAN FILNER

    The Chairman. Good morning. This session of the House 
Committee on Veterans' Affairs is called to order.
    We thank all of you for being here and I ask unanimous 
consent that all Members have 5 legislative days in which to 
revise and extend their remarks.
    Hearing no objection, so ordered.
    We are going to try to move a little faster this morning 
because we will have votes in about an hour. Let me just say 
this is obviously a very important hearing. The power of the 
purse is the most important power Congress has and our budget 
must reflect our goals and our responsibilities.
    Veterans are a high priority in our thinking and in our 
budget. Having a budget is fine, as all of the veterans' groups 
will tell us, but if it's not a timely budget, it throws 
everything into turmoil. Nobody can plan, nobody can hire, and 
nobody knows what to do. In fact, over the last 20 years, I 
think, the U.S. Department of Veterans Affairs (VA) budget has 
been enacted before the start of the fiscal year only four 
times.
    Advance funding is the mechanism by which we hope to get 
control over that. Senator Akaka and I have introduced 
legislation to accomplish this, and many Members of this 
Committee support the House Bill, H.R. 1016.
    We want to hear today from interested parties about how we 
make this process work, any problems with advance funding and 
how we might deal with these problems. We look forward to 
trying to get this done through this Committee as soon as we 
can.
    I yield to Mr. Buyer for an opening statement.
    [The prepared statement of Chairman Filner appears on p. 
44.]

             OPENING STATEMENT OF HON. STEVE BUYER

    Mr. Buyer. Before I go to opening statement, I have a 
question for the Chairman. It has been a custom of this 
Committee, and most Committees of Congress, to have Members of 
the President's Cabinet as the first witness to testify. 
Recognizing that the Secretary is a representative of the 
President, he is, in fact, the President's agent at this 
hearing here today. And given that each branch is co-equal in 
our respect and mutual respect between the Legislative, the 
Judiciary and the Executive Branch, I believe the Secretary 
should be accorded the respect that he is due.
    The question for the Chairman is, is today's order of 
witnesses, which places the Secretary on a third panel, 
considered exception to the usual practice?
    The Chairman. Would you have Mr. Buyer's light on because 
this is part of his opening statement, please. He he seems to 
be representing his party well in obstructing things, as usual.
    As you know, the Chairman sets the agenda, and I will be 
happy to answer it when your opening statement is through.
    Mr. Buyer. I'd like to make a motion, given that I have the 
time. I move that the current Panel Number 3 be made Panel 
Number 1 and move Panel Number 1 to Panel Number 2 and move 
current Panel Number 2 to Panel Number 3. This is my motion.
    The Chairman. Any second? Motion dies for lack of a second.
    Mr. Buyer. I have a motion to--I make a motion----
    The Chairman. The motion is out of order. The Chairman sets 
the agenda for the meeting.
    Mr. Buyer. I control the time. I control the time.
    I control the time.
    I ask for regular order. I ask for regular order. I asked 
for regular order. This is my time. This is my time.
    The Chairman. And your motion is out of order.
    Mr. Buyer. I have a second motion. I make a motion to move 
the current Panel Number 3 to Panel Number 1. I move for the 
current Panel Number 1 to Panel Number 2 and move the current 
Panel Number 2 to Panel Number 3.
    The Chairman. The motion is out of order.
    Mr. Buyer. It is not out of order.
    The Chairman. The motion is out of order. Do you want your 
time or not?
    Mr. Buyer. Would the Chairman cite the rule? I would like a 
parliamentary inquiry to cite the rule as to how the motion 
would be out of order.
    The Chairman. Because the Chairman sets the agenda. It is 
not subject to your----
    Mr. Buyer. But the Chairman cannot make up the rules. Will 
the Chairman--will Counsel please advise? Parliamentary 
inquiry. Would the Counsel please advise as to why this would 
be out of order?
    The Chairman. Mr. Buyer, let me----
    Mr. Buyer. No, no, no. This is a parliamentary inquiry.
    The Chairman. Mr. Buyer, let me say something about your 
issues here, which I take--you were Chairman for 2 years. You 
ran the Committee and the agenda the way you wanted. We thought 
it was wrong, but you did it. I have watched for 16 years in 
this Committee, both under Republican and----
    Mr. Buyer. Is this on my time?
    The Chairman [continuing]. Both under Republican----
    Mr. Buyer. I reclaim my time. I reclaim my time. I reclaim 
my time. You can say what you want.
    The Chairman. Your time has expired.
    Mr. Buyer. I have 2--I would say to my colleagues here, and 
this is ridiculous. I have 2 minutes and 42 seconds on my time.
    The Chairman. Mr. Buyer, Mr. Buyer, Mr. Buyer----
    Mr. Buyer. No, this is my time.
    The Chairman. You may finish your time.
    Mr. Buyer. Here is what is challenging. Here is what is 
challenging, to those who are listening. I equally have 
listened to you belittle two prior Secretaries, and now you are 
demeaning this President's Secretary by what you are doing here 
today and I am very bothered by it. I asked and made sure that 
Kingston Smith would talk to Malcom Shorter to make sure that 
this type of embarrassment would not occur.
    And you know what, my friends out here, representatives of 
the veterans service organizations (VSOs), they pride 
themselves equally with regard to values and virtues and 
respect. And this town works when you have mutual respect.
    Now, General Shinseki, now Secretary Shinseki, he is not 
going to get involved in this. Why? Because he is a gentleman. 
And so when you say, well, Mr. Secretary, I want you to be on 
the third panel, you know what he's going to say? I will be 
wherever I think I need to be.
    But what is important, I believe, for us, is to make sure 
that that we treat Secretaries with the respect for which they 
are accorded, and I was hopeful that in fact, would have 
happened here today. And so I am greatly disappointed, greatly 
disappointed, but not surprised, that once again you would 
attempt to manipulate the rules and make things up as you go. 
That is really unfortunate.
    What those of us here on the Committee have done is, we 
have worked very hard so that we work between each other and we 
have respect with each other.
    But I am stunned that you would treat Secretary Shinseki in 
such a manner. And you know what? The Secretary has an 
excellent working relationship. He stepped off like he should, 
and he built rapport with the veteran service organizations.
    So you set the stage here today to sort of imply that, here 
is a Secretary, we are going to put him on the third panel, he 
is going to sit there, he is going to listen to the first two 
panels. What? The implication or the inference is that the 
Secretary doesn't listen to the veteran service organizations? 
That is false because he has already met and meets regularly 
with them. So you don't set that stage.
    The Secretary is doing exactly what the Secretary should be 
doing.
    So does form and procedure and rules matter? Absolutely. 
And that is why I asked, very politely here, that the Secretary 
be placed on the first panel.
    You are absolutely right. You can run things the way you 
want to run things. I just believe that you are setting the 
wrong perception and implication out there.
    This is a Secretary that listens. He has met with every 
Member of this Committee. He moves out smartly. He wants to do 
the right thing by our soldiers and dependents and the disabled 
and the families, but you are setting the wrong tone and that 
is the reason I was politely asking for this replacement.
    [The prepared statement of Congressman Buyer appears on 
p. 44.]
    The Chairman. Thank you, Mr. Buyer.
    The first panel consists of representatives of various 
veteran service organizations representing the Partnership for 
Veterans Health Care Budget Reform. Joe Violante is the 
National Legislative Director of the Disabled American Veterans 
(DAV). Steve Robertson is the Director of the National 
Legislative Commission of the American Legion. Carl Blake is 
the National Legislative Director of the Paralyzed Veterans of 
America (PVA).
    As you know, you will be recognized for 5 minutes each. 
Your written statements will be made part of the record. We 
look forward to your testimony. We thank you for getting this 
coalition together and making sure that the Hill and the Nation 
understand what is at stake here.
    Mr. Violante.

    STATEMENTS OF JOSEPH A. VIOLANTE, NATIONAL LEGISLATIVE 
    DIRECTOR, DISABLED AMERICAN VETERANS, ON BEHALF OF THE 
   PARTNERSHIP FOR VETERANS HEALTH CARE BUDGET REFORM; STEVE 
ROBERTSON, DIRECTOR, NATIONAL LEGISLATIVE COMMISSION, AMERICAN 
 LEGION, ON BEHALF OF THE PARTNERSHIP FOR VETERANS HEALTH CARE 
 BUDGET REFORM; AND CARL BLAKE, NATIONAL LEGISLATIVE DIRECTOR, 
PARALYZED VETERANS OF AMERICA, ON BEHALF OF THE PARTNERSHIP FOR 
               VETERANS HEALTH CARE BUDGET REFORM

                STATEMENT OF JOSEPH A. VIOLANTE

    Mr. Violante. Thank you, Mr. Chairman and Members of the 
Committee. Thank you for holding this hearing today and for 
inviting the Partnership for Veterans Health Care Budget Reform 
to testify.
    The Partnership includes the American Legion, AMVETS, 
Blinded Veterans Association, Disabled American Veterans, 
Jewish War Veterans, Military Order of the Purple Heart, 
Paralyzed Veterans of America, Veterans of Foreign Wars and 
Vietnam Veterans of America.
    Mr. Chairman, it has been over 18 months since I testified 
before this Committee at a hearing on this same subject: how to 
provide sufficient, timely and predictable funding for veterans 
health care programs. Then, as had been our position for many 
years, the Partnership focused on mandatory funding.
    However, at that hearing I told the Committee this: ``If 
the Committee chooses a different method for effecting this 
change, we will examine that proposal to determine whether it 
meets our three essential standards for reform--sufficiency, 
predictability and timeliness of funding for VA health care. If 
that alternative fully meets those standards, our organizations 
will enthusiastically support it.''
    Well, you did, we have, it does, and we do. That is, you 
did introduce new legislation, H.R. 1016, the Veterans Health 
Care Budget Reform and Transparency Act, that supports advanced 
appropriations (AA). The Partnership was honored to work with 
you and Chairman Akaka in developing that proposal. The new 
legislation does meet our goals and the Partnership does 
enthusiastically support it.
    Mr. Chairman, we applaud Congress for the significant 
funding increases that have occurred in recent years and the 
President's 2010 budget request.
    However, for too long the VA health care system has had to 
struggle with the budgets that were too little and too late. In 
2001, VA health care funding began to fall significantly behind 
the demand for services, straining VA's ability to provide 
treatment and leaving 250,000 veterans waiting 6 months or 
longer for doctor's appointments.
    In 2002, VA placed a moratorium on marketing and outreach 
activities. In 2003, then Secretary Principi cut off enrollment 
of new Priority Group 8 veterans. In 2004, Secretary Principi 
told this Committee that VA's fiscal year 2005 budget request 
was cut $1.2 billion by the Office of Management Budget (OMB). 
In 2005, Secretary Nicholson admitted that VA's budget request 
for fiscal year 2005 and 2006 were insufficient.
    And while we appreciate Congress completing the VA's 
appropriations on time last year, that was only the third time 
in two decades. Unfortunately, VA officials have become 
accustomed to continuing resolutions (CR) in emergency 
supplemental appropriations. This has created a feast-or-famine 
mentality, wherein VA managers hoard money in the beginning of 
the year and spend money unnecessarily at the end. No private-
sector business, especially a health care system, would operate 
effectively without knowing what its budget will be until 
months after the start of the fiscal year and neither can VA.
    To resolve these problems, the Partnership believes that 
the proposal most likely to lead to sufficient, timely, and 
predictable funding is H.R. 1016.
    We thank you, Mr. Chairman, for working with the 
Partnership and Chairman Akaka in developing this legislation, 
and we are pleased that these bills have significant bipartisan 
support, 97 cosponsors in the House and 41 in the Senate.
    In addition to the Partnership, this legislation is 
endorsed by the Independent Budget, the Military Coalition and 
the American Federation for Government Employees.
    Advance appropriations have also been endorsed by a 
Coalition of Former VA Senior Officials, including former 
Secretary Principi. I have a statement from this coalition and 
ask unanimous consent that it be made part of the record.
    The Chairman. So ordered.
    [The prepared statement of the Coalition of Former VA 
Officials appears on p. 71.]
    Mr. Violante. We recently met with President Obama, who 
told us in a private meeting, and then reiterated before the 
cameras, that he fully intends to keep his campaign promise on 
advance appropriations.
    President Obama said the following: ``The care that our 
veterans receive should never be hindered by budget delays.
    I have shared this concern with Secretary Shinseki and we 
have worked together to support advance funding for veterans' 
medical care.''
    The Senate included advance appropriations in their budget 
resolution, and Chairman Spratt and Chairman Conrad have 
reached agreement to keep advance appropriations in the final 
2010 budget resolution.
    H.R. 1016 is a common sense solution to a longstanding 
problem. Advance appropriations will not add one more dollar to 
the Federal deficit or national debt.
    Mr. Chairman, we look forward to enactment of this 
legislation so that we can finally guarantee veterans' health 
care funding will be sufficient, timely and predictable.
    My colleagues will now address the details of your 
legislation, and we look forward to answering any questions the 
Committee may have of us. Thank you.
    [The prepared statement of Mr. Violante appears on p. 45.]
    The Chairman. Thank you, Mr. Violante.
    Mr. Robertson.

                  STATEMENT OF STEVE ROBERTSON

    Mr. Robertson. Thank you, Mr. Chairman, Mr. Buyer, and 
other Members of the Committee for allowing the American Legion 
to participate in this hearing.
    From the very beginning, our goal has been a shared goal by 
the Partnership, and that is to provide sufficient, timely and 
predictable funding. We have worked with you and developed a 
piece of legislation that we believe is a solution to our 
problems.
    Historically, advance appropriations has been used to make 
program functions more effectively better rely on the funding 
cycles with program recipients and provide insulation from 
annual partisan political maneuvering.
    By moving advance appropriations, veterans' health care 
programs can benefit from these three elements. The problem the 
Partnership is trying to address is the annual discretionary 
appropriations not always being available to VA on October 1st. 
This delay in the timely and predictable provisions of medical 
funds means that the VA health care system administrators are 
cautious in decisions that they have to make concerning hiring 
of medical personnel, procurement of new equipment, supplies 
and services, and the construction and maintenance of VA 
medical facilities, until those funds are actually appropriated 
and gets to them.
    While Congress has taken--made great strides to increase 
funding during the past several years, it has been the 
potential for significant--there is still the potential for 
significant delays in the VA funding process.
    The core problem in the timing, a timely funding of VA 
medical care is the inherent volatile nature of the annual 
appropriations process. Due in large part to the current 
medical care funding process used to approve annual 
discretionary appropriations, it is clearly flawed, and the 
Partnership has looked for a new way to address this issue.
    That approach, clearly to us, is advanced appropriations. 
We believe that it will stabilize the VA medical care funding 
and provide the funds truly in a timely and predictable manner.
    Congress will still have its discretionary authority to 
approve and oversee these funds. Because medical care 
discretionary appropriations will be decided 1 year in advance, 
VA medical programs could be more closely monitored to make 
sure the funding levels are sufficient. More importantly, the 
VA medical care would be available on October 1st of every 
year.
    If advanced appropriations for VA medical care were adopted 
by Congress, VA administrators would have 1 year in advance of 
when that appropriations is due to be able to plan accordingly, 
to deliver quality medical care services to all enrolled 
veterans who need it.
    Most importantly, advanced appropriations allows Congress 
to improve its oversight responsibilities over VA medical care 
because VA administrators will be held more accountable due to 
the fact that they should be able to make better use of these 
resources.
    Advanced appropriations is a technique already used by 
Congress for many years to approve authority for 1 year in 
advance of certain government programs, such as the Low-Income 
Housing Energy Assistance Program and Section 8 housing.
    Although Congress has provided advanced funding for these 
programs for a variety of public policy reasons, it does not 
provide advanced appropriations for timely and predictable 
provisions for VA medical care. We would like to see this 
changed.
    As a Nation at war and with the economic difficulties we 
face today, now is the time to enact this critical legislation. 
As you and your colleagues consider the conference report for 
S. Con. Res. 13, the Budget Resolution for 2010, we are pleased 
to see advanced appropriations for VA medical care included in 
that Congressional blueprint.
    The Partnership supports that provision in S. Con. Res. 13. 
Advanced appropriations will increase budget flexibility for 
Congress to provide sufficient funding. If faced with 
unforeseen medical circumstances that dictate changing the 
funding amount, clearly advanced appropriations fully addresses 
two of the three prongs of our sufficient, timely and 
predictable medical care funding, while helping to create an 
environment that is more likely to produce sufficient funding.
    Mr. Chairman, the Partnership welcomes the opportunity to 
continue to work with you and your colleagues toward enactment 
of the budget reform that will achieve sufficient, timely and 
predictable annual discretionary appropriations for VA medical 
care.
    Thank you. That concludes my testimony.
    [The prepared statement of Mr. Robertson appears on p. 49.]
    The Chairman. Thank you, Mr. Robertson.
    Mr. Blake.

                    STATEMENT OF CARL BLAKE

    Mr. Blake. Chairman Filner, Ranking Member Buyer, Members 
of the Committee, on behalf of the Partnership, I would like to 
thank you for the opportunity to testify today.
    As already mentioned, the Partnership's goal for VA health 
care system is to ensure sufficient, timely, and predictable 
funding.
    While much of the attention during the debate of this 
legislation has been focused on the advanced appropriations 
aspect, we believe that the second part of the proposal is 
equally important.
    To ensure sufficiency of the VA health care budget, section 
4 of H.R. 1016 would require VA's internal budget model to be 
shared publicly with Congress to provide accurate estimates for 
VA health care funding as determined by a U.S. Government 
Accountability Office (GAO) audit before political 
considerations take over the process.
    In recent years, VA developed its new methodology to 
estimate its resource needs for veterans' health care through 
the Enrollee Health Care Projection Model, or the ``Model.''
    Developed in collaboration with a leading private-sector 
actuarial firm, Milliman, Inc., over the last several years the 
Model has substantially improved VA's ability to estimate its 
budgetary needs for future years. The Model has been thoroughly 
reviewed by the Office of Management and Budget and approved 
for use in developing VA's budget.
    We recognize that the Model itself directly accounts for 
approximately 86 percent of the real costs to the VA to provide 
services in a given year. The remainder of the budget needed by 
the VA primarily goes to long-term care, approximately 10 
percent for nursing home and non-institutional care, as well as 
some smaller programs that make up approximately 4 percent.
    The Partnership also recognizes that the biggest argument 
against relying on the Model for budget forecasting is the 
impact unforeseen events, such as exceedingly large numbers of 
new enrollments or catastrophic events might have on the 
budget. For instance, the report released on April 3rd, 2009, 
by the Congressional Research Service (CRS) titled, ``Advance 
Appropriations for Veterans' Health Care: Issues and Options 
for Congress,'' addresses this concern directly.
    The report specifically states that, ``It is reasonable to 
assume that future year budget projections could have variances 
that could create budget shortfalls if there are unanticipated 
shocks to the model.'' We see this as simply a statement of the 
obvious since this point is true even under the current budget 
process.
    The Partnership does not believe that the advanced 
appropriations proposal somehow changes the actions that 
Congress would take under these circumstances. There seems to 
be an assumption that if our entire proposal were to be 
enacted, that Congress would no longer have or choose not to 
use its authority to provide emergency supplemental 
appropriations when warranted.
    The Partnership would also like to point to the detailed 
analysis of the Enrollee Health Care Projection Model conducted 
by the RAND Corporation. Ultimately, we believe that the most 
important point of the RAND study is that compared to 
traditional models, the current specification offers the 
benefit of a substantially more flexible and detailed platform 
from which to plan the VA's appropriations request, monitor 
budget execution and assess system performance. If the outcomes 
of the model were shared publicly, Congress would have better 
information in order to develop its own appropriations plan for 
the VA.
    The Partnership simply believes that the outcomes of the 
Model better reflect the needs of the VA health care system 
than any other model currently used.
    Mr. Chairman, we look forward to working with the Committee 
to ensure that your legislation, H.R. 1016, is advanced and 
ultimately enacted. We appreciate the opportunity to lay out 
our proposal in detail and we would be happy to take any 
questions that you or the Members of the Committee might have. 
Thank you.
    [The prepared statement of Mr. Blake appears on p. 51.]
    The Chairman. Thank you all for your testimony.
    Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman, Mr. Ranking 
Member, for having this hearing today. I think it is very 
important. I have always been a strong supporter of making sure 
that we have adequate funding for the VA, but also that that 
funding comes on time, and there has been a problem over 
previous years as the panel had alluded to earlier, as far as 
getting the budget on time.
    I have been very used to dealing with 2-year budgets 
serving in the Maine legislature and chairing the Appropriation 
Committee and it works very well. But my question is, when you 
look at the Model that the VA puts forward, currently there's a 
lag in that Model. And by having advanced appropriations, that 
will add another year in that lag as far as adequately 
reflecting what the budget should be within the VA.
    And I heard Mr. Blake mention in his testimony the fact 
that, yes, even if we do advanced funding, we probably will 
have to come back and make some adjustments in the following 
Congress.
    Do you feel comfortable--and I will ask each of you--do you 
feel comfortable with advanced funding, that additional year 
lag, that we can make adjustments down the road to take care of 
that, or other ways that we might be able to look at that model 
to make sure that it accurately reflects what is really 
happening within the VA system?
    Mr. Violante. Mr. Chair, that is a question that we have 
considered, and we do feel comfortable. We believe that in the 
beginning there may be some things that need to be ironed out, 
and that is why we have asked or that the bill contains a 
review by GAO to make sure that the numbers that are going in 
are accurate. And we think as time progresses and with all 
these numbers being looked at, both forward and backward, that 
we will get a good estimate in the very near future.
    If immediately something needs to be done to correct it, we 
would hope that Congress would take steps either during the 
normal budget process or in a supplemental. But we do feel 
comfortable that this model will work for 2 years out.
    Mr. Robertson. Mr. Chairman, we have looked at this as 
nothing new, as nothing new. If these numbers were used in the 
regular process that we are using right now and they were 
inaccurate, we would go back and fix it.
    So it is not like we are chiseling this on a tablet 
somewhere and bringing it down and giving it to you. It is a 
flexible document. And all the tools that the Congress has to 
make adjustments in the appropriations, that are given out, 
whether they are advanced appropriations, whether they are 
supplemental appropriations, whether they are continuing 
resolution, are still there.
    I agree with Joe. The more people looking at the Model and 
making evaluations of it, I think, the better fine tuned we can 
make it.
    Mr. Blake. I guess I couldn't say much more than what they 
have said, Mr. Michaud, except to say that you sort of imply 
that the assumption would be that emergency supplemental 
appropriations and things like that would become part of the 
normal process, and that is not necessarily what we are 
advocating for. We believe if we can get this right, there 
should not be the need for that kind of activity.
    I think the point that we tried to make in our testimony 
about emergency supplemental is, the intent of something like 
that is when things like a shock to the system, as outlined by 
the CRS Report, occur, that is the reason for that being a tool 
that the Congress has.
    I would also point to the fact that in the RAND study, they 
do have a conclusion in there that they believe that this model 
is good for short-term budget planning. Now, obviously that 
opens up a big question about what constitutes short-term 
budget planning. Two years? We feel pretty comfortable and we 
have discussed that that probably falls within that window.
    Now whether that applies to 5--and 10--year budget 
projections out, I am not sure that we have the same fate.
    Mr. Michaud. As you know, I am a cosponsor of Chairman 
Filner and Chairman Akaka's legislation dealing with advanced 
funding and look forward to moving that legislation forward. My 
second question is, do you feel it would be easier to have a 
more accurate account for advanced funding appropriation for 
the VA system if, in fact, the VA and the U.S. Department of 
Defense (DoD) moves more rapidly with a seamless transition, 
electronic medical records and other information that the VA 
needs? Do you think that would be extremely helpful, as well, 
when you look at the accuracy issue?
    Mr. Violante. It would definitely be helpful and we 
appreciated the President back on April 9th when he came out 
with Secretary Shinseki and Secretary Gates to announce that 
will be happening and that definitely will help alleviate a lot 
of problems.
    Mr. Robertson. It will also give you a look ahead that will 
be much better as to what population you may be receiving in 
the next year. And I think the most important thing that a lot 
of people overlook is we will all be working off the same 
numbers. Everybody will be working off the same numbers. It 
won't be your Committee having one set of numbers, our 
organizations having another set of numbers, and the Secretary 
having another set of numbers. We will all be working off the 
basic core package.
    Mr. Blake. Mr. Michaud, I would like to make one other 
comment, too. There's another recommendation that is part of 
this that the VA has made or a plan going forward that I think 
is critical to this, and that is this idea that when a 
servicemember takes the oath and becomes a servicemember, they 
then are enrolled into a system where they never leave the DoD 
and then they have to get back in to VA a different way so that 
they are always a one and the same system. I think it makes it 
better to track these people going forward and you can keep a 
better--you get a better idea of trends as it relates from the 
beginning of military service all the way through.
    It creates a different aspect, but it is certainly 
something we support.
    Mr. Michaud. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman.
    Let me just say that, Mr. Robertson, let us say we did this 
advanced appropriation with the Department of Defense. Would 
you think that that would be a good idea, to have advanced 
appropriations for Navy, Army, Navy and Marine Corps?
    Mr. Robertson. Would I think it would be good to make the 
entire budget advanced appropriations?
    Mr. Stearns. I am talking for the Department of Defense. If 
we took a segment. For example, as I understand it, this 
advanced appropriations account would account for 43 percent of 
the total VA budget, 85 percent of the total VA discretionary 
account. So we are talking about almost half of the VA budget 
being funded through AA.
    Mr. Robertson. I think you would have a very good argument 
if the DoD budget wasn't usually the first one that's adopted. 
I don't think the DoD appropriations or the DoD supplemental 
requests are ever delayed over, you know, 6 or 7 months. That 
is what maintains----
    Mr. Stearns. Well, no. Sometimes the DoD is delayed, we 
have to do an emergency appropriation supplemental. It's 
constant, you know, dealing with Afghanistan and the Iraq war. 
We had the same problem with late appropriations and these 
people didn't have money.
    So I mean, if your argument is strong here, then I am just 
curious if you feel it should be applied to the Department of 
Defense.
    Mr. Robertson. I do not think that the Department of 
Defense has suffered in decisionmaking process due to delays 
like the VA has on the medical care side of it.
    Mr. Stearns. Isn't it true that by doing this, this will be 
the first time in the Federal budget that we are giving advance 
appropriations for health care? We are not doing it for 
Medicare or Medicaid. I mean----
    Mr. Robertson. Those are mandatory programs, sir, and they 
are automatic.
    Mr. Stearns. I know. But we are not doing advanced 
appropriations like we are requesting here.
    Mr. Robertson. It is an automatic, sir. It is effective 
October 1st.
    Mr. Stearns. Would you rather have that automatic, rather 
than the advanced appropriations?
    Mr. Robertson. Sir, that is what we initially pushed for 
and was turned away from by Congress. Congress has asked us to 
give them a discretionary appropriations that they can continue 
to work with.
    Mr. Stearns. If we have advance appropriations, what about 
the flexibility for the Secretary of Veterans Affairs? Doesn't 
he lose some of the flexibility he needs when he looks at--I 
mean, we have talked about--Mr. Blake talked about the RAND 
study. We also have input from the GAO that indicated the 
provision of advance appropriations would use up discretionary 
budget authority for the next year and would so limit Congress' 
flexibility to respond to changing priorities and needs. The 
longer projection period increases the uncertainty of the date 
and projection used.
    And in addition to Congress losing flexibility, the 
Secretary of Veterans Affairs loses his flexibility. So what 
would you say to that? There is no flexibility provided.
    Mr. Blake. Mr. Stearns, could I answer that question?
    Mr. Stearns. Sure.
    Mr. Blake. First, I would say that I don't believe the 
Secretary would lose any flexibility. What we are proposing 
doesn't in some way change the authorities that the Secretary 
has and how he spends his money, whether he can transfer funds 
around. And ultimately, the money will become available for all 
of the accounts in the VA on the same day, assuming that all of 
the other accounts not governed by advanced appropriations are 
approved before October 1st.
    My understanding of the GAO findings, which I think you 
referred to their testimony that was submitted for the hearing 
today which was, I just glanced over it before we began this 
morning, I think that their finding is targeted more at their 
concern about the flexibility Congress would have, and my sense 
of reading that suggests that by moving this into an advanced 
area, it is removed from the current budget debate and it is a 
pot of money that the Congress no longer has to manipulate in 
some fashion to address other priorities or not that they may 
have.
    Mr. Stearns. Mr. Blake, let me just read. ``In January 2009 
the GAO found that the VA's assumptions about the costs of 
providing long-term care appear unreliable given that assumed 
costs increases were lower than VA's recent spending experience 
and guidance provided by the Office of Management and Budget.''
    So they are pretty clear. They don't think that the 
projections are reliable and with that, in fact, if you have 
advance appropriations, then you have assumptions that are 
based upon unreliable data.
    Mr. Blake. Well, to your point, Mr. Stearns, the 
projections they refer to, refer to the long-term care piece of 
the VA, which is actually not governed by the Model itself. And 
that is something we see as a problem. I even mentioned it in 
my written statement. And I won't argue with you. I agree. If 
there is an area where they have clearly manipulated and made 
false assumptions, it is in how they planned their long-term 
care.
    I think in recent past we have seen that the VA has wanted 
to get out of the business of institutional long-term care, and 
I think their assumptions reflect that.
    Mr. Stearns. Mr. Blake, they also moved not just to long-
term. They said they had a report that indicated that the VA 
underestimated the cost of serving veterans returning from 
military operations in Iraq and Afghanistan.
    So it is not just in the long-term. It is a consistent 
pattern that they found unreliability of the data. And so that 
is why--you know, we are all on the same team here, you know. I 
think, as serving on the Veterans Committee almost 20 years, 
that I would like to have that flexibility and be able to come 
out and help when there is unreliable data.
    But now, subject to what the GAO found and the RAND study, 
the flexibility is gone from Congress, gone from the Secretary 
of Veterans Affairs, and based upon unreliable data, not what I 
said, what the GAO said.
    Mr. Robertson. Mr. Stearns, if I may, with advanced 
appropriations, the Secretary would still go through the 
regular appropriations process and if he felt that the 
appropriation level for the next year was too high, he could 
state that from the very beginning of the budget process with 
the President's budget request.
    But, secondly, which I think is a very important point, is 
that you are making an--or that report is making an assumption 
that the Model that was used was what was advanced by the 
Administration, and I don't think that is always the case. I 
think the Model may have had higher numbers or better 
predictions. It just, when it was passed back through the OMB 
process, it may have been skewed.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Violante. If I could just answer that also. I mean, 
Steve is right. If you look at that report, it talks about the 
fact----
    Mr. Stearns. The GAO report or the RAND report?
    Mr. Violante. Yes. The GAO report. That, you know, VA 
compared projected costs to the anticipated requests, not based 
on the needs.
    And the other thing about this legislation, it does not 
require Congress to use the numbers that the Model puts forth. 
I mean, everyone has flexibility. The idea was to have this 
Model made available so everyone would know what the needs are.
    I mean, Congress may not agree with those needs, and 
Congress can add more or subtract money from that. This 
legislation does not bind you to the VA's model.
    Mr. Stearns. Thank you.
    Mr. Chairman, that would make a good question for the 
Secretary of Veterans Affairs when he comes up.
    The Chairman. Thank you, Mr. Stearns.
    Mr. Walz.
    Mr. Walz. Thank you, Mr. Chairman and Ranking Member and 
thank you to each of you, once again, for all you do for our 
veterans. Maybe I will have to take responsibility for the 
black cloud that entered here, both literally and as I got 
soaked on the way, and figuratively as I couldn't find my 
caffeine and everything else went wrong today. The one thing I 
could count on, though, was coming here on this important 
issue. And I think moving in a positive manner to kind of break 
this jinx I have been under, I am going to speak heresy here 
because I'm trying to figure it out on the flexibility side of 
this, too.
    I think we do this thing right because many of us feel this 
gives the flexibility to the Secretary and to his managers. 
With those of us who have been out there and watched the 
decisions that have to be made by hospital administrators on 
cutting back nurses and care at the last minute and then maybe 
being able to rehire them back down the road or different 
things that were going on. I think the potential lies here to 
get efficiencies out of the system so that we may deal with the 
issue of rescissions of money coming back. Now, wouldn't that 
be odd?
    If we were able to get the system to where it was 
functioning correctly and if we do this right, we shouldn't 
always have to. And I am glad that you brought this up, Carl, 
focusing on this, because I, too, want to make sure. And I 
think Mr. Stearns brings up a valid point on allowing that 
flexibility.
    But the way I understand it is, if the budgeting processes 
are more in the hands--with advance appropriations--of the 
Secretary and of his managers who know how to deliver the care, 
I think we have got a much better chance of coming to the 
number of what it actually takes to care for our veterans and 
get it back.
    Would you agree with that, that that is the point we are 
trying to get to, that this doesn't necessarily just mean more 
money, faster money? It means the correct amount of funding at 
the right place and right time to deliver the care.
    Mr. Violante. You are exactly right. And that is what we 
are trying to do with this legislation, is to get to that point 
where we know what the needs are, not what the government wants 
to spend on veterans.
    Mr. Robertson. This is the old ``garbage in, garbage out.'' 
If you don't have good data to start with, if we are operating 
off of five or six or ten or fifteen different proposals, then 
how do we know which one is the best one? If we have a good 
model that the taxpayers are paying for, why aren't we all 
using it? Why aren't we all working off the same sheet of music 
and coming up with the best plan possible? And it does provide, 
I think, a tremendous amount of flexibility.
    And you are exactly right. If I was a brandnew researcher 
coming out of a medical school, which system am I going to go 
to? One that doesn't know when its budget is going to be 
approved and how much they are going to have to operate their 
system?
    If I am uncertain of what the fate is of the VA medical 
care system, I need to go someplace else where I have a little 
more security.
    Mr. Blake. I agree wholeheartedly with you, Mr. Walz. I 
mean, even in our statement we make the point that we're not 
suggesting that we just want increased budgets year after year 
after year.
    If ultimately we get this right and it is reflected that--I 
mean, I think we all know that the patient population of the VA 
is actually slowly decreasing, or at least the growth of it is, 
and the discussion about the World War II generation and once 
it is gone will have a significant impact on the utilization in 
VA.
    And so, we recognize that fact and we accept that. And so 
the impact that will have on the budget, if it drives the 
budget down some, so be it. We just want to get it right.
    Mr. Walz. Again, I think my colleague from Florida brought 
up an interesting point in asking about other appropriations. I 
think there is a valid argument to be made there and I think, 
Steve, you are right about this, that others didn't have to do 
it and there might be a difference in appropriating a building 
or something, as opposed to the care of one of our warriors. I 
understand that is a pretty strong moral argument.
    But I do think that what the President's talked about and 
what his Secretaries are talking about is a total change in 
efficiencies and transparencies, how we do this. I have worked 
in organizations. I am not talking about putting government on 
auto pilot. What I am talking about is our responsibilities to 
get that out. The Secretary's responsibility is his managers 
are better at understanding how to deliver that. Our job is to 
provide oversight. I worked in school systems where every 
single year we got pink slipped as a way to just assume, we 
didn't know if we were going to have the money to have you 
back, so everybody got laid off automatically, and you got 
hired back on again in the fall until you received quite a bit 
of seniority.
    That created massive problems in how to figure things out. 
It created a sense of, in the organization, no sense of 
consistency, and the morale in the organization was hurt by 
that lack of understanding of what was coming. So I think there 
is--we are not going to talk about intangibles. We are going to 
measure them, we are going to show, we are going to provide how 
this works.
    But I think the proposal is solid. I have supported it. I 
think you have thought through some of the difficulties. And I 
think this discussion further on how we make government more 
efficient is warranted, so I yield back my time, Mr. Chairman.
    The Chairman. Thank you, Mr. Walz.
    Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you. I would yield my time 
to the gentleman from Florida who has additional requests or 
questions. Thank you.
    Mr. Stearns. I thank my distinguished colleague.
    Mr. Chairman, I thought I might just continue this GAO 
discussion with Mr. Blake and Mr. Robertson and just to have 
them aware of what the conclusions are.
    I think my colleague mentioned a little bit about putting 
this whole thing on auto pilot, and I think that's obviously a 
concern when we want to have flexibility for both the Secretary 
and as publicly elected Members of Congress, why wouldn't I 
want to get involved with priorities here.
    And I feel, Mr. Robertson, by this advance appropriations 
proposal, I am giving up a little bit. And he used the word 
``auto pilot,'' and I am just going to use his word to say 
that, you know, we are tying up Members of Congress from having 
the flexibility we need, not to mention the Secretary of 
Veterans Affairs.
    Let me just read, if you would allow me to read from their 
concluding comments of this recent testimony that the GAO did. 
Now, lots of times if you are, you know, people quote OMB and 
they say, oh, that is the White House. And then if your party's 
in power and GAO is quoted and you say, well, that is Congress 
and that is your party. But I mean, this is the GAO today, and 
I think most of us respect, regardless of what party we are, we 
respect what the GAO has to say.
    I will read a little bit of what they said. ``Providing 
advanced appropriations will not mitigate or solve the problem, 
which is noted above, regarding data calculations or 
assumptions in developing the VA health care budget. Nor will 
it address any link between cost, growth and program design. 
Congressional oversight will continue to be critical.'' So you 
don't want to tie our hands here so that we don't have this 
flexibility.
    ``If the VA is to receive advance appropriations''--this is 
the GAO we are talking about, for health care--``the amount of 
discretionary spending available for Congress to allocate to 
other Federal activities in that year will be reduced. In 
addition, providing advance appropriations for health care, VA 
health care, will not resolve the problems we have identified 
in the VA's budget formulation.''
    Mr. Robertson. Mr. Stearns, are they basing this on all of 
the other advance appropriations that have been awarded for 
over the years? Is that a problem that is common amongst all 
the other Federal programs that receive advanced 
appropriations, that it is running amuck? Because if we have 
got that many programs that are receiving advanced 
appropriations, that they are basing this on, because we 
haven't ever done this as a VA appropriation. So my question 
is, is this report being based upon their experience with----
    Mr. Stearns. No.
    Mr. Robertson [continuing]. Other advance appropriation----
    Mr. Stearns. I am told by Counsel it is not based upon 
that. In fact, there is not as many advanced appropriation 
programs as you indicated. So Counsel is telling me ``no,'' 
that is not true.
    So, I mean, the fundamental question is that the three of 
you have to, in your conscience, think about if what you are 
asking based upon the GAO's finding, going to tie our hands and 
in the area where you want to have this improved health care, 
will not resolve the problems because you are advancing money 
and no one knows, based upon the data that is provided, that it 
is going to do the job.
    So, I mean, this is just sort of a general comment. I mean, 
you are welcome to comment, but I am just reading from the GAO 
report and not having had a lot of experience, frankly, so I 
can't even answer your question, if it is legitimate, whether 
advanced appropriations have worked or not. I mean, that is a 
good question. I think myself and Counsel should----
    Mr. Robertson. Mr. Stearns, with all due respect, when Mr. 
Buyer was Chairman and he called up the question about how the 
methodology was being determined by all of the groups and 
everybody else, we all had to lay our cards out on the table, 
it was clear that we weren't doing it right, with the way the 
process was going. The data was clearly well outdated. I mean, 
they didn't even take into consideration we were in a war.
    So how did we fix it then? We made the adjustments. We got 
the additional appropriations. The President came back with a 
new budget request and they fixed the problem.
    When you do advanced appropriations, it is the exact same 
thing. The money is not spent. It is out there on the wall. If 
we determine between now and when that appropriation goes into 
effect that it is inaccurate, we still have the vehicles to 
correct it.
    You have a rescission process. If the bill goes into effect 
and the money is appropriated, you can go back and take money 
back if you feel it is inaccurate.
    So I hate this thought that this is automatic pilot. It is 
not. It is still subject to review.
    Mr. Stearns. Well, let me just conclude, Mr. Robertson, can 
you cite an example where Congress has taken money back? I will 
give you 230 years of history.
    Mr. Robertson. I will be glad to show you my tax return.
    [Laughter.]
    Mr. Stearns. Okay. Well, you are the only one.
    Mr. Robertson. Talking current receipt.
    Mr. Stearns. Well, in my 20 years of Congress, I have never 
seen Congress take back money, so if that is a new era, I am 
looking forward to it.
    The Chairman. The President has made decisions all along, 
Mr. Stearns.
    Mr. Stearns. Yeah, well, I am not thinking in the way he is 
thinking. To see government, Congress, come back and take money 
back. But in all defense of what you are talking about, you 
know, the current budget and appropriations process is not 
perfect up here. That is for sure and we are sometimes just as 
unreliable as anybody. So thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mrs. Halvorson.
    Mrs. Halvorson. Thank you, Mr. Chairman. Thank you all for 
being here. I have an Advisory Committee for Veterans and I 
just met with them on Saturday and we had a lot of discussion 
over health care. In fact, my district, the most calls we get 
are from veterans and people who feel that their health care 
needs are not being satisfied, and the smooth transition that 
we need to see from the Department of Defense into the 
Department of VA.
    But Mr. Robertson, you make a very, very good point. Just 
because you have an advanced budget, doesn't mean you spend it. 
And I am really concerned, from spending a lot of years in 
State government, the fact that you hoard all your money in the 
beginning because you don't know what is going to come up and 
then you spend it needlessly because if you don't spend it, you 
are not going to get it next year.
    And that is why we have got to remember, what I am hearing, 
and I may be new and I am trying to keep this simple, but what 
I am hearing is we are putting politics before the health of 
our veterans, and we need to put the health of our veterans and 
veterans first.
    Where, if it is going to help the health of our veterans to 
have an advanced appropriation, I think no matter what, we 
should be doing that. But for Congress to say they want more 
control, but that hurts our veterans, I think that is 
absolutely ridiculous. We should be putting the flexibility in 
the hands of the Secretary so that our veterans are the ones 
that are taken care of, because any time Congress wants to pull 
that back and make sure that it is more efficient, they can.
    So my question to you is, if we have an advanced 
appropriation, is it going to help take care of our veterans 
better? And any one of you can answer or all of you can.
    Mr. Violante. Definitely. I mean, we wouldn't be supporting 
it if we didn't believe that this will benefit veterans getting 
proper timely quality health care. And I think the statement I 
asked to be introduced into the record from former VA 
personnel, including Former Secretary Principi, Deputy 
Secretaries Hershel Gober and Gordon Mansfield, and almost two 
dozen other directors, indicate that the biggest problem they 
have is not knowing what they are going to get and when they 
are going to get it.
    And what happens is--and we have talked to a number of 
directors--when they get their budget 3 months late, what 
happens is, they can't hire the doctors at that time. They have 
to contract out, which then costs them more money.
    So I think, all in all, advance appropriations will solve a 
lot of problems.
    Mr. Robertson. And ma'am, we are all held responsible. Our 
organizations, I can speak for the American Legion. I can't 
speak for my partners, but I have a true feeling that it is the 
same. If it was wrong, if it was doing--if advanced 
appropriations hurt the veterans community, we would be the 
first ones up here yelling and screaming, ``Stop the wagon, 
stop the wagon.'' But right now, we feel that this is the best 
approach, short of mandatory funding, to be able to make sure 
that we are getting timely, sufficient and predictable revenue.
    Mr. Blake. You know, Mrs. Halvorson, the irony of this is 
everyone, I think, deep down believes that there is a need for 
some kind of funding reform in the VA health care system. 
Mandatory funding was simply, it just didn't have the--there 
was no will to support it.
    Mrs. Halvorson. Right. Okay, I'll talk to you somewhere 
else.
    Mr. Blake. Because of PAYGO considerations and other 
things, because it would become a mandatory program. And I'm 
not sure that we necessarily have had any time to really digest 
this. I think we believe that this is better because this 
proposal actually answers a number of the concerns raised by 
mandatory funding as it relates to Congress and its actions.
    But I think that this will simply be, allow the VA to be 
more efficient. And if we can get to the bottom line so that 
the VA, it would provide better care in a timely manner, then 
so be it.
    Mrs. Halvorson. Well, and to me, that is better care, more 
efficiency, transparency, timely manner. To me, that is what it 
is all about. And I also want to congratulate Secretary 
Shinseki for sitting here through all the panels and for being 
on the third panel because I have been through a lot of 
Committee hearings where they sit through the first panel and 
leave.
    You know, congratulations, Secretary, for wanting to hear 
what we on the Committee also are asking because this is so 
important to us.
    And you know, we have created a lot of veterans and it is 
up to us to make sure we take care of them, and I haven't seen 
that happening. You know, this is very personal. You know, I 
have a father, a husband and a son all serving or who have 
served. And you know, I congratulate all of you for wanting to 
come to us to make sure that this is a priority. So I yield 
back. Thank you.
    The Chairman. Thank you, Mrs. Halvorson.
    Mr. Buchanan.
    Mr. Buchanan. I don't have anything.
    The Chairman. Mr. Bilirakis?
    Mr. Bilirakis. No questions.
    The Chairman. Mr. Teague?
    Mr. Teague. Yes. I just want to say, you know, that 
definitely I am in support--well, first, thank you, Mr. 
Chairman and Ranking Member, I am sorry.
    But I do want to say that I am in support of advance 
appropriations and that is why I wrote two letters of support. 
I think that the fact that we allow these gaps to happen in the 
coverage of our veterans is wrong because they never let the 
gaps occur in their protection of us. I think it is an 
embarrassment and I definitely want us to fix it. Thank you.
    The Chairman. Thank you, Mr. Teague.
    Mr. Buyer.
    Mr. Buyer. What I am going to try to do here is, what I was 
doing is looking at the legislation and then listening to your 
testimony, is your testimony relying upon what is in H.R. 1016?
    Mr. Violante. Yes.
    Mr. Buyer. The advance appropriation relies upon the 
enrollee model. Do you have the confidence in its planning and 
predictability?
    Mr. Violante. We believe the model is good, that there are, 
as we have seen from numerous reports, there are problems with 
some of the information that goes in, and it is our hope that 
with GAO looking at it, constant look back at this situation or 
looking at it beforehand, that we get this refined.
    The model is good. It is what goes into it, that's the 
problem--or what happens with OMB when those numbers come out.
    Mr. Blake. Mr. Buyer, I would like to make one comment 
along that line, too. I think the problem is, we don't know 
what the model in its first form puts out as a projected need. 
We don't believe, I think as a Partnership, that what 
ultimately gets submitted as the President's budget request on 
the first Monday in February, reflects what is the initial 
projection of the model. There are too many other political and 
policy considerations that get added in after that point that I 
think lead to what we see in February and begin the debating 
process.
    So if we had the opportunity to at least see that first, we 
could make a better judgment and a better decision.
    Mr. Buyer. I am going to embrace what my friend, Steve, 
just testified to Mr. Stearns, when reflecting upon the past 
years when we looked at the model and it was the inputs and now 
we have RAND's analysis of the enrollee model, and says it is a 
pretty good model with regard to the short term, but with 
regard to long-term predictability, it gets a little fuzzy. It 
is harder. It gets a little more difficult. Those are my words, 
but that is kind of what RAND is saying to us.
    So with regard to our level of confidence in the 
predictability for longer term, I think we have to acknowledge 
that is where we have to continue our oversight, if this is the 
pathway that we want to take.
    Would you concur with that, Mr. Violante?
    Mr. Violante. Again, it is not defined what short term and 
long terms is in that report, and I would say that 2 years out 
is not long term. But, yes, the further out you get, the more 
unreliable anything will be.
    Mr. Buyer. All right. So then I will take it that you also 
concur with RAND's review and evaluation of the current model.
    With regard to the accounts, if we are going to use the 
word ``flexibility,'' and that's what's sort of being danced 
around here by the panel and by different questions, the 
flexibility isn't necessarily there in the legislation itself. 
I mean, I went and grabbed the legislation; I went and looked 
at it. And it applies to specific line-item appropriation 
accounts, and so excluding out of this would be your research--
--
    Mr. Robertson. Construction.
    Mr. Buyer [continuing]. Your construction. And the one that 
was really bothersome that we better take a good look at is 
information technology (IT), because I don't know how the 
Secretary can really do his job with regard to the IT 
architecture when you have medical IT also. I mean, it is all 
synergistically intertwined and I think we are going to need to 
give the Secretary some of that ``flexibility'' we are talking 
about. We may need to make some amendments to this legislation 
to make sure the Secretary is able to move necessary dollars 
among accounts.
    You know, we do that with regard to the Department of 
Defense. How challenging it would be for the Secretary to have 
been the Chief of Staff of the Army with the ability to move 
funds among accounts and work with the Appropriations 
Committee, but then not be able to do that in the VA.
    So I think if truly our interests then are serving the 
veterans and making sure appropriate dollars are where they 
need to be, we should look at some discretionary authorities to 
the Secretary. Would you agree?
    Mr. Blake. Mr. Buyer, I don't think we would have any 
argument with that. I mean, we are interested in ensuring that 
the legislation accomplishes the best possible outcome and 
ultimately meets our goals as the Partnership.
    I wouldn't argue that necessarily all of the programs in 
the VA wouldn't benefit from advanced appropriations. However, 
there are no other programs in the VA that have something like 
the Enrollee Health Care Projection Model to rely upon in 
determining its resource needs and outcomes.
    And as far as--and as far as the----
    Mr. Buyer. Well, let us explore the IT issue because this 
would be very challenging for the Secretary for medical IT and 
equipment. Concur?
    Mr. Robertson. And I think the other thing that is 
important is, as Mr. Stearns pointed out, that it is such--by 
the time you get your comp and pen appropriations and the 
medical care appropriations, there is only a small portion left 
of the VA budget. Hopefully that would be an incentive to get 
the budget through by October 1st. That maybe the advanced 
appropriation would be the driving stimulus to get the rest of 
the package done in a more timely manner.
    What has happened in the past, we have had many bills that 
have been agreed to by the House and the Senate, have been 
agreed to by the President. It just never got out of Congress 
over to the White House because of the other appropriations 
that were attached to it. That is what we are trying to get 
away from. And if this helps us achieve that goal, even more 
the better.
    The Chairman. Thank you, Mr. Buyer.
    We thank you for being here.
    Mr. Stearns, if I may, I think the issues you raise are a 
little bit of a ``red herring'' in that nothing changes from 
the way we do it now, except that it is a year further out. If 
the model is bad, it is a model that is bad for this year, next 
year and every year.
    We are discussing the exact same issue, the exact same 
situation and we have a chance to change it just like we do 
now. I don't find any of your concerns really applicable 
because we are just discussing fiscal year 2011's budget right 
now instead of fiscal year 2010's budget. We are going through 
with the same oversight, the same flexibility, and the same 
process. If the model is wrong, it is going to be wrong even if 
we were doing it last year.
    So I understand your concerns but I don't think it really 
would affect the working of this Congress.
    Mr. Stearns. Would the gentleman yield?
    The Chairman. Yes.
    Mr. Stearns. Let's say that it passes and we are the next 
year out and we find there is a problem, how do we go about 
changing it?
    The Chairman. The same way we would change it if it was 
this year's budget. A couple of years ago, the VA came back to 
us and said that we didn't calculate it right in the current 
year. We had to pass a supplemental. The same thing can happen 
at any point in our appropriations cycle now.
    Mr. Stearns. Now, let's take the opposite, that they have 
leftover funds. Can we get them back? How do we get them back?
    The Chairman. There are provisions for both--the President, 
by the way, has enormous rescission authority which has been 
used. You said earlier that you don't know when it has been 
used. Presidents have used rescission authority numerous times.
    Mr. Stearns. So third year, then, he would use his 
rescission authority because of the second year to get that 
money back?
    The Chairman. No, the rescission can happen in the existing 
situation. It doesn't take away any of the tools that we have 
now. Nothing has changed, except the fact that a medical 
director in Florida knows what is coming and can plan his or 
her activities.
    Mr. Stearns. I will just conclude and thank you for the 
time, Mr. Chairman. This is from the RAND study, ``The longer 
the period of time between the baseline year and the budget 
planning year, the higher the risk that past budgets do not 
reflect the resources required by the VA to achieve its . . .''
    The Chairman. No question. The model could be wrong for 
this year, but we are balancing two things--the fact that they 
cannot count on a budget now, and the uncertainty of a timely 
budget.
    So which one is more important to look at now? I think the 
fact that any medical director in Florida or San Diego cannot 
hire, cannot plan, and cannot assure anything that is going on 
in their own hospital when the budget is 5 months late. Is that 
better or worse than that our estimates may be off because we 
did it at the current estimate? That is what we have to 
balance.
    Mr. Stearns. No, and I see your point there.
    The Chairman. I apologize for downgrading your point.
    Mr. Stearns. No, no, no, I see your point. I just question, 
I think our big issue is the flexibility.
    The Chairman. I think we have the same flexibility either 
way.
    Mr. Stearns. Anyway.
    The Chairman. Thank you, Panel 1. We will start with Panel 
2 where we have a Senior Economist for the RAND Corporation, 
the Congressional Research Service and a representative for the 
Agency for Health Care Research and Quality.
    I'll just proceed in the order that I have, unless you have 
a different intention.
    Katherine Harris is a Senior Economist for the RAND 
Corporation, so some of your concerns, Mr. Stearns and others, 
can be dealt with.
    Ms. Harris.

   STATEMENTS OF KATHERINE M. HARRIS, PH.D., STUDY DIRECTOR, 
REVIEW AND EVALUATION OF THE VA ENROLLEE PROJECTION MODEL, RAND 
  CORPORATION; SIDATH VIRANGA PANANGALA, ANALYST IN VETERANS 
 POLICY, CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS; 
 JESSICA BANTHIN, PH.D., DIRECTOR OF MODELING AND SIMULATION, 
   CENTER FOR FINANCING, ACCESS, AND COST TRENDS, AGENCY FOR 
  HEALTHCARE RESEARCH AND QUALITY (AHRQ), U.S. DEPARTMENT OF 
    HEALTH AND HUMAN SERVICES (HHS); RANDALL B. WILLIAMSON, 
 DIRECTOR, HEALTH CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 
   ACCOMPANIED BY SUSAN J. IRVING, DIRECTOR, FEDERAL BUDGET 
  ANALYSIS, STRATEGIC ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

            STATEMENT OF KATHERINE M. HARRIS, PH.D.

    Dr. Harris. Thank you, Chairman Filner and Ranking Member 
Buyer. Today I will discuss findings from RAND's recent 
evaluation of the VA's Enrollee Health Care Projection Model. 
First, I will summarize findings from our evaluation, discuss 
the model support for advanced appropriations and discuss our 
recommendations for improving the model.
    To support budgeting and planning for its broad mission, 
the VA relies on a complex forecasting model to project demand 
for VA health care 20 years into the future. The VA uses the 
third-year estimates in formulating its annual budget request.
    I refer you to my written testimony for a short overview of 
how the model works.
    The VA asked RAND to work in conjunction with an 
independent actuary to review the validity and accuracy of the 
model. Our evaluation found that the model is useful for short-
term budget planning. And compared to methodologies used in the 
past, the model offers the VA a high degree of flexibility and 
detail in planning its budget.
    However, we also found that the model may yield misleading 
forecasts when used for longer-term strategic planning and 
analysis. This is because the model structure does not account 
for key drivers of the future demand for VA care and the costs 
of providing it. These longer term applications would require 
measures of costs, the costs of providing care that are 
independent of the current appropriation, information about 
VA's capability to expand its capacity to meet future demand 
and information about factors driving veterans' reliance on VA 
facilities.
    In the absence of such information, model forecasts rely on 
a number of unrealistic and untested assumptions. For example, 
the model assumes that unit costs do not vary with changes in 
treatment capacity that are likely to occur over time. This is 
akin to assuming that the VA pays for care on a fee-for-service 
basis similar to Medicare.
    Finally, we found that the model's complexity limits its 
transparency and tractability. This complexity stems from two 
sources. The first is a series of major adjustments to 
commercial utilization benchmarks that are undertaken in order 
to equate a commercially enrolled population with enrolled 
population and veterans. Second, the model calibrates these 
adjusted benchmarks back to actual VA workload data. These 
calibrations embed past VA appropriations and model forecasts. 
Past appropriations may or may not be an accurate reflection of 
enrollee demand for VA care.
    Advanced appropriation would, in essence, link the time 
horizon over which the model forecast resource requirements 
from 3 years to 4 years. Under advanced appropriation, the 
fiscal year 2009 model baseline would inform the 2013 budget 
request.
    The expanded time period between budget planning and the 
time the spending actually occurs makes it even more imperative 
that the VA have robust budget planning tools at its disposal.
    Because past budgets are key drivers of the model short-
term forecasts, the longer the period of time between the 
baseline year and the budget planning year, the higher the risk 
that past budgets do not reflect the resources required by the 
VA to achieve its mission.
    We made recommendations for improvement in three areas. 
First, to provide more tractable and transparent support for 
short-term planning, the VA should consider simplifying the 
model to rely more exclusively on its own administrative 
workload data.
    Second, to enhance the model's ability to inform long-range 
planning, the VA should consider modifying subcomponents to 
allow more robust forecasting of demand for and the cost of 
providing care for veterans in a changing policy environment.
    Fortunately, the model is structured in such a way to allow 
modifications to support longer term planning and policy 
analysis, applications without disrupting its usefulness for 
short-term budget planning.
    Finally, the VA should also consider other improvements, 
which include making the documentation more approachable and 
complete, the involvement of a wider range of expertise in 
developing the model, and periodic review of the model by 
independent experts.
    Thank you for your time and I am happy to answer any 
questions.
    [The prepared statement of Dr. Harris appears on p. 53.]
    The Chairman. Thank you, Ms. Harris.
    Mr. Panangala is an Analyst in Veterans Policy for the 
Congressional Research Service. You have 5 minutes, sir.

             STATEMENT OF SIDATH VIRANGA PANANGALA

    Mr. Panangala. Chairman Filner, Ranking Member Buyer, and 
distinguished Members of the Committee. My name is Sidath 
Panangala from the Congressional Research Service.
    I am honored to appear before the Committee today. As 
requested by the Committee, my testimony will highlight some of 
the issues that are discussed in our report entitled, ``Advance 
Appropriations for Veterans' Health Care: Issues and Options 
for Congress.'' As a supplement to my testimony, I have 
included this report for the record. CRS takes no position on 
any of the legislative proposals to authorize advance 
appropriations that fund certain accounts of the Veterans 
Health Administration (VHA).
    I will begin by briefly providing an overview of VHA's 
current budget formulation process and the current 
appropriations process for health care programs.
    Historically, the major determinant of VHA's budget size 
and character were the number of staffed beds, which was 
generally controlled by Congress. The preliminary budget 
estimate, to a large extent, was based on funding and activity 
of previous years. VHA developed the system-wide workload 
estimates by type of care, using forecasts submitted by the 
field stations.
    In 1996, Congress enacted the Department of Veterans 
Affairs and Housing and Urban Development Independent Agencies 
Act requiring VHA to develop a plan for allocation of health 
care resources to ensure that veterans eligible for medical 
care who have similar economic status and eligibility priority 
have similar access to such care, regardless of where they 
reside.
    We also had the Health Care Eligibility Reform Act 1996, 
which established an enrollment system. As part of those 
requirements, VHA began to establish the Demand Model in 1998. 
The model has evolved over time and develops estimates of 
future veteran enrollment, enrollees' expected utilization of 
health care, and the costs associated with that utilization. A 
detailed description has been given in our report and in the 
RAND Corporation study as well.
    VHA's budget request is formulated using this Enrollee 
Health Care Model to estimate the demand for medical services 
among veterans in future years. Each year, through the annual 
appropriations process, then Congress appropriates funds to 
these accounts that comprise medical services, medical support 
and compliance, medical facilities, and prosthetic research.
    One proposal that has been discussed in the past few months 
is to provide more predictability in funding for the VHA in the 
future is the use of advanced appropriations for certain 
medical care accounts.
    An advanced appropriation provides funding that is budget 
authority to an account one fiscal year or more ahead of 
schedule. So if in an annual appropriations act, let us say 
2010, has authority to provide to an account in fiscal year 
2011 or a later fiscal year, that would be considered an 
advanced appropriation.
    Let me highlight two potential implementation issues that 
were discussed in our report. One concern that has already been 
discussed is the impact of funding based on this model. GAO, in 
a recent testimony, and I quote, ``The formulation of VHA's 
budget is by its very nature challenging, and is based on 
assumptions and imperfect information on health services VHA 
expects to provide.'' End of quote.
    The RAND Corporation also found that while the model 
projects reasonably for the future enrollment estimates in a 
stable environment, it has also found that we have no 
understanding of the future specificity of explicit scenarios 
regarding the relationship and the utilization in future years. 
Under such findings, it is reasonable to assume that future 
year budget projections could have variances that could create 
budget shortfalls if there are unanticipated shocks to the 
system.
    Just to give an example of this is when you have, for 
example, there is a concern in Congress what happens if a lot 
of people start losing health care due to unemployment and loss 
of jobs, because of current economic conditions, would the VA 
be able to anticipate that burden coming into the VA.
    Another issue that has already been raised is the IT issue. 
There are some options that Congress might want to decide on 
long-term financing of VA health care and one option might be 
the creation of an independent entity modeled on the lines of 
the Medicare Payment Advisory Commission (MedPAC).
    Congress established MedPAC in 1997 to advise Congress on 
issues affecting the Medicare program. MedPAC is tasked to 
analyze access to care, quality of care, and other issues 
affecting Medicare. The Commission meets publicly, discusses 
Medicare issues and policy questions and then develops and 
approves its reports and recommendations to Congress. Such a 
program for VHA might independently analyze issues facing VHA 
and advise Congress on funding for both short and long-term 
issues affecting VA health care. It could bring transparency to 
the VHA's funding process and create credibility, particularly 
among key constituency groups. This could, in turn, provide an 
added layer of transparency and accountability to VHA's budget 
process.
    This concludes my statement. I would be pleased to answer 
any questions the Committee may have. Thank you.
    [The prepared statement of Mr. Panangala appears on p. 58.]
    The Chairman. Thank you, sir.
    Jessica Banthin is the Director of Modeling and Simulation 
for the Center of Financing, Access and Cost Trends with the 
Agency for Health care Research and Quality.

              STATEMENT OF JESSICA BANTHIN, PH.D.

    Dr. Banthin. Good morning, Mr. Chairman.
    The Chairman. Please tell us what your agency does.
    Dr. Banthin. I am the Director of the Division of Modeling 
and Simulation. I head a small group of economists that 
develops micro-simulation models related to health care.
    Good morning, Mr. Chairman and Members of the Committee. 
Thank you for the opportunity to testify before the Committee 
on the issue of long term projection models. I would ask that 
my written testimony be made part of the official record.
    The Chairman. That is ordered. Thank you.
    Dr. Banthin. I want to mention that the Agency for Health 
care Research and Quality has benefited from extensive 
collaboration with the Department of Veterans Affairs in areas 
of health services research, patient safety, and quality of 
care. We consider the VA an important partner in improving 
health care.
    At AHRQ we have extensive experience developing 
sophisticated health care models based on household survey 
data. For example, we have developed a simulation model that 
estimates the number of eligible uninsured children in the U.S. 
and can be used to project enrollment in Medicaid and the 
Children's Health Insurance Program. The model has also 
informed outreach efforts to increase enrollment of eligible 
children. Details about this model are included in my written 
testimony.
    I have had the opportunity to review the RAND report on the 
VA Enrollee Health Care Projection Model. The VA Model includes 
three major components; an enrollment model, a utilization 
model, and a unit cost model.
    The RAND report draws a distinction between actuarial 
models that are based on historical trends and economic models 
that incorporate behavioral parameters. There are caveats to 
all long-term projection models.
    Mr. Chairman, the long-term projection of costs and 
utilization is very difficult because of the number of factors 
that affect use of health care services. Factors include 
unpredictable changes in both the demand for and the supply of 
various services.
    For example, technological change can yield new treatments 
for medical conditions and improved diagnosis of ailments. 
Changes in the prevalence of disease can affect the demand for 
care.
    When AHRQ publishes micro-level projected health care 
expenditure data, we refrain from applying complex models and 
behavioral assumptions. Instead, we rely on publicly available 
projections from census data regarding demographic changes, and 
from Centers for Medicare and Medicaid Services (CMS) regarding 
aggregate health expenditure growth. We project expenditures 
using this relatively conservative approach that is more 
aligned to actuarial methods.
    AHRQ-projected expenditure data are publicly available, so 
that modelers can then use these data as a baseline from which 
to develop more complex economic simulation models that 
incorporation various behavioral parameters. These more complex 
models are critical for policy analysis, and this is one of the 
primary benefits of developing models with behavioral 
parameters, but their long-term accuracy in projecting 
expenditures is very hard to gauge.
    Programs, such as the VA, face several challenges in 
projecting utilization and costs for its patient population 
when there is limited information on other non-program sources 
of care that patients may access. This issue is more pronounced 
for patients under age 65 without Medicare claims data to 
examine. To the extent that the VA patient population is unique 
and differs from the commercially insured population, such data 
limitations present additional challenges in projecting future 
utilization and costs.
    In particular, it is important to account for illness 
severity or morbidity when projecting costs. Morbidity is a 
strong predictor of both enrollment and use of services. This 
can be measured with clinical measures but can also be 
accounted for with simpler survey-based measures of patient 
reported physical and mental health status, functional status, 
and work disability. These patient reported measures have 
strong predictive power in many economic models of demand for 
care.
    In conclusion, I want to emphasize that there are caveats 
associated with all long-term projection models, whether they 
use actuarial or economic methods.
    In addition, the accuracy of all projection models depends 
critically on available data. Without sufficient data there may 
be areas in the models that rely on best guesses rather than 
solid information.
    As most modelers know, long-term projection models can 
constantly be improved and enhanced. This is usually an ongoing 
process. The VA Enrollee Health Care Projection Model is a very 
sophisticated model that benefits each year from better 
information on the current veteran population.
    Mr. Chairman, this concludes my prepared testimony. Thank 
you, and I would be happy to answer any questions.
    [The prepared statement of Dr. Banthin appears on p. 60.]
    The Chairman. Thank you.
    Mr. Williamson, Director of the Health Care Team for the 
VA-DoD Health Care Issues with GAO and he is accompanied by 
Susan Irving who is the Director of the Federal Budget Analysis 
and Strategic Issues.

               STATEMENT OF RANDALL B. WILLIAMSON

    Mr. Williamson. Thank you, Mr. Chairman. We are pleased to 
be here today as the Committee considers potential changes in 
how funds are appropriated for VA health care programs.
    With me today is Susan Irving, Director of Federal Budget 
Analysis from our Strategic Issues Team. Together, we will 
address VA's budget challenges and offer views on advanced 
appropriations for VA.
    By its very nature, VA's budget formulation is challenging 
since it is based on assumptions and imperfect information, 
which is further complicated in the changing environment VA 
faces in the differing veteran populations it serves.
    In 2006 and 2009, we issued reports that examined some of 
the challenges VA faces in budget formulation, including 
obtaining sufficient data for useful budget projections, making 
accurate calculations, and making realistic assumptions. For 
example, our 2006 report on VA's overall health care budget 
found that VA underestimated the cost of serving veterans 
returning from military operations in Iraq and Afghanistan, in 
part because estimates for fiscal years 2005 were based on data 
that largely predated the Iraqi conflict.
    Earlier this year we again reported on budget formulation 
issues for the long-term care portion of VA's budget which is 
formulated separately from VA's budget projection model.
    Specifically, in its 2009 budget request VA may have made 
unrealistic assumptions about the cost of both its nursing home 
and non-institutional long-term care and workload projections 
for non-institutional care. To its credit, VA has implemented a 
number of recommendations to address past budget issues, but 
continued vigilance is necessary.
    Turning now to the issue of advanced appropriations for VA. 
There are a number of important considerations in deciding on 
changes in the appropriations cycle. As a first step, it is 
critical to understand the true nature of the problems that 
exist in terms of how and to what degree circumstances 
surrounding the current budget approach have impacted VA's past 
ability to provide quality health care to veterans.
    Also important is to consider the current flexibility that 
VA already has. For example, VA carries over as much as $600 
million annually and has authority to move funds among its 
health care accounts, both of which can provide flexibility to 
respond to changing circumstances.
    Any proposals to change the appropriation cycle should be 
considered in the context of the budget structure and the 
Congressional budget process, including budget controls, as 
well as the impact on Congressional flexibility and oversight.
    One issue relates to the impact on Congress' ability to 
consider competing demands for Federal funds and the allocation 
of resources among other critical areas, such as national 
defense, homeland security, energy and natural resources, 
education and public health.
    Currently, the Congress sets totals for its discretionary 
spending for 5 years to the Congressional Budget Resolution. A 
provision for advanced appropriations would pre-commit or use 
up some of next year's discretionary budget authority, thereby 
limiting flexibility to deal with changing priorities and 
reducing the amount available for other high priorities.
    A related issue is a potential impact on Congressional 
oversight. Given the challenges VA faces in formulating its 
health care budget and the changing nature of health care, 
proposals to change that cycle deserve careful scrutiny. 
Providing advanced appropriations will not solve the problems 
we have previously reported regarding the data used or the 
calculations made during budget formulation. Continued 
Congressional oversight will be critical.
    On another matter, H.R. 1016 would require GAO to conduct a 
study of the adequacy and accuracy of the budget projections 
made by VA's Enrollee Health Care Projection Model and report 
at the same time as our President's budget is submitted in 
2011, 2012 and 2013, indicating whether the President's budget 
request for VA health care funding is consistent with 
estimating expenditures under the model.
    We do not think it is feasible for GAO to conduct a study 
because of formidable challenges in obtaining, evaluating and 
reporting detailed information about the model and information 
concerning the President's budget submissions for VA health 
funding as they are being developed as the bill suggests.
    Instead, GAO would be pleased to work with Members of the 
Committee to develop a request for that work in a timely manner 
that would inform Congressional deliberations over VA's budget 
and address issues of particular relevance and interest to the 
Committee at that time.
    Mr. Chairman, that concludes my remarks. We will be happy 
to answer any questions that you or other Members have.
    [The prepared statement of Mr. Williamson and Ms. Irving 
appears on p. 62.]
    The Chairman. We thank you so much. We are in the process 
of three votes. We will recess for 25 minutes and return as 
quickly as we can. Thank you.
    [Recess.]
    The Chairman. I apologize for the recess. Of course, we 
don't have control over when the votes are, and I thank you for 
your patience.
    I would just like to make a few comments, and anybody can 
respond if they want.
    Number one, it seems to me that to use the argument of a 
bad model against advance funding is not meaningful. If the 
formula is bad, it is a bad formula and you deal with it. If we 
defined the formula as being accurate for 2 years, then your 
formula is good. If the formula is bad and doesn't cover the 
first year, why is that any different than the second? It makes 
it that much less certain.
    I don't believe that if we have a bad model, we've got to 
correct the model and not argue that against advanced funding.
    Second, I am not sure where the line is in any of your 
testimonies between short term and long term. Why not 
appropriate a month in advance because we don't know 2 months 
out, or a day in an advance or an hour in advance? Why don't we 
have hourly funding because the model loses its certainty. 
Where in that spectrum does it become completely unhelpful?
    Third, just as a policy issue, it seems to me that we have 
to balance against uncertainty in the funding in the current 
process. Uncertainty in the model can be corrected as we go 
along. Uncertainty in the process can't. If you are 6 months 
late, nothing can make up for that. So as a policy issue, I 
think we have to make those balances.
    If anybody wants to comment on any of those points, I would 
be happy to hear from you.
    Ms. Harris. Thank you. I would like to start by saying I 
think we all see--I speak for myself, but I think in general--
there is a disconnect between the advanced appropriation issue 
and the delayed appropriation and the budgeting tools that the 
VA uses in formulating its budget.
    But I think what is important is that good budgeting tools 
are important under any circumstance and incrementally more 
important the farther out the appropriation is.
    I don't have a figure for you at what time the short run 
becomes the long run. If the model is used in a stable policy 
environment, that short run could last 3 to 5 years or even 
longer. If there is a dynamic unstable policy environment, the 
long run could be right now, particularly if you think that the 
current VA budget isn't adequate to meet demand for care.
    The Chairman. But they are separate issues. I mean----
    Ms. Harris. I think under any circumstance you might want 
to improve the----
    The Chairman. The model.
    Ms. Harris [continuing]. Robustness of the model.
    The Chairman. Any other comments on that?
    Ms. Irving. Mr. Chairman, I think I would say they are 
separable, but not unrelated issues, which I think was your 
point. I think some of the disconnect in the conversation is, 
in part, what is the presumption about the amount, about what 
advance funding represents. That is, some of the conversation 
seemed to imply that it was rather like going to biannual 
budgeting as the State of Maine does, in which you would, in 
effect, in the fiscal year 2010 process appropriate a full 
fiscal 2010 appropriation and then advance appropriate the full 
fiscal year 2011--a full year under the same structure that 
Congress provided.
    In that case, I think the longer lead time between the 
preparation of the budget submitted and the effective date of 
that budget becomes a bigger issue.
    On the other hand, the presumption could be that this is 
more like a downpayment; a CR is a downpayment. If it is sort 
of like we are going to advance appropriate some money ``in 
case,'' you know, just to alleviate--concern since the agencies 
have not, in fact, had a funding gaps--then the issue of the 
uncertainly of the model may be much less important. It is 
still important in the way you described it in terms of for 1 
year, but the lead time issue becomes different.
    So I think the question of what is the plan and what is the 
intent about the share and the scope of the advance 
appropriation becomes very critical for the importance of the 
uncertainty of the model, for the flexibility in the budget 
debate for the next year, and for all of those kinds of issues. 
That is something that only Congress can decide.
    The Chairman. Thank you.
    Mr. Michaud, any questions?
    Mr. Michaud. No questions.
    The Chairman. Mr. Snyder?
    Mr. Snyder. To GAO, and this H.R. 1016, you made a comment 
in your written statement, I think, that you did not think you 
could comply with one of the requirements of the bill that GAO 
does a study on the ability of the accuracy of the budget 
projection. Would you comment on that, why you don't think that 
you all would not be able to comply with that?
    Mr. Williamson. Yes. Two points to really consider there. 
One is that H.R. 1016 contemplates that information on VA's 
budget, health care budget, would be available to us at the 
time that budget's being developed. And typically OMB and the 
Executive Agencies have resisted giving us that kind of 
information, especially while the budget is undergoing 
development. So it would require extensive and lengthy 
negotiations with OMB and the Executive Agencies to get that. 
That is the first point.
    The other point relates to the enormity of that study and 
what it would involve. As others of my colleagues have 
discussed, that is a very complex tool that has been developed 
and maintained by Milliman and Co., Incorporated. And it 
contains output from three separate submodels used as part of 
that. It contains, literally hundreds of data points, 
calculations, assumptions and to do that and deal with that 
would require very much considerable resources. So for those 
two reasons, we just don't think it is feasible.
    I think, though, there are some acceptable alternatives. We 
have in the past looked at particular critical assumptions and 
cost drivers that go into the model and we can still do that.
    We could also, and we have used this in the past simply, 
and it is more doable, we can look back at what happened versus 
what was enacted, and use, you know, the reasons, if there was 
any gaps that exist, whatever those reasons are, we can then 
apply to making improvements to either the model or the future 
budget process.
    But that is much more feasible than the mandate currently 
states.
    The Chairman. Thank you.
    Mr. Buyer.
    Mr. Buyer. I would like to thank CRS for your report, and I 
would also like for you to help clarify what I think are some 
use of clumsy language. The reason I choose the word ``clumsy 
language,'' is that many terms are being used interchangeably 
among my comrades back in Indiana.
    So if you could please help explain, I would like for the 
record, the difference between an advanced appropriation, 
forward funding and advanced funding. What are the true 
differences between them as a finance model?
    Mr. Panangala. Thank you, Ranking Member Buyer, for that 
question. Let me just start out by saying I am not an expert in 
the budget process, but I will just reiterate some of the 
things that I have highlighted in the thing, and I guess others 
in the panel may want to jump in and provide some examples as 
well.
    An advance appropriation is an appropriation of new budget 
authority. That is, authority provided by Federal law for 
outlays, for the agencies to enter into outlays, that becomes 
available 1 or more fiscal years beyond the fiscal year for 
which the Appropriation Act was passed.
    So, for example, if you take the following language in an 
appropriations bill. For 2010, it would provide an advanced 
appropriation for fiscal 2011 for medical services, and let us 
assume $30.8 billion.
    Mr. Buyer. I only have a limited amount of time.
    Mr. Panangala. Right.
    Mr. Buyer. Give me the definitions without the----
    Mr. Panangala. An advanced funding is a budget authority 
that you provide in an appropriation act to obligate or to 
disburse funds from its succeeding years' appropriation.
    And a forward funding is a budget authority that is made 
for obligation beginning in the last quarter of the fiscal year 
for financing ongoing activities, especially for grant programs 
and education. So that is sort of the general definition or 
differences between the three.
    Mr. Buyer. All right. Thank you.
    Ms. Irving. Mr. Buyer----
    Mr. Buyer. One of the questions I have is to the GAO. Is 
there a constitutional question if the President's prerogative 
is to propose and to execute and GAO then is an arm of the 
Congress, as proposed in this legislation, it is asking GAO to 
make a judgment. And you are an extensive arm of the Congress 
as laying responsibility right in your lap. Is there a 
constitutional question?
    Ms. Irving. Mr. Buyer, I think that I would probably wish I 
had Counsel with me. But, in general, we would assert that 
there are not limits to our ability to access that data. We 
often, through comity, reach agreements with the Executive 
Branch on behalf of the Congress of what makes sense for us to 
do and what not.
    I also point out that one of the things, as my colleague 
mentioned about the mandate is that you lock into law the scope 
of the study. Whereas, suppose instead you wanted to focus on 
something in particular? That doesn't answer your particular 
question.
    Mr. Buyer. You are auditors.
    Ms. Irving. Yes, sir.
    Mr. Buyer. So as auditors you look backward, right?
    Ms. Irving. Well----
    Mr. Buyer. And this is asking you to look forward. So do 
you have the expertise to be able to do what is asked in this 
bill?
    Ms. Irving. I will answer part of this question and then 
defer to Mr. Williamson, but we do a great deal forward-looking 
work. In fact, my area where we do the long-term budget 
simulations and work with our programmatic colleagues on what 
we think is likely, something is likely to do.
    As to the programmatic expertise to do this particular kind 
of work, I----
    Mr. Williamson. Well, typically we look backward and we 
also do real-time auditing where we are in there as things are 
happening. But again, when you have a very sensitive situation 
like we have here, where the budget is being developed at the 
same time that we would be in there, it is very unusual. Again, 
OMB and Executive Agencies resist that kind of thing, 
particularly as it is ongoing.
    Mr. Buyer. That is why I asked is there a constitutional 
question here about your involvement in the Secretary and the 
President's business.
    Ms. Irving. One of the interesting things----
    Mr. Buyer. Wait, hold on.
    Ms. Irving. Oh, I am sorry.
    Mr. Williamson. I don't know if it is a constitutional 
question. It is a very practical question. We think--we believe 
we have access to that data, so in that regard it is probably 
not a constitutional question.
    Mr. Buyer. Right.
    Mr. Williamson. But I am not----
    Mr. Buyer. Will you have your counsel provide input to us 
on separation of powers issue?
    Mr. Williamson. Sure.
    [The GAO subsequently provided the following information:]

          Section 4 of H.R. 1016 \1\ requires GAO to conduct a study of 
        the adequacy and accuracy of budget projections made by the 
        Enrollee Health Care Projection Model and determine whether the 
        President's requests for VA health care funding are consistent 
        with expenditures estimated under the Model. Section 4 requires 
        GAO to report to the Committees on Veterans' Affairs, 
        Appropriations, and Budget of the House of Representatives and 
        the Senate no later than the date on which the President's 
        budget requests are submitted in 2011, 2012, and 2013. As 
        discussed below, we do not believe that section 4 implicates 
        the constitutional principle of separation of powers.
---------------------------------------------------------------------------
    \1\ H.R. 1016 was introduced on February 12, 2009, and referred to 
the Committee on Veterans' Affairs.
---------------------------------------------------------------------------
          The Supreme Court's 1986 decision in Bowsher v. Synar \2\ is 
        particularly instructive with respect to the role of the 
        Comptroller General and executive branch functions. In that 
        case, the Court considered the Comptroller General's 
        responsibilities under the Balanced Budget and Emergency 
        Deficit Control Act 1995 (act).\3\ The act required the 
        Comptroller General to report to the President on deficit 
        estimates and spending reductions in Federal programs designed 
        to achieve target deficit levels, and further required the 
        President to reduce spending in accordance with the Comptroller 
        General's reports. The Court held that the provisions requiring 
        the President to reduce spending consistent with the 
        Comptroller General's reports violated the principle of 
        separation of powers.\4\ It explained that by placing 
        responsibility for execution of the act in an officer subject 
        to removal only by Congress, Congress had in effect retained 
        control over the execution of the act and unconstitutionally 
        intruded into the executive function.
---------------------------------------------------------------------------
    \2\ 478 U.S. 714 (1986).
    \3\ Pub. L. No. 99-177, Sec. Sec. 251, 252, 99 Stat. 1038, 1063-
1078.
    \4\ 478 U.S. at 732-34.
---------------------------------------------------------------------------
          Section 4 of H.R. 1016 does not provide GAO with authority or 
        control over Executive Branch powers or functions. Notably, 
        unlike the provisions at issue in Bowsher v. Synar, section 4 
        does not require the President or any other Member of the 
        Executive Branch to act in accordance with GAO's report, such 
        as by requiring the President to adjust his requests for 
        funding based on GAO's findings about the relationship between 
        the requests and the Enrollee Health Care Projection Model. To 
        the contrary, section 4 merely directs GAO to study the 
        President's requests for VA health care funding and report to 
        identified Congressional Committees on its findings. GAO does 
        not believe this provision implicates the principle of 
        separation of powers.
          Although we do not believe that section 4 of H.R. 1016 
        presents separation of powers issues, we do question whether 
        GAO could conduct the required studies due at or before the 
        date the President's budget request is submitted to Congress 
        because of challenges in obtaining, evaluating, and reporting 
        on the relevant budgetary and technical information. Section 4 
        contemplates that information regarding the President's 
        requests for VA health care funding would be available to GAO 
        as they are developed. While GAO has a broad statutory right of 
        access to agency records under section 716(a) of title 31, 
        United States Code, Executive Agencies have consistently 
        resisted making detailed information about the development of 
        the President's budget available to GAO.\5\ In light of the 
        extensive negotiations typically required to resolve requests 
        for this type of information, as well as the need for timely 
        information for Congressional deliberations on VA funding, GAO 
        believes that a requirement like that contained in section 4 is 
        inadvisable.
---------------------------------------------------------------------------
    \5\ Executive Agencies often assert that information related to the 
development of the President's budget is deliberative or ``pre-
decisional'' in nature. While, under certain circumstances, the 
Comptroller General may be precluded under section 716 from pursuing a 
judicial remedy for an agency's failure to disclose records covered by 
the deliberative process privilege, the provision is not triggered by a 
mere assertion that records are ``pre-decisional.'' Section 716 does 
not bar GAO from pursuing such information unless the President or the 
Director of the Office of Management and Budget first certifies that 
(1) the record could be withheld from disclosure under the Freedom of 
Information Act exemptions for records covered by the deliberative 
process privilege or compiled for law enforcement purposes and (2) that 
disclosure reasonably could be expected to impair substantially the 
operations of the Government.

    Mr. Buyer. Thank you. I yield back.
    The Chairman. Thank you, Mr. Buyer.
    We thank you for your expertise and your thoughtful 
testimony. We will excuse Panel 2 and call the Secretary of the 
VA up for the last panel.
    Thank you. Mr. Secretary, you are accompanied by Patricia 
Vandenberg, the Assistant Deputy Under Secretary for Health for 
Policy and Planning with the VHA. We thank you for being here 
and for listening to the earlier testimony. I know you agree 
with me that that informs your ability to testify and makes 
this a more meaningful dialog. You are recognized, sir.

STATEMENT OF HON. ERIC K. SHINSEKI, SECRETARY, U.S. DEPARTMENT 
 OF VETERANS AFFAIRS; ACCOMPANIED BY PATRICIA VANDENBERG, MHA, 
BSN, ASSISTANT DEPUTY UNDER SECRETARY FOR HEALTH FOR POLICY AND 
 PLANNING, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 
                        VETERANS AFFAIRS

    Secretary Shinseki. Thank you, Mr. Chairman, Chairman 
Filner, Ranking Member Buyer, and distinguished Members of the 
Committee. I am please to be joined today, and the Chairman has 
already introduced her, but let me do that again.
    Patricia Vandenberg is our Assistant Deputy Under Secretary 
for Health at our Veterans Health Administration.
    What that really means is that she is the person I rely on 
to have oversight over this modeling process that we have been 
discussing this morning.
    We thank you for this opportunity to discuss advance 
appropriations and the requirement to project VA future 
budgetary needs.
    It has been a very busy 3 months at VA for this new 
Secretary, as we have begun laying the groundwork for 
fulfilling the President's charter to us of establishing a 
vision for transforming this VA into a 21st century 
organization.
    Earlier this month, the President announced the joint VA-
DoD initiative requiring both of us to work together to create 
a virtual lifetime electronic record for members of our armed 
forces, one that will stay with them throughout their service 
in uniform and to the date that the VA lays them to rest.
    In making that announcement, the President repeated his 
concern that caring for veterans should never be hindered by 
budget delays. I share the President's concern as well as his 
support for advanced appropriations as a way to ensure 
uninterrupted care. In particular, we support the overall 
intent that is covered in H.R. 1016 and are committed to 
working with the Congress to provide veterans with care they 
expect and deserve.
    Having lived with continuing resolutions in another life, I 
know how disruptive they can be, especially in the case of 
health care and other services and benefits provided to 
veterans. Implementing an advance appropriations mechanism is 
not without challenges. However, VA has had considerable 
success recently in predicting future needs using its Enrollee 
Health Care Projection Model, developed in 1998 with the help 
of Milliman, Incorporated, the largest health care actuarial 
practice in this country.
    Over the last 11 years, VA and Milliman have continued to 
improve the model with periodic updates. We have developed a 
strong partnership that has resulted in a credible, in my 
opinion, credible modeling tool. VA has guided the overall 
development of the Model and ensures that it meets the needs of 
its stakeholders. VA program staff provide expertise on the 
unique needs of veterans that resides within the VA, that 
knowledge, patterns of practice in the VA health-care system, 
and how the system is expected to evolve over the next 20 
years. Milliman brings specialized actuarial expertise, access 
to extensive amounts of non-VA health-care data and excellent 
research to the overall modeling effort and we think that this 
marriage between both, our historical database and what they 
bring to the table, creates a very strong and robust model.
    This partnership with Milliman has enabled VA to develop a 
robust model that produces thorough and accurate projections of 
demand for health services for enrolled veterans. In the last 5 
fiscal years, the average variance between the model's 
projection of enrollees and the actual enrollee population was 
.54 percent under forecast. In other words, slightly more 
veterans, half of one percent, enrolled than were projected to 
do so.
    For the same 5 years, the average variance between the VA 
model's projection of veteran patients and actual patients was 
1.7 percent over forecast. In other words, slightly fewer 
patients were actually treated than were projected.
    The VA model is used to develop most, but not all, of VA's 
health care budget, about 84 percent. Sixteen percent of our 
health care budget is developed through alternative models and 
estimations.
    All such models and estimations are based on assumptions 
about the future. Any advanced appropriations mechanism should 
provide some flexibility for budgetary adjustments in a 
following year, a year two for example, in order to account for 
factors that could not have been foreseen by year one 
assumptions.
    Finally, close consultation between the Administration, the 
Congress, the VSOs and other stakeholders, some who appeared on 
panels here this morning, is necessary to make advance 
appropriations work. I believe today's hearing recognizes that 
necessity.
    I value the opinions of others who work with us in ensuring 
that our modeling process is first rate and I welcome the 
testimony of today's previous panels. I look forward to hearing 
the Committee's views on advanced appropriations and I am 
prepared to answer your questions.
    Thank you, Mr. Chairman.
    [The prepared statement of Secretary Shinseki appears on p. 
68.]
    The Chairman. Thank you, Mr. Secretary, and again we 
appreciate your first 100 days. I know you have been 
constrained in that only two of your appointees have been 
confirmed by the Senate.
    Secretary Shinseki. They have.
    The Chairman. There are another nine or ten to go? We look 
forward to you being fully staffed and taking full reins of the 
job. We appreciate what you have done so far.
    Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman. I too want 
to thank you, Mr. Secretary, for all that you have done so far 
and all that you are planning on doing to make sure that our 
veterans receive adequate, timely health care and have access 
to that health care as well, especially in the rural areas.
    I am also very appreciative of the fact that you and the 
Administration are looking forward to working with Congress for 
some type of advanced funding mechanism. H.R. 1016 might not be 
perfect, but I think it is a good basis for us to move forward. 
I think all too often people are skeptical of change and are 
unwilling to think outside the box and do things differently.
    I am convinced, however, having talked to former VA 
officials that have to deal with budgets, budgets that have 
been delayed 2, 3, 4, 5, 6 months, that we can do things 
differently and we can improve on the process that is currently 
there.
    And at the same time, with that improvement, I think we 
actually can save money. All too often if budgets are not 
approved come October 1st, it forces the VA--having talked to 
former VA officials--to make decisions that might not be cost 
effective decisions that they have to make just to live within 
the budget continuing resolution that is provided to them from 
Congress.
    So I just want to let you know, Mr. Secretary, that I will 
work with you and the Administration to move forward and make 
changes within H.R. 1016 if changes have to be made, which I 
think they probably should. And I would just ask you, is there 
anything in particular, under H.R. 1016, that is causing you 
some problems or how might we be able to address it a little 
differently than what is currently presented in that piece of 
legislation?
    Secretary Shinseki. Thank you for this opportunity.
    However the final legislation is worded, I would hope that 
in a follow on year there is a mechanism of some kind that 
would allow us, all of us, to be able to adjust, for the 
unforeseen, which, you know, whether it is an outbreak of swine 
flu, as we are currently contending with, there will be the 
unexpected and the unknowns, and so flexibility to accommodate 
that, and even flexibility to accommodate misreads by us in how 
we put the assumptions in. We have gotten a lot better at that. 
We have very much narrowed those issues and, over time, 
improved performance.
    I would say that that would be one interest. Another one 
would be to work closely with you all to ensure that when we 
talk about those three categories that would fall under advance 
appropriations--medical services, medical support and 
compliance, medical facilities, as was indicated earlier here 
in some discussion--that anymore IT is very much integrated 
into those activities and that we should be sure that that is 
also how we parse that to ensure that that is included so that 
our plans to provide services, health care services and 
community-based outpatient clinics (CBOCs) or open new CBOCs, 
are not hindered by an inability to have that kind of 
flexibility.
    Mr. Michaud. Have you looked or have you talked to former 
VA employees or existing VA employees who have been there for a 
length of time as far as how much more cost effective this 
might be for advance funding? Have you had any discussions 
internally about that as of yet?
    Secretary Shinseki. I am not aware that we have had those 
discussions, but to be sure, those discussions will take place. 
We are beginning now to look at our ability to look beyond the 
first year and see just how accurate our models are.
    This model looks out 20 years. And all of us would say 20 
years is probably not worth looking at. Year one has been the 
focus. We looked at year two and looked backward to compare how 
the year two projections compare with what would have been the 
model suggestion. The correlation is pretty close. So I defer 
again to RAND and GAO's stated comfort in the short term for 
the model's being useful.
    Mr. Michaud. Once again, thank you very much, Mr. 
Secretary, and I also want to thank all the employees that work 
at VA. You do a phenomenal job with the resources that you are 
provided in taking care of our veterans. So thank you and your 
employees as well.
    Secretary Shinseki. Thank you. Thank you very much.
    Mr. Michaud. I yield back, Mr. Chairman.
    The Chairman. Mr. Walz?
    Mr. Walz. Thank you, Mr. Chairman.
    Mr. Secretary, again, thank you for being here and more 
importantly, thank you for all of your years of service. And I 
am always reminded, and folks have told me to tell you this 
when I see you, thank your wife for letting you come back again 
to do this, how important that is.
    Ms. Vandenberg, thank you for choosing to serve our 
veterans. It is truly important.
    A couple of things. First of all, the announcement on the 
9th of April was incredibly heartening for many of us, 
especially that I think we are looking at the full spectrum of 
how to make the system more efficient, how to come together to 
get this right. The seamless transition and uniform enrollment 
is another big piece we will be working simultaneously on, but 
I really do get it and believe it is going to get us there.
    I think it is important that we do remember here and we see 
some of the issues coming up and we hear support for this or we 
hear some of the legitimate concerns that we want to air. This 
is not a VA issue, a weakness there. It is not our veterans 
demanding something above and beyond. It is Congress' failure 
to get done by the 1st of October. That is where all of the 
problems start.
    And I wish there were another mechanism. I have suggested 
that if our appropriations are not done by October 1, they 
start reducing pay daily and see how quickly things get done. 
It is the nature of a deliberative body to wait until the last 
minute, but that last minute does have huge repercussions.
    So I wish there were a better way to be able to do this. I 
sure do not want to inhibit in any way your flexibility, Mr. 
Secretary, and your staff's flexibility. That is absolutely 
paramount. And one of the things you are most known for is your 
frankness and directness on this.
    Are we missing anything here that is going to be a problem? 
I know the modeling issue got--and all we can count on is 
exactly what you said. It was a question I was going to ask 
where RAND says the model is somewhat uncertain. All models are 
to a certain degree.
    Are we missing something here that could cause us problems 
on this from your perspective that you want us to really, 
really keep in mind? I know it has kind of been asked before, 
but any frank assessment? Because our goal here is to make this 
work.
    Secretary Shinseki. I would just remind that this model is 
intended to run based on assumptions that we input into it and 
run clean, and then it produces outcomes that we use to inform 
the budgeting process. So we are talking about a modeling 
process that is expected to inform the budgeting process. And 
my interest is keeping this process essentially designed to do 
what it is supposed to do. So that with that information, now 
we can decide how much risk we want to take in any given budget 
or sets of years of budgets.
    If this process isn't allowed to do that, we will never 
know where risk resides in this. We will take at good faith 
that these are good numbers and we won't know until it is too 
late. So my hope is that in working with the Congress and 
working with the VSOs and other people who do modeling, is to 
have an open and transparent understanding of the process, but 
let the process run, and then we can decide to do what it is we 
need to do with the results.
    And hopefully, it will inform a very good budgeting process 
where decisions can be made about how much risk to take. We 
don't want to take risk in the modeling process. That ought to 
be allowed to be a clean run.
    If I have a concern, it is that we missed this opportunity 
to separate those two pieces here, and I would ask for just the 
opportunity to be able to express even stronger feelings about 
why that is important. And we in VA will commit to sharing as 
much visibility as we can of this process. All the people can 
develop the same trust and confidence in this model as we have 
and I have in the last 3 months in sitting with the experts who 
are taking me through it.
    I think those would be the two issues I would offer. One is 
looking for help in ensuring that this process is allowed to 
run. We can discuss the assumptions and why they go in and talk 
about it, but once run, it can then be allowed to inform the 
budgeting process and then we will make as much transparency as 
we can.
    A certain piece of this is proprietary to Milliman so, you 
know, they own it. But all the inputs and the outputs, we can 
look at very closely.
    Mr. Walz. Well, I truly appreciate it, and I guess our 
bottom line is, and it may be too early to tell, the intent of 
this is plain and simple, to give you another tool to provide 
quality care and hopefully in an efficient manner, and that 
anything in this process that is leading us away from that, 
well, we need to be aware of and switch directions, so I very 
much appreciate it. I yield back, Mr. Chairman.
    The Chairman. Thank you, Mr. Walz.
    I just want to remind everyone as we talk about modeling 
and all the expertise that several years ago we had a budget 
that did not assume a that war was going on. That says to me 
that if you don't have accurate data, it doesn't make any 
difference anyway.
    Mr. Hall.
    Mr. Hall. Thank you, Mr. Chairman.
    Mr. Secretary, welcome back. It is good to see you. I bring 
you greetings from Sheriff Don Smith from Putnam County, New 
York, and his wife who send their best. And thank you, again, 
for your service to our country.
    Some of the VSOs we have heard from have worried that in 
the past, the VA has had a pattern of hoarding funds until the 
end of the fiscal year and then spending them needlessly or 
inefficiently because they know if they don't spend it, the 
money won't be available in the next budget year. That is 
something I saw when I served in local and county government 
that different agencies would do.
    If we do advanced appropriations for VA, what can you do or 
what can we do to prevent that from happening?
    Secretary Shinseki. Well, part of the process here, in 
response to Congressman's Walz's question, last question, what 
I am trying to assure or what I am trying to develop is 
confidence in the model. What I would also like to do is work 
with you to develop your confidence in me in making the right 
calls, and the example you cited would be something I would 
look at.
    In the last 12 weeks we have canceled or deferred about $18 
million worth of things we didn't have to do, and that is just 
business the way I am use to doing it and I will take on this 
issue that you have mentioned. I do not have particulars on it. 
I don't doubt that some of that goes on, but I will get to the 
bottom of it.
    Mr. Hall. I am sure you will be watching it, sir. I also 
wanted to mention that we had a hearing in the Subcommittee on 
Disability Assistance on my bill, H.R. 952, the ``COMBAT PTSD 
Act.'' In the course of that hearing, Director Mayes' remark 
that you or the President had asked, the Department to try to 
move in a regulatory fashion to provide some of the same goals, 
to achieve the same goals that this legislation would achieve, 
that being a presumed stressor for PTSD if a service man or 
woman comes back from Iraq or Afghanistan or whatever conflict 
and is diagnosed. They can't just say they have it, but they 
have to actually have the diagnosis of the symptoms that make 
up post-traumatic stress.
    And in the course of that hearing, it was related by some 
VSO reps as well as VA witnesses that in the early `eighties a 
similar decision was made regarding Agent Orange. That Vietnam 
era exposure to Agent Orange was initially dealt with on a one 
case at a time basis, trying to link the individual veteran to 
an exposure being sprayed in a field, or having a barrel break 
open in a truck that one was driving or something that you 
could draw a direct line to. And it turned out to be 
inefficient and cause more person hours to be expended, and at 
the same time delay the claim from being expedited.
    So as a result, as you know, there has been a blanket 
presumption that if you served in Vietnam and you come down 
later with prostate disease or with diabetes, or certain 
diseases that are known to be caused by Agent Orange, that that 
automatically would be presumed to be caused by your service 
there.
    There seems to be somewhat of a parallel between that and 
the current conflicts and PTSD and I was just curious, in terms 
of budgeting, whether you thought that there was something to 
that and whether you would look into it as regards to either a 
regulatory fix or the bill that I am talking about.
    Secretary Shinseki. Mr. Hall, I am part of the Vietnam 
generation. I do know the history of Agent Orange, 40 years. I 
also know the history of Gulf War illness, 20 years. We are 
where we are and my interest for this current generation of 
young Americans is to understand whether we have to follow the 
same scientific method that we followed in both of these 
examples for the last several decades, which is collection of 
data, the writing of professional papers, sharing opinions, and 
at some point decisions get to be made about individual cases 
or individual disabilities.
    The scientific process is important. It is a part and 
parcel of a lot of things we do, and there is great faith in 
its veracity. But I would say in my experience, that it does 
not favor the veteran because we come to those conclusions over 
time after we have arrived at convincing evidence that there is 
a connection. And I think, you know, part of my responsibility 
here is to look at whether there is another way of doing this.
    The veterans, about 3 years, you know in a Vietnam, 
gathered around reunion tables as their units gathered, and 
they all compared notes and they could figure out something 
wasn't right. They came to those conclusions without that 
scientific collection, but they had the evidence that was 
important to them. That is, they didn't grow up in any place 
together, except they served in the same unit, in the same 
location and, you know, the conclusions were----
    So I think, you know, we have a responsibility to look at 
the process that we have lived with and ask whether that is the 
right process. I have asked whether that is the right process, 
so that some future Secretary is not sitting here 20 or 40 
years after Afghanistan and Iraq and wrestling the same issues 
the way I am wrestling today to decide whether Parkinson's is, 
you know, connected or isn't.
    On behalf of the veteran, at least I am going to look and 
see whether there is a better process.
    Mr. Hall. Thank you, Mr. Secretary. And your seriousness 
and intelligence that you bring to bear on this is certainly 
appreciated. And I have run out of time. I yield back. Thank 
you.
    The Chairman. I too want to thank you for that heart-felt 
answer, Mr. Secretary.
    Mr. Snyder.
    Mr. Snyder. Thank you, Mr. Secretary, for being here. I 
just make a comment. I appreciate your thoughtfulness in being 
here today. In your written statement, my only comment is that 
this whole issue is what I call the Moses gold tablets. Nobody 
put on gold tablets that tells us what is the right way to make 
these kinds of estimations.
    These are human made formulas and estimates with all the 
frailties that we human beings have and I think that all of us 
need to enter into this with a certain amount of humility as, 
at the task of trying to estimate what is going to happen in 
years in the future as, you know, right now in the hallway we 
are just beginning a hearing for all the Members of the House 
on Swine Flu, with several of the Secretaries there, and you 
know, okay, what does that potentially do to health care 
estimates? Well, you can't predict those kinds of things, but I 
appreciate your attending this as an issue, and appreciate your 
being here today. Thank you.
    The Chairman. Thank you, Mr. Snyder.
    Mr. Buyer.
    Mr. Buyer. I think that the Secretary, the sincerity of the 
statement of Dr. Snyder relies upon his experience that he has 
done dealing with the military health delivery system, your 
experience as a Commander and Chief of Staff of the Army, as 
you work with the Secretary of the Army. Every time we do a 
supplemental, health care is in that supplemental, and it is 
where I learned about the modeling and tried doing the 
predictability and all the inputs.
    So even if we do, let us take ourselves forward, even if we 
would do this advanced appropriation, as I listened to the 
testimony from the second panel, the testimony, the lady said 
the 2009 baseline would form the 2013 budget process. So, 
before we go and mock the 2005 budget that was passed by 
Congress in 2004, that utilized inputs out of 2001 and saying, 
oh my gosh, you used inputs that didn't include the war, that 
in fact was true. But no differently than if we were to do an 
advanced appropriation, we would go into that process, the 
inputs are not changing.
    So what I embrace most is Dr. Snyder's comment here of, you 
know, we are all human, we make the errors and yet there has to 
be some latitude here with the Secretary in the judgments and 
our monies that they lay down.
    Now, over the years what I have really paid attention to is 
the money, the bridge money that goes from 1 year to the next, 
how much monies have been carried over. And it is what the 
departments sort of prepare themselves for.
    So if we are going to think outside the box, I look at this 
and say, if we are worried about the inputs and, in fact, we 
are going to use a model that provides excellent predictability 
for the short term, but if we are asking to go 4 years out that 
we are stressing the model, then perhaps let us not lock 
ourselves in. Perhaps maybe what we should be doing here is 
creating some type of a bridge fund or reserve fund and fund it 
with $10 billion, or pick a number and we give the discretion 
to the Secretary that he can move it among accounts, rather 
than locking us in to specific appropriation accounts whereby 
he then cannot have flexibility.
    Take a Katrina that wipes out, you know, a medical 
facility, or some tornado that wipes out facilities or numbers 
of facilities, and yet he doesn't have the flexibility to go 
get extra monies.
    You know, Mr. Michaud, I respect you a lot and so you have 
used this to your budgeting process. I am just--let me throw 
that out to you, Mr. Secretary. If we were to define an 
advanced appropriation by really giving you an X-dollar amount, 
say a $10 billion or a $15 billion as a bridge amount that is 
carried from every year so that we address the concerns that 
the VSOs have always brought to us, that the Veterans 
Integrated Services Networks (VISNs) out there, as they put 
those dollars out to the medical centers, it is okay to do the 
hires, it is okay to function.
    Let me throw that out as an idea to you.
    Secretary Shinseki. I wouldn't have any idea what a good 
number would be, but if that were not the issue of the 
discussion, I think, you know, that would be an option that 
would be worth part of this deliberation.
    I mean, I am not sure exactly--I think, Mr. Buyer, you 
know, the appropriations we get don't come to the Secretary 
directly. They are into three Administrations. And so, 
inherently there is already some constraint, and I would have 
to think about how this bridging mechanism might work.
    Mr. Buyer. As you consider that, because I would send the 
bridge fund to you as discretionary authority over the three 
Administrations.
    And if we are going to talk about the reorganizations, you 
know I have been asking and working with Mr. Michaud and Dr. 
Boozman about creating a fourth Administration, and I know you 
have some ideas on reorganizing. I have advocated over the 
years that a Secretary should have increased political 
appointments. And in that discussion, if you believe that we 
should have some increased political appointments, please let 
us know and I will be as helpful as I can to make sure that you 
have the ability to implement, and I think that is what you 
should need.
    Especially also with regard to procurement, and I am quite 
certain you have some ideas and thoughts on that. With regard 
to advanced appropriation, are we going to see any legislative 
proposal now that the President has said he supports it in your 
2010 budget that you are sending to us, and then comment on 
reorganization?
    Secretary Shinseki. This is the piece that I would like to 
come and work with this Committee and the Congress and then 
show that implementation makes sense, that we get it right and 
that the veterans are well served. And so however this is done, 
I would like to work that with Members of this Committee.
    Mr. Buyer. Can you comment on proposed reorganization, 
please?
    Secretary Shinseki. One of the issues I have right now is, 
we do contracting in multiple locations. I don't have an 
acquisition oversight. An Assistant Secretary should do that 
exclusively and that is something I would like to have an 
opportunity to discuss with the Congress and whether or not 
that is possible and how that would be structured and what 
authorities that individual would have in concert with any 
other proposals for reorganizations.
    Mr. Buyer. Very good. Thank you, Mr. Chairman.
    The Chairman. Again. Thank you, Mr. Secretary. We 
appreciate you being here with us today. I don't know if you 
have a copy of the statement that was entered into the record 
by the VSOs by the former VA officials who have endorsed 
advanced funding. Do you have that document?
    Secretary Shinseki. I don't have it here.
    The Chairman. Make sure----
    Secretary Shinseki. I have seen it. I just read it.
    The Chairman. I just think it is pretty impressive when I 
look at former Secretaries, one in the Clinton Administration 
and one in the Bush Administration, the Deputy Secretaries 
under both, and every Under Secretary for Health since Clinton 
and into the Bush Administration, including many VISN directors 
and hospital directors. I think that is a pretty powerful 
endorsement that if some of those really high officials have 
dealt with this year after year and they see it as a worthwhile 
model.
    I listened to the discussion today. It comes down to a 
policy decision of do you go with some of the uncertainty of 
the model, which as you have pointed out is very high, or with 
the uncertainty of the delay to the whole system.
    The first one is correctable, so I would live with that as 
opposed to living with a 4 or 5 or 6 month delay. I know both 
you and the President are hopeful that all of the budgets are 
passed on time, especially the veterans' budget, but the system 
does not always work the way we all want it to work. As someone 
pointed out today, the House can pass a bill, the Senate can 
pass a bill and we can all agree on it. The President can agree 
on it, and yet it doesn't come out of the Congress for other 
reasons that have nothing to do with veterans or with the 
budget of your Department.
    Factors outside of our control affect that and lead to the 
uncertainty that we have heard described today. I am convinced 
that whatever uncertainty there is in the model, that 
uncertainty is present in this year's budget. The Swine Flu is 
not because we have an advance appropriation to the Swine Flu 
because we didn't know it was coming. For example, if tens of 
thousands of veterans end up in the hospital because of ``Swine 
Flu'' we are going to have to address it with more funding--
whether this was an advanced appropriation or this year's 
appropriation. I think we can live with those uncertainties.
    Mr. Secretary, you have been with us all day today and I 
appreciate it. I appreciate your listening to the other 
panelists and I will give you the last word for anything you 
would like to comment on.
    Secretary Shinseki. Thank you, Mr. Chairman. Just to 
reiterate that I am here to make very clear that the President 
and I support the requirement for advanced appropriations and 
that I look forward to working with the Congress in ensuring 
that we implement this in a way that veterans begin to benefit 
from this in the short term. Thank you, Mr. Chairman.
    The Chairman. Again, thank you, Mr. Secretary and we look 
forward to working with you on that.
    This hearing is adjourned.
    [Whereupon, at 12:55 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

    Good morning. I would like to thank the Members of the Committee, 
our witnesses, and all those in the audience for being here today.
    Congress' power to set the spending and taxing policies of the 
nation, the ``power of the purse,'' is the most important power that 
Congress possesses. The budgets we pass reflect our National goals and 
fulfill our constitutional responsibilities.
    Veterans are one of our top national priorities, as evidenced by 
the appropriations measures adopted last Congress and the 
Administration's proposed VA budget for FY 2010. These record funding 
increases followed on the heels of inadequate health care budgets and 
budget shortfalls, such as the one faced by VA in 2005.
    Veterans' groups argue that even if the VA health care budget is 
sufficient to meet the needs of veterans, if it is not passed in a 
timely fashion then health care services to veterans will be 
jeopardized. The VA budget has been enacted before the start of the 
fiscal year four times over the last 20 years; 1989, 1995, 1997, and 
2009.
    Advanced funding is supported by President Obama, many here in 
Congress, and many veteran service organizations. In February, Senator 
Akaka, Chairman of the Senate Committee on Veterans' Affairs and I 
introduced the Veterans Health Care Budget Reform and Transparency Act 
of 2009; the House version of this bill, H.R. 1016, is supported by 
many on this Committee.
    The law of unintended consequences reminds us to proceed with 
wholesale change in a systematic manner. I am reminded of a favorite 
saying of Augustus--``make haste slowly.'' I believe that it is 
essential that the issue of advanced funding be thoroughly discussed so 
that Members, veterans, and our fellow citizens understand the 
benefits, as well as any disadvantages, that might arise from the 
decision to provide VA health care funding a year removed from the 
annual budget debate.
    Today, we will begin the discussion as to how best to fund the VA 
of the future and how we can meet the needs of our returning 
servicemembers, as well as our veterans from previous conflicts. Our 
goal is to make sure that the VA has sufficient budgets to meet the 
needs of veterans and that these budgets are provided in a timely 
fashion in order for the VA to make the most out of these dollars.
    To this end, we will explore advance appropriations as a budgeting 
mechanism for the Department of Veterans Affairs. We will also examine 
the efficacy of the VA's budget forecasting model in making sound out-
year budget projections. Finally, we will look to the VA and veterans' 
groups to provide recommended funding levels to assist Congress' 
decision-making as we move forward.

                                 
   Prepared Statement of Hon. Steve Buyer, Ranking Republican Member,
                  Full Committee on Veterans' Affairs

    Thank you Mr. Chairman,
    Good morning. I'd like to join in welcoming everyone to this 
morning's hearing on funding the VA of the future. It is my pleasure to 
once again have Secretary 
Shinseki with us as well as our other witnesses, and I look forward to y
our testimony.
    The appropriations process for VA has been a topic of discussion 
for several years now. Throughout most of this time, veterans' service 
organizations held the view that ``guaranteed'' or ``mandatory'' 
funding for VA health care was the key to addressing timeliness 
problems.
    However, after hearings on this subject brought to light a number 
of reasons why a switch to a mandatory appropriation would be 
detrimental to VA, the idea was abandoned and replaced with the current 
proposal for advanced funding.
    As I have stated previously, I have some deep concerns with what 
such an overhaul may hold. Primarily among them is the fact that 
budgets planned so far in advance would be based on stale data by the 
time of implementation.
    Appropriations should be formulated using the most contemporary 
information possible, and I can envision a number scenarios in which 
the advanced funding model would prove dysfunctional. I understand that 
problems have occurred using the current appropriations model, but I 
believe the answer to such problems lies largely with Congress doing 
its job in a proper and timely manner. This especially means that 
funding for our Nation's veterans should not be deliberately stalled 
for political reasons, as it was in 2007.
    For those of you who may not recall, that year the House had passed 
a bipartisan appropriations bill prior to the 4th of July recess. A few 
weeks later, the Senate passed its version and immediately appointed 
conferees to negotiate differences with the House. At the same time, 
President Bush indicated he would sign the bill, so it seemed as if 
funding for troops and veterans was assured.
    However, instead of appointing conferees, House Democrat leaders 
decided to exploit the bill's favorable standing and use it as a 
vehicle to move a pork-laden Labor, HHS, and Education Appropriations 
Conference Report. But aside from the unacceptable political 
maneuvering that took place, Congress clearly illustrated that it can 
complete appropriations work in a timely manner.
    It proved so again last year, when Congress did pass a timely 
appropriations bill. If that were to happen every year from now on, 
there would be no need for advance appropriations.
    Congress has also illustrated the ability to make rapid adjustments 
when necessary, as we did in 2005 when the funding shortfall occurred. 
I continue to be open to exploring proposals to improve the budget 
process used by VA.
    Our oversight of the issues that led to the 2005 shortfall resulted 
in significant improvements to the process. But very little objective 
analysis has taken place on the advanced funding model other than the 
CRS report I requested. I'll have questions for the panels based on 
that report, and I look forward to your testimony.
    Thank you Mr. Chairman, I yield back.

                                 
              Prepared Statement of Hon. Harry E. Mitchell

    Chairman Filner, thank you for calling this hearing to examine a 
proposal that is, for many VSOs, the very top priority for the 111th 
Congress. Thank you also to our witnesses for appearing today.
    Secretary Shinseki, this third appearance before our Committee in 
as many months is a testament to your hard work and willingness to 
cooperate on the work of caring for veterans and their families. Thank 
you for appearing again today.
    Today's question seems simple--should we budget a year ahead for 
veterans' health care and insulate it from the disruptions of 
continuing resolutions? The Chairman of this Committee has said yes. I 
have said yes, and at least 96 other Democrats and Republicans in the 
House agree.
    Some things are too important for us to let them fall victim to the 
partisan appropriations process. Veterans' health care is a life and 
death issue. It is too important.
    However, appropriating funds a year in advance poses real 
challenges that we must address. I am concerned that the VA's current 
actuarial model does not have the capacity to reliably forecast costs a 
year beyond the typical 18-month period of appropriations planning.
    I look forward to hearing the challenges of health care budget 
forecasting from Panel 2. I am also eager to hear the VA's proposals to 
overcome those challenges and facilitate advance budgeting.
    The veteran community has made it clear that this issue must be 
addressed. Scores of Members have registered their agreement. I look 
forward to hearing input today and working with all sides to ensure 
that veterans receive the health care they need and deserve.
    Thank you again, Chairman Filner. I yield back.

                                 
               Prepared Statement of Joseph A. Violante,
       National Legislative Director, Disabled American Veterans,
  on Behalf of the Partnership for Veterans Health Care Budget Reform

    Mr. Chairman and Members of the Committee:
    Thank you very much for holding today's hearing and for inviting 
representatives from the Partnership for Veterans Health Care Budget 
Reform to testify. The Partnership, which includes The American Legion, 
AMVETS, Blinded Veterans Association, Disabled American Veterans, 
Jewish War Veterans, Military Order of the Purple Heart, Paralyzed 
Veterans of America, Veterans of Foreign Wars and Vietnam Veterans of 
America, was created more than a decade ago to reform the budget and 
appropriations process for veterans health care, the subject of today's 
hearing.
    Mr. Chairman, it has been over 18 months since I sat in this same 
chair testifying before this same Committee at a hearing on this same 
subject: how to provide sufficient, timely and predictable funding for 
veterans health care programs. Then, as had been our position for the 
many prior years, the Partnership's focus was on mandatory funding. 
However, at that hearing I told this Committee that:

          If the Committee chooses a different method for effecting 
        this change . . ., we will examine that proposal to determine 
        whether it meets our three essential standards for reform: 
        sufficiency, predictability and timelines of funding for VA 
        health care. If that alternative fully meets those standards, 
        our organizations will enthusiastically support it.

    Well, you did, we have, it does, and we do. That is, you did 
introduce new legislation, H.R. 1016, the Veterans Health Care Budget 
Reform and Transparency Act, that proposes advance appropriations 
rather than mandatory funding; the Partnership was honored to work with 
you and Senator Akaka in developing and examining that proposal; the 
new legislation does meet our goals of sufficiency, timeliness, and 
predictability; and the Partnership does enthusiastically support this 
legislation.
    Briefly, H.R. 1016 would change VA's medical care appropriation to 
an advance appropriation, approving funding for the health care system 
1 year in advance of the actual fiscal year (FY) involved. Had this 
proposal previously been in effect, there would be an existing FY 2010 
budget in place for VA, and Congress could now be working on the FY 
2011 appropriations bill for VA health care. Advance appropriations are 
done for a number of other Federal programs, including housing and 
education programs, such as Section 8 housing vouchers and Head Start, 
as well as for the Corporation for Public Broadcasting. We believe that 
veteran's health care should certainly have the same status as PBS.
    Moreover, to help ensure that we have sufficient funding, H.R. 1016 
adds transparency to the budget process. The bill would require the 
Government Accountability Office (GAO) to audit VA's internal budget 
model and publicly report to Congress whether the VA budget request 
accurately reflects the projected needs of veterans as measured by VA's 
model. Having GAO independently review the assumptions and data used in 
preparing the budget will add further integrity and accuracy to the 
process.
    Mr. Chairman, since I testified at the hearing in October 2007, we 
have significantly altered our legislative focus and strategy for 
reforming the VA budget and appropriations process; however, one thing 
that has not changed is the documented need for reform. While VA health 
care has expanded and its quality increased, late and inadequate 
funding continues to threaten the long term quality of care provided to 
veterans.
    With over 200,000 employees, a budget approaching $50 billion, more 
than 1,000 health care access points, including hospitals, medical 
centers, outpatient clinics, and other sites, the Veterans Health 
Administration (VHA) operates the largest integrated health system in 
the country, providing care to almost 6 million enrolled veterans. 
Thanks to visionary reforms begun over a decade ago, the quality and 
safety of veterans health care has improved dramatically. In fact, 
numerous independent health care analysts and leading journalists who 
have studied the VA health care system have concluded time and again 
that VA health care is as good, if not better, than any other public or 
private health care system in the U.S. VA's shift from an inpatient 
hospital model to an outpatient clinic model brought VA closer to where 
veterans live, and in the past decade there has been a tremendous 
influx of veterans into VA health care.
    From 1998 to 2003, the number of enrolled veterans rose by more 
than 70 percent--from under 4 million to over 7 million enrolled 
veterans. However, the level of appropriations for VA health care has 
risen less than 50 percent, placing a tremendous strain on VA's ability 
to treat so many new veterans. As veterans increasingly sought out VA 
health care, the pressures on the system began to boil over. In 2001, 
VA reported that more than 250,000 veterans were waiting 6 months or 
longer for their first appointments with a doctor or for a follow-up 
visit with a specialist. As waiting lists grew, in 2002, VA placed a 
moratorium on marketing and outreach activities to slow down the number 
of new veterans coming into the system. In 2003, then-Secretary Anthony 
Principi announced that VA would invoke its regulatory authority to cut 
off enrollment of new Priority 8 veterans, those veterans without 
service-connected disabilities or lower incomes, effectively closing VA 
health care to 16 million veterans. Also in 2003, a Presidential Task 
Force appointed by President Bush concluded that there was a 
``mismatch'' between demands for services and available resources, 
recommending that the VA budget and appropriations process be modified 
to provide full funding, either through mandatory funding or another 
mechanism to better align demand and resources.
    Although there were significant funding increases during each of 
these years, VA continued to fall farther and farther behind. In 2004, 
Secretary Principi told this Committee that VA's FY 2005 budget request 
was cut $1.2 billion by the Office of Management and Budget (OMB). A 
year later, Principi's successor, Jim Nicholson, who had just been 
sworn in as Secretary, testified before this Committee that the 
Administration's FY 2006 budget request for VA was adequate. However, 
within months, Secretary Nicholson reversed that testimony, admitting 
that VA's budget requests for both FY 2005 and FY 2006 were 
insufficient by $975 million and $2 billion, respectively.
    A GAO review of the 2005 and 2006 VA budget turmoil found that VA 
had relied upon cost-saving policy proposals, such as new user fees, as 
well as so-called ``management efficiencies,'' to make up differences 
between funding needs identified by its internal budget model and the 
amount of appropriations requested in the budget. When policy proposals 
failed to be enacted by Congress, and ``management efficiencies'' were 
not realized, VA repeatedly found itself with insufficient resources, 
eventually forcing them to issue a mea culpa. A lack of transparency in 
the budget process had left Congress without the information necessary 
to address these problems until it was too late. H.R. 1016 would 
increase transparency to help prevent such an occurrence in the future.
    Mr. Chairman, we fully appreciate and applaud Congress for the 
significant funding increases that have occurred in recent years, and 
we strongly support the President's 2010 budget request and the funding 
levels recommended by this Committee for VA health care next year. 
However, for too long the VA health care system has had to struggle 
with budgets that were too little and too late. Insufficient funding 
for veterans health care leads to rationed care, waiting lists and 
veterans being turned away from VA hospitals and clinics. Long term 
underfunding can also threaten the quality of care, something that VA 
has worked so hard to achieve.
    And just as important as how much funding VA receives is when VA 
receives that funding. Although we do appreciate Congress completing 
the VA appropriation on time last year, albeit just 1 day prior to the 
start of the new fiscal year, that is the exception that proves the 
rule. Notwithstanding the fine work done last year, the budget has been 
late for 19 of the last 22 years, averaging 3 months late over the past 
7 years. In fact, last year's budget was the first one completed on 
time since September 11, 2001. This is not a problem of one party or 
one side of Capitol Hill; it is a systemic problem that cries out for 
systemic reform.
    As a result of this history, VA officials have become accustomed to 
continuing resolutions at the beginning of fiscal years, and emergency 
supplemental appropriations at the end of fiscal years. This has 
created a constant ``feast or famine'' mentality, wherein VA 
administrators and managers will hoard money in the beginning of the 
year, and later spend money unnecessarily at the end of the year. When 
VA is forced to operate month-by-month under a continuing resolution, 
hospital and clinic administrators are often forced to delay hiring new 
doctors and nurses, purchasing new equipment, or leasing new space 
clinical space. The inability to properly plan leads to inefficiencies 
and waste. Short term management fixes become long term problems, 
further straining the system. No private sector business or 
organization, especially a health care system, could operate 
effectively without knowing what their budget will be until months 
AFTER the start of the fiscal year; and neither can VA.
    For these and many other reasons, The Partnership for Veterans 
Health Care Budget Reform continues to call for reform of the budget 
and appropriations process. We believe it is time to take the politics 
out of VA health care and reform the system to assure sufficient, 
timely and predictable funding. While we have long advocated mandatory 
funding as one option to achieve our goal, that goal is quality health 
care for veterans when they need it, where they need it. Mandatory 
funding was a mechanism to achieve a goal, sufficient, timely and 
predictable funding, not the goal itself.
    The Partnership today believes that the proposal most likely to 
achieve success is H.R. 1016, the Veterans Health Care Budget Reform 
and Transparency Act, which you introduced in the House and which 
Chairman Akaka introduced in the Senate as S. 423. We thank you, Mr. 
Chairman, for working with the Partnership and the Senate in developing 
and drafting this legislation, and we are pleased that these bills have 
already garnered significant bipartisan support in Congress. As of 
April 24th, there were 89 cosponsors in the House and 38 in the Senate, 
with more being added every day.
    The coalition of supporters outside Congress has also grown 
considerably. In addition to the Partnership, this legislation is 
endorsed by The Independent Budget, The Military Coalition, which 
includes 35 veterans and military service organizations, and the 
American Federation for Government Employees (AFGE), which represents 
600,000 government employees, many of whom work at VA.
    Advance appropriations have also been fully endorsed by a coalition 
of former VA senior officials, including former VA Secretary Anthony 
Principi, two former Deputy Secretaries, four former Under Secretaries 
for Health, several Assistant Secretaries, and over a dozen hospital or 
regional VISN directors who know the firsthand, the effects of late and 
unpredictable funding. An Advance appropriation for VA health care is 
also overwhelmingly supported by the American people. In a national 
survey conducted last August for DAV by Beldon, Russonello & Stewart, 
83 percent of the public supported providing VA health care funding 1 
year in advance. The survey also showed that the public considers 
health care for veterans as one of the highest priorities for Congress 
and the President.
    Mr. Chairman, since the introduction of the Veterans Health Care 
Budget Reform and Transparency Act in February, there has been a number 
of very significant developments that bode well for the legislation's 
ultimate success. Earlier this month, the Senate approved an amendment 
to the budget resolution to allow advance appropriations for VA medical 
care. The bipartisan Inhofe-Akaka amendment allows VA's medical care 
programs to be funded through advance appropriations without being 
subject to a point of order. This important change to the budget 
resolution would clear the way for enacting advance appropriations this 
budget cycle. We certainly hope that the conference Committee will 
retain the Senate provision as well as include a similar House 
provision, and I want to thank Congressmen Harry Teague, Michael 
Michaud and Jerry Moran for organizing a bipartisan letter to conferees 
urging them to do just that.
    I also had the honor, along with other VSO representatives, of 
meeting directly with President Obama on April 9th to discuss advance 
appropriations. Most of you are aware of his campaign pledge to request 
advance appropriations legislation in the FY 2010 budget. While we are 
still waiting for the Administration's final, comprehensive budget, 
President Obama assured us in our private meeting, and then reiterated 
at a subsequent public event, that he fully intended to keep his 
campaign promise. President Obama said the following:

          . . . the care that our veterans receive should never be 
        hindered by budget delays. I've shared this concern with 
        Secretary Shinseki and we have worked together to support 
        Advance Funding for veterans medical care. What that means is a 
        timely and predictable flow of funding from year to year, but 
        more importantly that means better care for our veterans. And I 
        was pleased to see that the budget resolution, passed by the 
        Senate, supports this concept in a bipartisan manner.''

    Mr. Chairman, your legislation, H.R. 1016, is a commonsense 
solution to a longstanding problem, which has gained broad bipartisan 
support in the House and Senate, from the President, from dozens of 
former VA leaders, from the American public, and from virtually every 
major veteran's organization.
    Unlike mandatory funding, advance appropriations are not subject to 
PAYGO rules. Advance appropriations do not in any way limit Congress' 
ability to perform oversight, hold VA accountable, or restrict or 
direct funding to meet changing demands of VA health care. Advance 
appropriations will not add one more dollar to the Federal deficit or 
national debt. With an advance appropriation, if VA's budget needs 
significantly change before the ``advance'' year, Congress still has 
that full year in advance to correct it through amendment or a 
supplemental process.
    And while we do appreciate both the on-time budget last year, and 
desire and good faith promises to get it done on time in the future, 
neither the President, VA Secretary, Speaker nor Senate Leader can 
guarantee ``timely'' funding: it is the very nature of the legislative 
process and budget system that leads to breakdowns, and which advance 
appropriations can fix.
    Mr. Chairman, we look forward to continuing to work with you and 
the other cosponsors of H.R. 1016 to help move this legislation through 
Congress and onto the President's desk so that we can finally guarantee 
that veterans health care funding will be sufficient, timely and 
predictable.
    Mr. Chairman, my colleagues will now address the details of your 
legislation and we all look forward to answering any questions the 
Committee may have for us.

                                 
                 Prepared Statement of Steve Robertson,
      Director, National Legislative Commission, American Legion,
  on Behalf of the Partnership for Veterans Health Care Budget Reform

    Chairman Filner, Ranking Member Buyer, and Members of the Committee 
on behalf of the Partnership for Veterans Health Care Budget Reform 
(Partnership), The American Legion would like to thank you for the 
opportunity to testify today. The Partnership is a coalition of nine 
veterans' service organizations--AMVETS, Blinded Veterans Association, 
Disabled American Veterans, Jewish War Veterans, Military Order of the 
Purple Heart, PVA, Veterans of Foreign Wars, Vietnam Veterans of 
America, and The American Legion. Our goal is funding reform for the 
Department of Veterans Affairs (VA) health care system that will ensure 
sufficient, timely, and predictable funding.
    Chairman Filner, the Partnership fully supports the Veterans Health 
Care Budget Reform and Transparency Act, H.R. 1016, introduced by you 
and cosponsored by many of your colleagues. The Partnership believes, 
if enacted, this bill would significantly help reform the current VA 
budget process by providing advance appropriations for veterans' health 
care. For more than a decade, the Partnership has worked to achieve a 
sensible and lasting reform of the funding process for veterans' health 
care. While the Partnership has long advocated converting VA's medical 
care funding from discretionary to mandatory funding, there has been 
virtually no movement in Congress in this direction.
    The Veterans Health Care Budget Reform and Transparency Act would 
ensure that the goals of the Partnership--sufficient, timely, and 
predictable funding--are 
met. Historically, advance appropriations have been used 
to make a program function more effectively, better align with funding 
cycles of program recipients, or provide insulation from annual 
partisan political maneuvering. By moving to advance appropriations, 
veterans' health care programs would accrue all three of these 
benefits.
    The Partnership fully supports the mechanism in section 3 of H.R. 
1016 that would fund the Department of Veterans Affairs (VA) medical 
care accounts 1 year ahead of the current fiscal year. This 
appropriations mechanism is known as advance appropriations. The goals 
of the Partnership are to make veterans' medical care funding 
sufficient, timely, and predictable. Advance appropriations will 
particularly help to ensure that funding is both timely and 
predictable.
    The problem the Partnership is trying to cure is that annual 
discretionary appropriations are not always available to VA on October 
1. This delay in the timely and predictable provision of medical care 
funds means the VA medical care system administrators are cautious in 
decisions to hire medical personnel; procure new medical equipment, 
supplies and services; and construct and maintain VA medical care 
facilities until those funds are appropriated.
    This failure to provide funding clearly puts at risk the quality of 
life, if not life itself, of veterans enrolled in VA medical care. 
Congress, by not adequately addressing the medical care needs of some 
of the nation's most vulnerable citizens, the enrolled veterans who 
earned this benefit due to their selfless military service, is just as 
clearly not fulfilling President Lincoln's promise--``To care for him 
who shall have borne the battle, and for his widow, and his orphan.''
    While Congress has taken great strides to increase the level of 
funding during the past several years, there have still been 
significant delays in VA receiving this funding. VA has received its 
annual funding late in 19 of the last 22 years. Over the past 7 years, 
VA has received its final budget an average of 3 months after the start 
of the new fiscal year. The core problem in the timely funding of 
veterans' medical care is the inherently volatile nature of the annual 
appropriations process. Unlike Medicare or Medicaid, VA must rely upon 
Congress and the President to pass a new appropriations law each year 
that provides VA the funding it needs to treat enrolled veterans. Due 
in large part to the current medical care funding process used to 
approve annual discretionary appropriations being clearly flawed, the 
Partnership looked for a new way of funding VA medical care.
    Initially, the Partnership wanted to end the annual political fight 
for VA discretionary appropriations by supporting mandatory funding. 
Mandatory funding for VA meant that veterans' medical care funding 
would be on par with Social Security, Medicare or Medicaid funding, 
which do not have to go through the same annual appropriations process 
because they are mandatory appropriations. This recommendation was met 
with great resistance by Congress.
    Congress gave the Partnership two main reasons for maintaining the 
current flawed system. One, mandatory funding would interfere with 
Congress' own self-imposed budgetary rules (known as PAYGO), and two, 
Congress may lose oversight capability of the VA medical care system. 
Although the Partnership disagrees with both reasons and still believes 
that mandatory funding would improve VA's funding problems, we decided 
to develop an alternative approach for providing VA medical care 
funding; one that meets the Partnership's goals of providing 
sufficient, timely and, predictable, funding for VA medical care, but 
also meets the concerns expressed by Congress.
    The new approach is to provide advance appropriations for VA 
medical care accounts. Advance appropriations will stabilize VA medical 
care funding and provide those funds on a timely and predictable basis.
    With advance appropriations, VA will know the specific amounts to 
be provided to its medical care accounts 1 year ahead of most other 
government programs. Congress still maintains its discretionary 
authority to approve and oversee the use of these funds. Because the 
medical care discretionary appropriations would be decided 1 year in 
advance, VA's medical programs could be more closely monitored to make 
sure the funding levels would be sufficient. More importantly, VA 
medical care funds will become available on October 1 of every new 
fiscal year
    In addition, if advance appropriations for VA medical care are 
adopted by Congress, VA administrators will know 1 year in advance what 
their fiscal year appropriations will be and can thus plan accordingly 
for delivering quality medical care services to all enrolled veterans 
who need it. Most importantly, advance appropriations allow Congress to 
improve its oversight responsibilities over VA medical care because VA 
administrators can be held more accountable due to the fact they should 
be able to better plan for the use of these resources.
    Advance appropriations is a technique used by Congress for many 
years to approve funding authority 1 year in advance for certain 
government programs, such as the Low Income Home Energy Assistance 
Program (LIHEAP) and Section 8 housing. Programs funded 1 year in 
advance in this year's budget resolution are the Employment and 
Training Administration; Office of Job Corps; Education for the 
Disadvantage; School Improvement Programs; Special Education; Career, 
Technical and Adult Education; payments to the Postal Service; Tenant-
based Rental Assistance and Project-based Rental Assistance. In 
addition, the budget resolution includes appropriations for 2 years in 
advance for the Corporation for Public Broadcasting.
    Although Congress has provided advance appropriations for those 
programs for a variety of public policy reasons, it does not provide 
advance appropriations for the timely and predictable provision of 
veterans' medical care. As a nation at war, and with the economic 
difficulties we face today, now is the time to enact this crucial 
legislation. In addition, given the more complex injuries suffered by 
today's wounded warriors of Operations Enduring Freedom and Iraqi 
Freedom and the aging veterans' population from prior wars now entering 
their retirement years; the problem of providing sufficient, timely, 
and predictable VA medical care funding becomes more politically acute 
as the demands on the VA health care system will increase for the 
foreseeable future.
    The implementation of advance appropriations for VA medical care 
accounts is a straightforward process. First, to begin the new cycle, 
there is a one-time 2 year appropriations for the VA medical care 
accounts for Fiscal Years (FY) 2010 and 2011 in the FY 2010 
appropriations act. Then, in the FY 2011 appropriations cycle, VA 
medical care accounts for FY 2012 will be provided in the FY 2011 
appropriations act and the new cycle continues into the future.
    Congress passes a 5-year budget resolution annually. It will have 
to ensure it appropriately incorporates this funding change into the 5-
year budget resolution in the manner it already does with the other 
programs that are currently provided advance appropriations. Again, 
Congress will need to review this upcoming change to the annual 
concurrent resolution on the budget and will have to ensure that the 
budget resolution sets the appropriate VA budget policies and 
functional spending priorities for the upcoming five fiscal years. This 
will also mean the proper allocations are made to the Committee, both 
for this budget year and the five fiscal years period covered by the 
budget resolution.
    Congress passes three main types of VA appropriations measures. 
Regular appropriations acts provide budget authority to VA for the next 
fiscal year. As previously stated, however, even though advance 
appropriations will provide timely and predictable funding to the VA 
medical accounts, contingencies may arise that will impact the 
sufficiency of these funds. Consequently, Congress has a 1 year period 
to review those medical care accounts and provide additional funds; or 
it can pass one or more supplemental appropriations acts that will 
provide the additional needed funds during the current fiscal year if 
the regular appropriations are insufficient or to finance activities 
not provided for in the regular appropriations. In the case of regular 
appropriations not being passed and Congress passes continuing 
appropriations acts that provide stop-gap (or full-year) funding for 
VA, then the medical care accounts will still be provided for at the 
level decided in the previous fiscal year appropriations act.
    Advance appropriations will increase budget flexibility for 
Congress to provide sufficient funding if faced with unforeseen medical 
care circumstances that dictate changing funding amounts. Advance 
appropriations removes VA medical care funding from the current 
political wrangling that may deadlock the Federal budget process and 
will provide VA officials knowledge of their budget funding in advance 
for VA medical care facilities around the country in order that they 
can responsibly manage the VA medical care system. In summary, advance 
appropriations fully addresses two of the three prongs for sufficient, 
timely, and predictable VA medical care funding, while helping to 
create an environment that is more likely to produce sufficient 
funding. Section 4 of H.R. 1016, which adds greater transparency to 
VA's internal budget process will also ensure sufficient funding and 
provide Congress additional tools to conduct its oversight 
responsibilities for the provision of VA medical care.
    Mr. Chairman, the Partnership welcomes the opportunity to continue 
working with you and your colleagues toward enactment of budgetary 
reform which will achieve sufficient, timely and predictable annual 
discretionary appropriations for veterans' medical care.

                                 
                   Prepared Statement of Carl Blake,
     National Legislative Director, Paralyzed Veterans of America,
  on Behalf of the Partnership for Veterans Health Care Budget Reform

    Chairman Filner, Ranking Member Buyer, and Members of the Committee 
on behalf of the Partnership for Veterans Health Care Budget Reform 
(Partnership), Paralyzed Veterans of America (PVA) would like to thank 
you for the opportunity to testify today. The Partnership is a 
coalition of nine veterans' service organizations--AMVETS, Blinded 
Veterans Association, Disabled American Veterans, Jewish War Veterans, 
Military Order of the Purple Heart, PVA, The American Legion, Veterans 
of Foreign Wars, and Vietnam Veterans of America. Our goal is funding 
reform for the Department of Veterans Affairs (VA) health care system 
that will ensure sufficient, timely, and predictable funding.
    Chairman Filner, we were pleased that you, along with a number of 
your colleagues on this Committee, recently re-introduced the 
``Veterans Health Care Budget Reform and Transparency Act''--H.R. 
1016--that would reform the VA budget process by providing advance 
appropriations for veterans' health care. The legislation was developed 
in consultation with the Partnership. For more than a decade, the 
Partnership has worked to achieve a sensible and lasting reform of the 
funding process for veterans' health care. While the Partnership has 
long advocated converting VA's medical care funding from discretionary 
to mandatory funding, there has been virtually no movement in Congress 
in this direction.
    The Veterans Health Care Budget Reform and Transparency Act would 
ensure that the goals of the Partnership--sufficient, timely, and 
predictable funding--are met. Historically, advance appropriations have 
been used to make a program function more effectively, better align 
with funding cycles of program recipients, or provide insulation from 
annual partisan political maneuvering. By moving to advance 
appropriations, veterans' health care programs would accrue all three 
of these benefits.
    While much of the attention during the debate of this legislation 
has been focused on the advance appropriations aspect, we believe that 
the second part of the proposal is equally important. To ensure 
sufficiency of the VA health care budget, section 4 of H.R. 1016 would 
require VA's internal budget model to be shared publicly with Congress 
to provide accurate estimates for VA health care funding, as determined 
by a Government Accountability Office (GAO) audit, before political 
considerations take over the process. This would add transparency and 
integrity to the VA health care budget process.
    In recent years, VA developed a new methodology to estimate its 
resource needs for veterans' health care called the Enrollee Health 
Care Projection Model (Model). Developed in collaboration with a 
leading private sector actuarial firm (Millman, Inc.) over the last 
several years, the Model has substantially improved VA's ability to 
estimate its budgetary needs for future years. The Model has been 
thoroughly reviewed by the Office of Management and Budget (OMB) and 
approved for use in developing VA's budget.
    The Model estimates VA health care resource needs by combining 
estimates of enrollment levels, utilization rates and unit costs for 58 
medical services and over 40,000 separate enrollee groups, or 
``cells.'' Each of the 40,000 cells represents a combination of one 
geographic sector, age range and priority level. The Model incorporates 
additional usage trends, such as reliance and intensity of services. It 
also separates out special populations, such as Operations Enduring 
Freedom and Iraqi Freedom veterans, and services, such as mental health 
care, for additional adjustments. While the Model relies heavily on 
Millman's proprietary Health Cost Guidelines, substantial adjustments 
are made to account for the unique characteristics of the veteran 
enrollee population and the VA health care system. The final results 
produced by the Model provide the most comprehensive, robust and 
accurate estimate of what it will cost VA in future years to provide 
current services authorized in law to the veterans expected to seek 
those services.
    We recognize that the Model itself directly accounts for 
approximately 84 percent of the real costs to the VA to provide 
services in a given year. The remainder of the budget needed by the VA 
primarily goes to long-term care (both nursing home and non-
institutional care), as well as some smaller programs. As the aspects 
of the Model are continuously refined, we believe that these services 
should be included.
    In fact, we would prefer to see long-term care components added to 
the Model, as the VA's current methodology for determining resources 
for long-term care is clearly flawed as evidenced by the findings of 
the GAO report (GAO-09-145), VA Health Care: Long-Term Care Strategic 
Planning and Budgeting Need Improvement, released in January 2009. The 
GAO specifically recommended:

          To strengthen the credibility of the estimates of long-term 
        care spending in VA's budgeting proposals and increase 
        transparency for Congress and stakeholders, we recommend that 
        VA, in future budget justifications, use cost assumptions for 
        estimating both nursing home and non-institutional long-term 
        care spending that are consistent with VA's recent experience 
        or report the rationale for using cost assumptions that are 
        not.

    This recommendation was made as a result of GAO finding that VA 
cost assumptions were unrealistically low, when compared to economic 
forecasts of increases in health care costs. Moreover, GAO stated that 
VA officials informed them that they (VA) made these assumptions in 
order to be conservative in VA's fiscal year 2009 budget estimates.
    This statement alone shows that budget forecasting is not immune to 
political considerations when developing estimates. It is also telling 
that the single biggest component of the VA budget not governed by the 
Enrollee Health Care Projection Model is the component that seems to be 
manipulated the most. We believe that the Model overcomes these 
problems.
    The Partnership also recognizes that the biggest argument against 
relying on the Model for budget forecasting is the impact unforeseen 
events (i.e. exceedingly large numbers of new enrollments, catastrophic 
events) might have on a tight budget. For instance the report released 
on April 3, 2009, by the Congressional Research Service titled Advance 
Appropriations for Veterans' Health Care: Issues and Options for 
Congress addresses this concern directly. The report specifically 
states that ``it is reasonable to assume that future year budget 
projections could have variances that could create budget shortfalls if 
there are unanticipated shocks to the model.'' This is simply a 
statement of the obvious since this point is true even under the 
current budget process.
    The Partnership does not believe that the advance appropriations 
proposal somehow changes the actions that Congress would take under 
these circumstances. There seems to be an assumption that if our entire 
proposal were to be enacted, that Congress would no longer have or 
choose not to use its authority to provide emergency supplemental 
appropriations when warranted. The Partnership actually sees no reason 
why emergency supplemental appropriations should not be considered an 
additional tool as part of this process.
    The Partnership would also like to point to the detailed analysis 
of the Enrollee Health Care Projection Model conducted by the RAND 
Corporation. The Veterans Health Administration's Office of the 
Assistant Secretary for Policy and Planning commissioned the study 
conducted jointly by RAND Health's Center for Military Health Policy 
Research and the Forces and Resources Policy Center of the National 
Defense Research Institute (NDRI). In November 2008, RAND released the 
report Review and Evaluation of the VA Enrollee Health Care Projection 
Model. This study assessed four issues with the Model--Validity, 
Accuracy, Tractability, and Transparency.
    With regards to Validity, the RAND Corporation concluded that the 
``EHCPM [Model] is likely to be valid for short-term budget planning 
but may not be valid for longer range planning and policy analysis.'' 
This obviously begs the question of what constitutes short-term 
planning? The Partnership believes that the advance appropriations 
proposal does fall within a short-term budget planning spectrum. We 
also believe that the RAND study's conclusion is targeted more at its 
limitation in providing 5 and 10-year strategic planning projections.
    To be fair, the RAND study does make the point that the Accuracy of 
the Model is difficult to assess and uncertain. However, the study 
emphasizes that the ``most challenging barrier to accuracy stems from 
the lack of unit cost measures that are independent of the VA's budget 
allocation. This is because the discretionary nature of the VA's budget 
complicates the relationship between model projections and actual 
expenditures.'' In other words, the VA is constrained by the resources 
it is given through the discretionary budget process, not by the demand 
on the system.
    More importantly, the RAND study also states that ``the EHCPM 
represents a substantial improvement over the budgeting methodologies 
used by the VA in the past for two reasons: (1) The model builds total 
expenditures from detailed service categories and enrollee types, and 
(2) it disaggregates enrollment, utilization, and cost components.''
    Ultimately, we believe that the most important point of the RAND 
study is that ``compared to traditional methods, the current 
specification offers the benefit of a substantially more flexible and 
detailed platform from which to plan the VA's appropriation request, 
monitor budget execution, and assess system performance.'' This 
statement goes directly to our emphasis on transparency and truth in 
budgeting. If the outcomes of the Model were shared publicly, Congress 
would have better information in order to develop its own 
appropriations plan for VA.
    Making VA's data and budget estimates public should also lead to 
greater confidence in the VA funding process since it would be hard for 
Congress or a future Administration to cut VA's funding below the 
projected need since the VA's own data would be available to show what 
the funding needs really are. Furthermore, GAO would have 
responsibility for validating the budget projections of the Model each 
year. This additional oversight in the process will make less likely 
that the VA would underestimate (or even overestimate) its resource 
needs. This transparency to the budget process would also prevent any 
future Administration or Congress from making these kinds of cuts 
behind closed doors, as has too often been the case over the past two 
decades.
    The Partnership simply believes that the outcomes of the Model 
better reflect the needs of the VA health care system than any other 
method currently used. While The Independent Budget has gained 
significance in recent years due to the budget recommendations put 
forth, the methodology is still much simpler than that which is 
provided by the Model. Of course, the outcome of the Model has to be 
shared prior to the manipulations that we all know occur once budget 
details are analyzed by the Office of Management and Budget (OMB). The 
success of The Independent Budget can at least partially be attributed 
to the fact that there are no external forces (i.e. OMB, politics, 
etc.) that can influence change. And yet, The Independent Budget 
endorses the concept of advance appropriations to produce a timely and 
predictable budget with transparency added to the VA's budget model to 
ensure sufficiency.
    Mr. Chairman, we look forward to working with the Committee to 
ensure that your legislation, H.R. 1016, is advanced and ultimately 
enacted. We appreciate the opportunity to lay out our proposal in 
detail. We would be happy to take any questions that you might have.

                                 
   Prepared Statement of Katherine M. Harris,* Ph.D., Study Director
       Review and Evaluation of the VA Enrollee Projection Model
                            RAND Corporation
            Gauging Future Demand for Veterans' Health Care_
          Does the VA Have the Forecasting Tools It Needs? \1\

    Mr. Chairman and distinguished Members of the Committee, thank you 
for inviting me to testify today. It is an honor and pleasure to be 
here. I will discuss the findings from RAND's recent evaluation of the 
VA's Enrollee Health care Project Model as it relates to the topic of 
your hearing today. More specifically, my testimony will briefly review 
the findings from our evaluation, discuss the model's utility to 
support the proposed advance appropriation of the VA budget, and 
discuss recommendations for improving the model.
---------------------------------------------------------------------------
    * The opinions and conclusions expressed in this testimony are the 
author's alone and should not be interpreted as representing those of 
RAND or any of the sponsors of its research. This product is part of 
the RAND Corporation testimony series. RAND testimonies record 
testimony presented by RAND associates to Federal, state, or local 
legislative Committees; government-appointed commissions and panels; 
and private review and oversight bodies. The RAND Corporation is a 
nonprofit research organization providing objective analysis and 
effective solutions that address the challenges facing the public and 
private sectors around the world. RAND's publications do not 
necessarily reflect the opinions of its research clients and sponsors.
    \1\ This testimony is available for free download at http://
www.rand.org/pubs/testimonies/CT327/. This product is part of the RAND 
Corporation testimony series. RAND testimonies record testimony 
presented by RAND associates to Federal, state, or local legislative 
committees; government-appointed commissions and panels; and private 
review and oversight bodies. The RAND Corporation is a nonprofit 
research organization providing objective analysis and effective 
solutions that address the challenges facing the public and private 
sectors around the world. RAND's publications do not necessarily 
reflect the opinions of its research clients and sponsors. RAND is a 
registered trademark.
---------------------------------------------------------------------------
Background
    In 1996, the mission of the Veterans Administration (VA) broadened 
dramatically. The Veterans' Health Care Eligibility Reform Act 1996 
transformed the VA from an episodic provider of inpatient care for 
veterans to a comprehensive health care provider responsible for all 
the medical needs of veterans who enroll. To support budgeting and 
planning for this broader mission, the VA relies on a complex model 
known as the Enrollee Health Care Projection Model (EHCPM). This model 
predicts future demand for veterans' health care needs. The VA asked 
RAND (in conjunction with an independent actuary) to evaluate the 
model, which was developed and is operated by an actuarial consulting 
firm.
    The RAND team reviewed how the model works and addressed three main 
questions in its evaluation:

      Does the modeling approach support long-term budget 
planning and policy analysis?
      Does it accurately project VA service demand and costs?
      Is the design and operation of the model transparent to 
users and outside parties?

    Overall, RAND's evaluation found that the EHCPM is useful for 
short-term budget planning, but is less useful for longer range 
planning, especially in a dynamic policy environment. Fortunately, the 
model is structured in a way that would allow modifications to support 
longer term policy and planning applications without disrupting its 
usefulness for near-term budget planning.
How Does the Model Work?
    The EHCPM estimates the use of VA services in a base year for each 
service category (e.g., inpatient care, office visits), using 
proprietary benchmarks derived from utilization in commercial health 
plans. The costs associated with the estimated use of each service are 
derived from data provided by the VA's cost accounting system. In the 
next step, the EHCPM estimates budget-year service use and the unit 
cost of services. These estimates are based on anticipated changes in 
demand for VA care, the efficiency and intensity of care provided by 
the VA system, and overall projected medical inflation in the United 
States. In any given year, the VA forecasts expenditures for each 
service by multiplying expected enrollment, forecast utilization, and 
forecast unit costs.
Does the Model Support Budgeting and Policy Analysis?
    The RAND evaluation found that the EHCPM supports VA's short-term 
budget planning and monitoring in a stable policy and practice 
environment. The model identifies factors that drive specific types of 
spending or spending for specific types of enrollees and can adjust 
those factors as needed. Model results can also help the VA to develop 
more informed strategies for managing expenditures. In addition, the 
current model allows the VA to monitor budget execution and performance 
relative to pre-established benchmarks. Assuming there are no short-
term ``shocks'' to the system, only the accuracy and timeliness of VA 
data systems--not the model's structure--limit the EHCPM's utility for 
short-term budget planning and monitoring.
    However, for longer term strategic planning and policy analysis, 
the model could yield misleading results because the model structure 
does not account for two things: key drivers of future demand for VA 
care and the costs of delivering it. Using the model to inform 
scenarios beyond the current policy and budgetary environment requires 
information about a wide range of factors, including the VA's future 
cost structure, how rapidly the VA can expand its capacity to meet 
demand, factors driving enrollment, and the relationships among 
enrollee health status, VA treatment capacity, and enrollees' 
preferences for treatment in VA facilities versus other facilities. In 
many cases, required information does not exist or was not available to 
model developers. In the absence of such information, model forecasts 
rely on a number of unrealistic assumptions. Thus, substantial 
modifications to model subcomponents and enhancements of supporting 
data inputs would likely be required before the EHCPM could effectively 
support longer range planning.
Is the Model Accurate?
    The model's ability to accurately predict the level of resources 
needed by the VA in future years to meet projected demand is uncertain. 
The discretionary nature of the VA's budget complicates the comparison 
between model projections and actual expenditures. Under a 
discretionary budget, the VA does not have the authority to spend more 
than Congress appropriates. If demand for VA services cannot be 
satisfied under its appropriation, then actual expenditures will 
reflect the constraints inherent in the appropriation and not actual 
demand for VA services.
    Model accuracy becomes less certain as it is used to project the 
impact of policy and budget scenarios farther from the status quo. The 
main source of this uncertainty stems from the fact that the EHCPM 
begins its expenditure projection with the VA's congressional budget 
allocation, rather than with an independent measure of resource needs. 
Past VA budgets are imbedded in expenditure projections through the 
derivation of the model's unit cost measure and through the calibration 
of utilization benchmarks to actual VA workload data. In other words, 
the accuracy of the model is uncertain because there exists no 
expenditure information independent of the VA appropriation with which 
to formulate a ``gold'' standard against which to compare model 
projections.
Is the Model Transparent?
    It is important that large, complex policy models like the EHCPM be 
transparent. A lack of transparency can undermine the credibility of 
the model and make the model difficult to operate and manage. The 
overall structure of the model is relatively easy for users and outside 
evaluators to understand. However, the model's subcomponents are less 
transparent. Transparency of the model's subcomponents is limited by 
several factors: complicated algorithms that are used to set parameters 
of model subcomponents; uneven and often incomplete model 
documentation; reliance on data and clinical efficiency benchmarks that 
are proprietary to the contractor who operates EHCPM and therefore not 
available for outside review; and the lack of a standing process for 
obtaining independent review.
Does the Model Support Advanced Appropriation?
    If enacted, the Veterans Health Care Budget Reform and Transparency 
Act of 2009 (HR1016) would give Congress the ability to appropriate 
funds. Advance appropriation would, in essence, lengthen the time 
horizon over which the model forecasts resource requirements from 3 
years in the current model baseline to 4 years. Under the current 
system, for example, the VA plans the FY 2012 budget request using a 
version of the model with an FY 2009 baseline. Under advanced 
appropriations, the FY 2009 baseline would inform the FY 2013 budget 
request. Generally the farther out the forecast, the less accurate the 
projections.
    Advance appropriations may serve to mitigate the challenges of 
operating a large, complex health care system posed by delayed 
enactment of the VA's annual budget. At the same time, the expanded 
time period between budget appropriation and the time spending actually 
occurs makes it even more imperative that the VA have robust budget 
planning tools at its disposal.
    Again, our findings suggest that the model is useful for short-term 
budget planning to the extent that the VA's treatment capacity and the 
policy environment surrounding the VA remain stable. This is because 
model projections are tied to past VA budgets and not an independent 
measure of resource requirements. The longer the period of time between 
the baseline year and the budget planning year, the higher the risk 
that that past budgets do not reflect the resources required by the VA 
to achieve its mission. Both the conflicts in Iraq and Afghanistan and 
the impact of the current recession on the employment and private 
health insurance coverage of veterans raise concerns about the impact 
of a changing policy environment for the robustness of short-term model 
forecasts. Lengthening the forecasted time period under advanced 
appropriation amplifies these concerns.
Recommendations for Improving the EHCPM
    Based on the results of our evaluation, we recommend that VA take a 
number of steps to increase the model's ability to generate budget 
forecasts that are robust to changes in the policy environment over 
longer periods of time.
Develop a Methodology for Estimating Demand-Based Resource Requirements
    We recommend that the VA develop and apply a method to enhance the 
model's capacity to estimate resource requirements that reflect any 
unmet demand using VA data sources. Budget forecasts are not fully 
demand-based, because calibrating commercial utilization benchmarks to 
VA workload data imbeds constraints that arise from VA capacity 
constraints in the baseline utilization estimates. Forecasting of 
resource requirements requires measures of demand that are responsive 
to changes in VA treatment capacity, benefit generosity, and case-mix. 
Estimating demand for VA health care for these purposes requires the 
development and application of methodologies for (1) estimating the 
utilization that would have occurred in the absence of constraints on 
VA's capacity to deliver care, (2) estimating the relationship between 
VA benefit generosity relative to other payors and demand for VA care, 
and (3) estimating the relationship between enrollee health status and 
demand for VA care.
    These methodologies could be developed by combining VA workload 
data with data describing treatment capacity and various sources of 
data on enrollee reliance. Exploiting variation in VA capacity across 
locations and over time could allow modelers to infer demand for VA 
care in constrained markets from administrative workload data collected 
from unconstrained regions and time periods, controlling for case-mix. 
The ability to control for and measure enrollee's partial reliance on 
VA care will require additional data beyond VA workload and VA 
treatment capacity. As reflected in the current model, such information 
is likely to include Medicare claims data linked to VA workload and 
self-reported reliance from survey data.
    To assure full exploration of the capabilities and limitations of 
VA administrative and survey data sources in estimating unconstrained 
demand for VA health care, we recommend the VA consult with a wide 
variety of independent experts including actuaries, economists, and in 
particular, individuals with experience aggregating VISN-level workload 
data to conduct national-level analyses.
Use Survey-Based Methods to Strengthen Demand Forecasting and Policy 
        Analysis
    We recommend the VA use survey-based methods to strengthen 
forecasting and policy analysis capabilities. The fact that veterans do 
not receive medical care exclusively from the VA makes it impossible to 
project future demand for VA health care from administrative data 
alone. For example, VA eligibility data does not contain information 
needed to measure the effect of changes in availability and generosity 
of employer-sponsored health insurance benefits on demand for 
enrollment and use of VA health care services. Likewise, it is not 
possible to distinguish the effect of reliance from veteran health 
status when using VA workload data to predict future demand.
    The current survey of enrollees provides useful information in 
estimating demand for VA care by asking insurance status and source, 
anticipated use of VA health care, health and functional status, and 
use of VA and non-VA health care. However, the utility of the current 
survey could be greatly increased if the sample (for both respondents 
and non respondents) were designed to be linkable to VA workload data, 
included non enrollees, and was stratified to ensure representation of 
veterans across VA markets identified as being supply constrained or 
having excess capacity. Likewise, the utility of the survey could be 
greatly increased if the questionnaire were modified to include 
screening questions regarding diagnosed health conditions, utilization 
of services in broad service categories, and more information about 
other health insurance coverage availability and costs.
    We recommend that the VA consult a variety of sampling 
statisticians and survey design experts in making design changes to 
assure that modifications support to the greatest extent possible VA's 
objectives related to forecasting and policy analysis while minimizing 
respondent burden and cost to the VA.
Explore the Utility and Feasibility of Improving Unit Cost Measures 
        Through Alternative Approaches
    We recommend the VA consult with a variety of experts to improve 
its understanding of the likely biases resulting from the current 
costing methods, whether and how alternative approaches could improve 
unit cost estimates. We found that the method used to derive unit costs 
has the potential to produce biased expenditure projections. The 
potential for bias stems from the implicit assumption that per unit 
costs do not vary with changes over time in the number of treated 
patients. In essence, the model assumes that VA pays for care on a fee-
for-service basis, similar to Medicare. Our analyses suggest that the 
potential for bias is greatest for services with large fixed cost 
components for both capacity constrained markets and markets with 
substantial excess capacity.
    Alternative approaches may yield more valid and accurate 
expenditure projections that can be more readily related to the VA's 
actual expenditures. In particular, we recommend the VA explore whether 
it is feasible to implement a staffing model using VA's cost accounting 
system. A staffing model explicitly maps resources expended in a 
delivery system to anticipated demand based on cost histories of 
service for major expenditure components, such as diagnostic equipment, 
office supplies, purchased services, administration, salaries and 
benefits and rent.
    We recommend that the VA consult actuaries, economists with 
expertise in costing methods, and individuals familiar with VA data 
systems to recommend a strategy for analyzing the problems associated 
with the current costing method and to assess whether a staffing model 
(or alternative costing method) is likely to result in improved 
accuracy and could be supported using the VA's current cost accounting 
system.
    The implementation of a staffing model as a basis for forecasting 
VA resource requirements would be time-consuming and resource 
intensive. However, investing in the capacity to develop, implement, 
and maintain a staffing model would most likely produce returns beyond 
the ability to improve the quality of model-based expenditure 
projections. In particular, the development of a staffing model would 
inform the development and refinement of productivity benchmarks for 
physicians, physician support staff, and medical equipment and the 
accurate measurement of performance relative to these benchmarks. A 
staffing model can also help the VA to evaluate potential return from 
investments in cost saving or quality enhancing technology.
Consider Streamlining the Current Model for Short-Term Budget Planning
    If model enhancements required to improve the model's capability to 
support long-term planning and analysis prove impractical, we recommend 
that the VA streamline the current model to provide more transparent 
support for short-term budget planning. Streamlining would entail 
discontinued use of commercial utilization benchmarks, the development 
of VA-specific utilization benchmarks, and the simplification of trend 
assumptions used to project base year utilization forward 3 years. We 
expect a streamlined model based on VA data would be close in structure 
to the current methodology used to project expenditures for non modeled 
services (e.g., outpatient mental health services, over-the-counter 
drugs and supplies). We expect that commercial benchmarks will prove 
useful in isolated instances in which VA data systems do not adequately 
capture utilization of covered services.
    Because VA workload drives short-term expenditure projections under 
the current model through the calibration of estimated utilization to 
actual utilization using VA workload data, discontinuing use of 
commercial utilization benchmarks will substantially reduce complexity 
and increase transparency without substantially affecting the 
continuity of the VA's budget planning process. The VA is substantially 
larger than many large health insurers who use their own experience for 
budgeting and strategic planning purposes. For this reason, it should 
be feasible to use standard statistical methods and the aggregation of 
data across multiple time periods to develop assumptions regarding 
variation in VA utilization by age, priority-level, and geographic 
region, even when the volume of workload is low for a given service.
Use a Wide Range of Expertise to Enhance Validity, Accuracy, and 
        Credibility
    We recommend that the VA draw on a broader range of expertise than 
is currently being employed for the purpose of enhancing the validity, 
accuracy, and external credibility of the model. Our evaluation 
suggested that model development activities were staffed solely by 
actuaries with support from programmers with limited support from 
outside experts. However, many modeling tasks are well within the 
purview of other disciplines, including economics, statistics, health 
services research, and epidemiology. Many individuals with backgrounds 
in these areas have relevant modeling experience and expertise in 
specialized analytic approaches needed to address model limitations 
identified in our evaluation. These approaches include cost 
measurement, estimating demand in supply constrained environments, and 
case-mix adjustment using administrative data.
Initiate Periodic External Review of the Model
    We recommend that VA initiate periodic review of the model by 
independent experts recruited from outside the VA. Independent review 
helps to insure model credibility in the eyes of stakeholders who may 
not have the time or expertise to evaluate the model themselves. To our 
knowledge, the EHCPM model has not been subject to external review 
prior to our evaluation. Sponsors of other large scale forecasting 
models, such as the models used by the Social Security Administration 
and the Center for Medicare and Medicaid Services (CMS), periodically 
engage panels of experts to review modeling methodologies, key 
assumptions, and model outputs. Proceedings from these meetings could 
serve as models in establishing a review process.
Involve Technical Writers in Documentation Process
    We recommend that the VA increase transparency and credibility 
through the use of technical writers to improve the quality of model 
documentation. As we note earlier in this report, any valid approach to 
projecting future VA health care expenditures under enrollment reform 
policies is likely to involve a very high degree of complexity. Given 
this complexity, it is crucial that model documentation be 
comprehensive, be clear, and meet the reviewers' expectations with 
respect to the appropriate level of detail. Technical writers have the 
skills and experience to assure that these goals are met through the 
use of unambiguous language and visual formatting.
Capture Institutional Knowledge through the Addition of Internal 
        Analytic Staff
    We recommend that the VA add internal analytic staff to participate 
in model development and related activities in order to accelerate 
institutional learning and increase the return on the VA's investment 
in the model. Our evaluation did not support conclusions one way or the 
other about the desirability of outsourcing model development and 
related activities. Our evaluation did, however, raise concerns about 
outsourcing the institutional knowledge that arises through day-to-day 
participation in model-related activities and interaction with other VA 
staff, both formal and informal. In our view, the capture of 
institutional knowledge is key to enhancing the VA's return on its 
investment in the model. Internal analytic staff would likely be 
familiar with the VA's strategic mission and have detailed knowledge of 
VA data systems. Thus, in addition to the general knowledge enhancement 
and related benefits achieved by the analytic staff, such individuals 
could also help to enhance the strategic value of the VA data systems.

                               __________
    [The RAND Report entitled, ``Review and Evaluation of the VA 
Enrollee Health Care Projection Model,'' by Katherine M. Harris, James 
P. Golasso and Chrinstine Eibner, will be retained in the Committee 
files. The report can also be found online at http://www.rand.org/pubs/
monographs/2008/RAND_MG596.pdf.]

                                 
            Prepared Statement of Sidath Viranga Panangala,
      Analyst in Veterans Policy, Congressional Research Service,
                          Library of Congress

Introduction
    Chairman Filner, Ranking Member Buyer, and distinguished Members of 
the Committee, my name is Sidath Panangala, from the Congressional 
Research Service (CRS). I am honored to appear before the Committee 
today. As requested by the Committee, my testimony will highlight some 
of the issues that are discussed in the CRS Report entitled Advance 
Appropriations for Veterans' Health Care: Issues and Options for 
Congress. As a supplement to my testimony, I have included this report 
for the record. CRS takes no position on any of the legislative 
proposals to authorize advance appropriations for certain accounts that 
fund the Veterans Health Administration (VHA) of the Department of 
Veterans Affairs (VA).
Current Funding for VHA
    Prior to discussing issues highlighted in our report, I will 
briefly provide an overview of VHA's current budget formulation process 
and the current appropriations process for VA health care programs. 
Historically, the major determinant of VHA's budget size and character 
was the number of staffed beds, which was controlled by Congress.\1\ 
The preliminary budget estimate, to a large extent, was based on the 
funding and activity of the previous year. VHA developed system-wide 
workload estimates, by type of care, using forecasts submitted by field 
stations. Costs associated with new programs were estimated by the VA 
central office and added to the budget estimate.\2\ Costs associated 
with staffing improvements, pay increases, and inflation were also 
added to this estimate. In 1996, Congress enacted the Department of 
Veterans Affairs and Housing and Urban Development and Independent 
Agencies Appropriations Act 1997 (P.L. 104-204), requiring VHA to 
develop a plan for the allocation of health care resources to ensure 
that veterans eligible for medical care who have similar economic 
status and eligibility priority have similar access to such care, 
regardless of where they reside.\3\ The plan was to ``account for 
forecasts in expected workload and to ensure fairness to facilities 
that provide cost-efficient health care.'' \4\
---------------------------------------------------------------------------
    \1\ U.S. Congress, House Committee on Veterans' Affairs, Health 
Care for American Veterans, prepared by National Academy of Sciences, 
National Research Council, 95th Cong., 1st sess., June 7, 1977, House 
Committee Print No. 36 (Washington: GPO, 1977), p. 37.
    \2\ Ibid, p. 42.
    \3\ Department of Veterans Affairs, Office of Inspector General, 
Report of Audit Congressional Concerns over Veterans Health 
Administration's Budget Execution, Report No. 06-01414-160, Washington, 
DC, June 30, 2006, p. 2.
    \4\ Ibid.
---------------------------------------------------------------------------
    In response to the above-mentioned Congressional mandate, as well 
as the mandate in the Health Care Eligibility Reform Act 1996 (P.L. 
104-262) that required the VHA to establish a priority-based enrollment 
system, VHA established the Enrollee Health Care Demand Model in 1998. 
The model, which has evolved over time, develops estimates of future 
veteran enrollment, enrollees' expected utilization of health care 
services, and the costs associated with that utilization. A more 
detailed description of the model is provided in our CRS report 
accompanying this testimony as well as in the RAND Corporation study 
titled Review and Evaluation of the VA Enrollee Health Care Projection 
Model.\5\
---------------------------------------------------------------------------
    \5\ Katherine M. Harris, James P. Galasso, and Christine Eibner, 
Review and Evaluation of the VA Enrollee Health Care Projection Model, 
The RAND Corporation, Center for Military Health Policy Research, 2008, 
pp. 23-43.
---------------------------------------------------------------------------
    VHA's budget request to Congress begins with the formulations of 
the budget based on the Enrollee Health Care Projection Model (EHCPM) 
to estimate the demand for medical services among veterans in future 
years. Each year, through the annual appropriations process, Congress 
appropriates funds to the accounts that comprise VHA: (1) medical 
services, (2) medical support and compliance account, (3) medical 
facilities, and (4) medical and prosthetic research.
    One proposal that has been discussed in the past few months to 
provide more ``predictability'' in funding VHA in the future is the use 
of advanced appropriations for certain medical care accounts of VHA.
    An advance appropriation provides funding to an account one fiscal 
year or more ahead of schedule. In an annual appropriations act for 
FY2010, for example, an appropriation to an account for FY2011 or a 
later fiscal year would be an advance appropriation. Because advance 
appropriations are not subject to the budget enforcement procedures 
that normally apply to the annual appropriations acts for the upcoming 
fiscal year, the annual budget resolution for several years has placed 
a cap on advance appropriations and specified the accounts eligible to 
receive this type of funding. For FY2010, the conference report 
(H.Rept.111-89) on the budget resolution identifies certain veterans' 
medical care accounts as eligible to receive advance appropriations but 
exempts them from the cap.\6\
---------------------------------------------------------------------------
    \6\ For a detailed description on budget procedures, see, CRS 
Report 98-721, Introduction to the Federal Budget Process, by Robert 
Keith.
---------------------------------------------------------------------------
VHA Advance Appropriation: Implementation Issues
    Let me highlight some potential implementation issues that were 
discussed in our report. One concern for Congress might be the effect 
or impact of funding some accounts under an advance appropriation based 
on the estimates generated by the Enrollee Health Care Projection 
Model. The Government Accountability Office has noted that ``[VHA's] 
formulation of its budget is by its very nature challenging, as it is 
based on assumptions and imperfect information on the health care 
services [VHA] expects to provide.'' \7\ The RAND Corporation has found 
that while the Enrollee Health Care Projection Model reasonably 
projects future enrollment estimates and is ``likely to yield accurate 
projections in a stable policy environment,'' it has also found that 
``the current specification of the Enrollee Health Care Projection 
Model appears to lack the specificity to inform explicit scenarios 
regarding the relationships among VA benefit generosity, other sources 
of health coverage, veterans' enrollment decisions, and enrollee health 
status.'' \8\ Under such findings, it is reasonable to assume that 
future year budget projections could have variances that could create 
budget shortfalls if there are unanticipated shocks to the VA health 
care system or to the surrounding policy environment. For instance, if 
under the current economic climate, large numbers of veterans were to 
lose their employer provided health insurance coverage, and for the 
first time try to seek care from the VA health care system, the 
Enrollee Health Care Projection Model may not be able to accurately 
forecast such a scenario.
---------------------------------------------------------------------------
    \7\ U.S. Government Accountability Office, VA Health Care 
Challenges in Budget Formulation and Execution, GAO-09-459T, March 12, 
2009, p. 1.
    \8\ Katherine M. Harris, James P. Galasso, and Christine Eibner, 
Review and Evaluation of the VA Enrollee Health Care Projection Model, 
The RAND Corporation, Center for Military Health Policy Research, 2008, 
p. 46.
---------------------------------------------------------------------------
    Another issue that may arise would be how funding for VHA 
information technology programs including its electronic medical 
records system relate to funding the rest of the VHA under an advance 
appropriation. Beginning in 2005, VA consolidated all information 
technology (IT) functions throughout the VA and brought them under 
control of the VA Chief Information Officer (CIO). As a result of this 
reorganization, VHA's health IT budget was brought under central 
control. Currently, all IT programs within the VA are funded under the 
Information Technology account. Therefore, providing an advance 
appropriation for some VHA accounts and funding IT accounts under a 
regular appropriation act could create a situation whereby, for 
example, VHA could not purchase computer software although it has 
procured medical equipment that needs software. Another example would 
be the difficulty of procuring the IT infrastructure to support the 
opening of a new community-based outpatient clinic (CBOC).
Option for Congress
    There are some options that might help Congress in deciding on the 
long-term financing of VA health care.
    One option might be to create an independent entity modeled along 
the lines of the Medicare Payment Advisory Commission (MedPAC).\9\ 
Creation of such an entity could bring transparency to VHA's funding 
process and would create credibility, particularly among key 
constituent groups. MedPAC was established by the Balanced Budget Act 
1997 (P.L. 105-33) to advise Congress on issues affecting the Medicare 
Program. The Commission's statutory mandate includes advising Congress 
on payments to private health plans participating in Medicare and 
providers in Medicare's traditional fee-for-service program. 
Furthermore, MedPAC is also tasked with analyzing access to care, 
quality of care, and other issues affecting Medicare. The Commission 
meets publicly to discuss Medicare issues and policy questions and to 
develop and approve its reports and recommendations to the Congress. 
Such a program for VHA might independently analyze issues facing VHA 
and advise Congress on funding for both short- and long-term issues 
affecting health care for veterans. This could, in turn, provide an 
added layer of transparency and accountability to VHA's budget process.
---------------------------------------------------------------------------
    \9\ [www.medpac.gov].
---------------------------------------------------------------------------
    This concludes my statement. I would be pleased to answer any 
questions the Committee may have.

                               __________
    [The CRS Report entitled, ``Advance Appropriations for Veterans' 
Health Care: Issues and Options for Congress,'' CRS Report No. R40489, 
dated April 28, 2009, will be retained in the Committee files. The 
Report can also be found online at http://apps.crs.gov/products/r/pdf/
R40489.pdf.]

                                 
       Prepared Statement of Jessica Banthin, Ph.D., Director of
Modeling and Simulation, Center for Financing, Access, and Cost Trends,
              Agency for Health Care Research and Quality,
              U.S. Department of Health and Human Services

Introduction
    Good morning, Mr. Chairman and Members of the Committee. Thank you 
for the opportunity to testify before the Committee on the issue of 
modeling long term projections. Before beginning the substance of my 
remarks, I want to state that the Agency for Health care Research and 
Quality (AHRQ), an agency of the Department of Health and Human 
Services (HHS), has benefited from extensive collaboration with the 
Department of Veterans Affairs (VA) in the areas of health services 
research, patient safety, and clinical quality of care. We consider the 
VA an important partner in improving health care.
    I serve as the Director of Modeling and Simulation in the Center 
for Financing, Access and Cost Trends at AHRQ. At AHRQ, we have 
extensive experience with working on sophisticated health care models. 
For example, we developed a simulation model that estimates the number 
of eligible uninsured children in the U.S. and can be used to project 
enrollment in Medicaid and the Children's Health Insurance Program 
(CHIP), and informs outreach efforts to increase enrollment of eligible 
children ages.1-4 We worked closely with actuaries at HHS's 
Centers for Medicare and Medicaid Services (CMS) to benchmark national 
health expenditure estimates.\5\ In addition, researchers at AHRQ 
designed an economic microsimulation model that predicted consumer 
choice of health insurance in response to changes in health insurance 
offerings.\6\ The model also projected changes in total health care 
spending resulting from the change in insurance offers.
    I have had the opportunity to review RAND report on the VA Enrollee 
Health Care Projection Model (EHCPM).\7\ The EHCPM includes three major 
components: an enrollment projection model, a utilization projection 
model, and a unit cost projection model.
    The RAND report draws distinction between actuarial models that are 
based on historical trends and economic models that incorporate 
behavioral parameters. I have worked with both actuarial and economic 
models. I have also worked with models that combine elements of both 
approaches. There are caveats to all long-term projection models.
    In my testimony, I will briefly describe an enrollment model that 
we have constructed at AHRQ that can be used to project children's 
enrollment in Medicaid and CHIP. I will also discuss the benefits, 
caveats and limitations that affect long-term cost and utilization 
projection models.
An Example of Modeling Medicaid and CHIP Eligibility and Enrollment
    In AHRQ's modeling efforts, we model Medicaid and CHIP enrollment 
using survey data from our Medical Expenditure Panel Survey (MEPS) as 
well as state-
specific eligibility rules. We make use of information on family 
structure and family income and then apply state specific eligibility 
rules to all sampled children in the MEPS data. We simulate the 
eligibility of each child for public coverage through Medicaid or CHIP. 
We then compare the simulated eligibility status to the child's 
reported insurance status. Many eligible children are enrolled in 
public coverage, and our model supports the calculation of take-up 
rates.
    Next, we use output from our eligibility simulation model to 
develop economic models that explain why some children are more likely 
than others to enroll. These models, as with all actuarial and economic 
models, are limited by the available data. We cannot easily measure the 
effects of factors that are not observed or measured. Nonetheless, the 
enrollment (or take up) model identifies the factors that have the 
largest marginal effects on enrollment. We find, for example, that 
among children who are eligible for public coverage, age, children's 
health and disability status and parents' employment status are strong 
predictors of enrollment (4). These models can easily support longer 
term enrollment projections and are flexible enough to account for 
changes that may affect enrollment decisions.
    In the aforementioned studies, MEPS data were used. Data from the 
American Community Survey (sponsored by the Bureau of the Census) also 
measure veteran status. As of 2008 the American Community Survey is 
also measuring health insurance status.
Cost and Utilization Projections
    The long-term projection of costs and utilization is very difficult 
because of the number of factors that affect use of health care 
services. Factors include unpredictable changes in both the demand for 
and the supply of various services. Technological change can yield new 
treatments for medical conditions and improved diagnosis of ailments. 
Changes in the prevalence of disease can affect the demand for care. 
When AHRQ projects health care expenditures, we refrain from applying 
complex models and assumptions and instead apply publicly available 
projections from census data (regarding demographic changes) and from 
CMS (regarding expenditure growth), so we project expenditures using a 
more conservative approach that is more aligned to actuarial methods. 
AHRQ-projected expenditure data are publicly available, so modelers can 
then use these data to develop more complex microsimulation models that 
predict the cost changes resulting from various behavioral parameters 
and assumptions. These more complex microsimulation models with 
behavioral parameters are critical for policy analysis, but their long-
term accuracy in projecting expenditures is very hard to gauge. The 
advantage of having extremely detailed information from private claims 
data on the use of health care services is that the data project use 
and costs associated with an array of specific health care services. 
Breaking down long-term projections in this way avoids the need for 
relying solely on these behavioral parameters.
Issues in Projecting Enrollment, Utilization and Costs
    Programs such as the VA face several challenges in projecting 
utilization and costs for its patient population when there is limited 
information on the other non-program sources of care patients may use. 
This issue is more pronounced for patients under age 65 without 
Medicare claims data to examine. To the extent that the VA patient 
population is unique and differs in many ways from the commercially 
insured population, such data limitations present additional challenges 
in projecting future utilization and costs.
    It is important to account for illness severity or morbidity when 
projecting costs. Morbidity is a strong predictor of both enrollment 
and use of services. Morbidity can be measured with clinical measures 
but can also be accounted for with some survey-based measures of 
patient reported physical and mental health status, functional status, 
and work disability. These patient reported measures have strong 
predictive power in many economic models of demand for services.
Conclusion
    In conclusion, I want to emphasize that there are caveats 
associated with all long-term projection models, whether they use 
actuarial or economic methods. In addition, the accuracy of all 
projection models depends critically on the available data. Without 
sufficient data there may be areas in the models that rely on best 
guesses rather than solid data. As most modelers know, long-term 
projection models can constantly be improved and enhanced. This is 
usually an ongoing process. Nevertheless, the VA Enrollee Health Care 
Projection Model is a very sophisticated model that benefits each year 
from better information on the current veteran population.
    Mr. Chairman, this concludes my prepared testimony. Thank you, and 
I would be happy to answer any questions you may have.
References
    [1] Hudson, J. and Selden, T., ``Children's Eligibility and 
Coverage: Recent Trends and a Look Ahead.,'' Health Affairs 26(5). 
August 2007.
    [2] Hudson, J., Selden, T., and Banthin, J. The impact of SCHIP on 
insurance coverage of children. Inquiry 2005 (Fall); 42(3):232-54.
    [3] Selden, TM, Hudson, JL and Banthin, JS. 2004. ``Tracking 
Changes in Eligibility and Coverage Among Children, 1996-2002.'' Health 
Affairs 23(5):39-50. September/October 2004.
    [4] Selden, TM, Banthin, JS, Cohen JW. March, 1999. ``Projecting 
Eligibility and Enrollment for the State Children's Health Insurance 
Program,'' AHCPR Pub. No. 99-025.
    [5] Sing M, Banthin JS, Selden TM, et al. Reconciling Medical 
Expenditure Estimates from the MEPS and NHEA, 2002. Health Care 
Financing Review 2006 Fall; 28(1):25-40.
    [6] Zabinski, D, Selden, TM, Moeller, JF and Banthin, JS. 1999. 
``Medical Savings Accounts: Microsimulation Results from a Model with 
Adverse Selection,'' Journal of Health Economics 18(2):195-218.
    [7] Harris, Katherine M., James P. Galasso, Christine Eibner. 
Review and evaluation of the VA Enrollee Health Care Projection Model. 
RAND 2008.

                                 
         Prepared Statement of Randall B. Williamson, Director,
 Health Care, and Susan J. Irving, Director, Federal Budget Analysis, 
        Strategic Issues, U.S. Government Accountability Office
          VA Health Care: Challenges in Budget Formulation and
       Issues Surrounding the Proposal for Advance Appropriations
                             GAO Highlights

Why GAO Did This Study
    The Department of Veterans Affairs (VA) estimates it will provide 
health care to 5.8 million patients with appropriations of about $41 
billion in fiscal year 2009. It provides a range of services, including 
primary care, outpatient and inpatient services, long-term care, and 
prescription drugs. VA formulates its health care budget by developing 
annual estimates of its likely spending for all its health care 
programs and services, and includes these estimates in its annual 
congressional budget justification.
    GAO was asked to discuss budgeting for VA health care. As agreed, 
this statement addresses (1) challenges VA faces in formulating its 
health care budget and (2) issues surrounding the possibility of 
providing advance appropriations for VA health care.
    This testimony is based on prior GAO work, including VA Health 
Care: Budget Formulation and Reporting on Budget Execution Need 
Improvement (GAO-06-958) (Sept. 2006); VA Health Care: Long-Term Care 
Strategic Planning and Budgeting Need Improvement (GAO-09-145) (Jan. 
2009); and VA Health Care: Challenges in Budget Formulation and 
Execution (GAO-09-459T) (Mar. 2009); and on GAO reviews of budgets, 
budget resolutions, and related legislative documents. We discussed the 
contents of this statement with VA officials.
What GAO Found
    GAO's prior work highlights some of the challenges VA faces in 
formulating its budget: obtaining sufficient data for useful budget 
projections, making accurate calculations, and making realistic 
assumptions. For example, GAO's 2006 report on VA's overall health care 
budget found that VA underestimated the cost of serving veterans 
returning from military operations in Iraq and Afghanistan. According 
to VA officials, the agency did not have sufficient data from the 
Department of Defense, but VA subsequently began receiving the needed 
data monthly rather than quarterly. In addition, VA made calculation 
errors when estimating the effect of its proposed fiscal year 2006 
nursing home policy, and this contributed to requests for supplemental 
funding. GAO recommended that VA strengthen its internal controls to 
better ensure the accuracy of calculations used to prepare budget 
requests. VA agreed and, for its fiscal year 2009 budget justification, 
had an independent actuarial firm validate savings estimates from 
proposals to increase fees for certain types of health care coverage. 
In January 2009, GAO found that VA's assumptions about the cost of 
providing long-term care appeared unreliable given that assumed cost 
increases were lower than VA's recent spending experience and guidance 
provided by the Office of Management and Budget. GAO recommended that 
VA use assumptions consistent with recent experience or report the 
rationale for alternative cost assumptions. In a March 23, 2009, letter 
to GAO, VA stated that it concurred and would implement this 
recommendation for future budget submissions.
    The provision of advance appropriations would ``use up'' 
discretionary budget authority for the next year and so limit 
Congress's flexibility to respond to changing priorities and needs. 
While providing funds for 2 years in a single appropriations act 
provides certainty about some funds, the longer projection period 
increases the uncertainty of the data and projections used. If VA is 
expected to submit its budget proposal for health care for 2 years, the 
lead time for the second year would be 30 months. This additional lead 
time increases the uncertainty of the estimates and could worsen the 
challenges VA already faces when formulating its health care budget.
    Given the challenges VA faces in formulating its health care budget 
and the changing nature of health care, proposals to change the 
availability of the appropriations it receives deserve careful 
scrutiny. Providing advance appropriations will not mitigate or solve 
the problems we have reported regarding data, calculations, or 
assumptions in developing VA's health care budget. Nor will it address 
any link between cost growth and program design. Congressional 
oversight will continue to be critical.
                               __________
    Mr. Chairman and Members of the Committee:
    We are pleased to be here today as the Committee considers issues 
in budgeting and funding for the Department of Veterans Affairs (VA) 
health care programs. These programs form one of the largest health 
care delivery systems in the nation and provide, for eligible veterans, 
a range of services, including preventive and primary health care, 
outpatient and inpatient services, long-term care, and prescription 
drugs. VA estimated that in fiscal year 2009, its health care programs 
would serve 5.8 million patients with appropriations of about $41 
billion.
    VA health care programs are funded through the annual 
appropriations process along with other areas of critical importance 
and high priority to the nation, including national defense, homeland 
security, transportation, energy and natural resources, education, and 
public health. VA formulates its health care budget by developing 
annual estimates of its likely spending for all of its health care 
programs and services. This is by its very nature challenging, as it is 
based on assumptions and imperfect information on the health care 
services VA expects to provide. For example, VA is responsible for 
anticipating the service needs of two very different populations--an 
aging veteran population and a growing number of veterans returning 
from the military operations in Afghanistan and Iraq--calculating the 
future costs associated with providing VA services, and using these 
factors to develop the department's budget request submitted to the 
Office of Management and Budget (OMB).\1\ VA provides its annual 
congressional budget justification to the appropriations subcommittees, 
providing additional explanation for the President's budget request.\2\
---------------------------------------------------------------------------
    \1\ VA begins to formulate its own budget request at least 18 
months before the start of the fiscal year to which the request relates 
and about 10 months before transmission of the President's budget 
request, which usually occurs in early February.
    \2\ The President's budget request for VA is developed by the 
Office of Management and Budget.
---------------------------------------------------------------------------
    VA uses an actuarial model to develop its annual budget estimates 
for most of its health care programs, including inpatient acute 
surgery, outpatient care, and prescription drugs. This model estimates 
future VA health care costs by using projections of veterans' demand 
for VA's health care services as well as cost estimates associated with 
particular health care services.\3\ In fiscal year 2006, VA used the 
actuarial model to estimate about 86 percent of its projected health 
care spending for that year. VA uses a separate approach to project 
long-term care demands and costs, which accounted for about 10 percent 
of VA's estimated health care spending for fiscal year 2006. VA used 
other approaches to project demand and costs for the remaining 4 
percent of the medical programs budget request for fiscal year 2006.
---------------------------------------------------------------------------
    \3\ The actuarial model reflects factors such as the age, sex, and 
morbidity of the veteran population as well as the extent to which 
veterans are expected to seek care from VA rather than health care 
providers reimbursed by other payers such as Medicare and Medicaid.
---------------------------------------------------------------------------
    In 2006 and 2009, we issued reports that examined some of the 
challenges VA faces in budget formulation; these reports pertained to 
VA's overall health care budget as well as portions of its budget that 
pertain to long-term care.\4\ We also testified in March 2009 before 
the House Subcommittee on Military Construction, Veterans Affairs, and 
Related Agencies, Committee on Appropriations, about challenges VA 
faces in formulating and executing its budget.\5\ You asked us to 
discuss budgeting for VA health care. As agreed, today we will discuss 
(1) challenges VA faces in formulating its health care budget and (2) 
some issues surrounding the possibility of providing advance 
appropriations for VA health care.\6\
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    \4\ See GAO, VA Health Care: Budget Formulation and Reporting on 
Budget Execution Need Improvement, GAO-06-958 (Washington, D.C.: Sept. 
20, 2006); GAO, VA Health Care: Long-Term Care Strategic Planning and 
Budgeting Need Improvement, GAO-09-145 (Washington, D.C.: Jan. 23, 
2009).
    \5\ See GAO, VA Health Care: Challenges in Budget Formulation and 
Execution, GAO-09-459T (Washington, D.C.: Mar. 12, 2009).
    \6\ The Veterans Health Care Budget Reform and Transparency Act of 
2009 would provide for the VA Medical Services, Medical Support and 
Compliance, and Medical Facilities appropriations accounts to receive 
advance appropriations beginning with fiscal year 2011. H.R. 1016 and 
S. 423, 111th Cong. (2009). Advance appropriations represent budget 
authority that becomes available 1 or more fiscal years after the 
fiscal year covered by the appropriations act in which they are made.
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    For our 2006 report on VA's overall health care budget for fiscal 
years 2005 and 2006, we analyzed and reviewed budget documents, 
including VA's budget justifications for health care programs for 
fiscal years 2005 and 2006, and interviewed VA officials responsible 
for VA health care budget issues and for developing budget projections. 
In addition, from August to September 2008, we reviewed VA documents to 
determine whether VA had implemented the recommendations we made in our 
2006 report. For our 2009 report on VA's long-term care budget, we 
reviewed VA's fiscal year 2009 congressional budget justification and 
related documents. We also interviewed VA officials. VA did not 
initially comment on the recommendations in our 2009 report, but said 
it would provide an action plan. VA provided this action plan in a 
March 23, 2009, letter to GAO. For this statement we reviewed VA's 
letter and action plan. For the discussion of appropriations and 
budgeting we reviewed previous GAO work, budgets, budget resolutions, 
and related legislative documents.\7\
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    \7\ See GAO, Budget Process: Issues in Biennial Budget Proposals, 
GAO/T-AIMD-96-136 (Washington, D.C.: July 24, 1996); GAO, Budget 
Process: Comments on S. 261--Biennial Budgeting and Appropriations Act, 
GAO/T-AIMD-97-84 (Washington, D.C.: Apr. 23, 1997); GAO, Budget Issues: 
Cap Structure and Guaranteed Funding, GAO/T-AIMD-99-210 (Washington, 
D.C.: July 21, 1999); GAO, Congressional Directives: Selected Agencies' 
Processes for Responding to Funding Instructions, GAO-08-209 
(Washington, D.C.: Jan. 31, 2008).
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    We conducted our work for these performance audits in accordance 
with generally accepted government auditing standards.\8\ Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. We discussed the contents of 
this statement with VA officials.
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    \8\ We conducted our work on VA's overall health care budget from 
October 2005 through September 2006, our work on VA's long-term care 
budget from November 2007 through January 2009, and our work for this 
statement in April 2009. The discussion of advance appropriations draws 
on work and analysis conducted on an ongoing basis for over a decade.
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VA Faces Challenges in Formulating Its Health Care Budget
    Our prior work highlights some of the challenges VA faces in 
formulating its budget: obtaining sufficient data for useful budget 
projections, making accurate calculations, and making realistic 
assumptions. Our 2006 report on VA's overall health care budget found 
that VA underestimated the cost of serving veterans returning from 
military operations in Afghanistan and Iraq, in part because estimates 
for fiscal year 2005 were based on data that largely predated the Iraq 
conflict.\9\ In fiscal year 2006, according to VA, the agency again 
underestimated the cost of serving these veterans because it did not 
have sufficient data due to challenges obtaining data needed to 
identify these veterans from the Department of Defense (DoD). According 
to VA officials, the agency subsequently began receiving the DoD data 
needed to identify these veterans on a monthly basis rather than 
quarterly.
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    \9\ See GAO-06-958.
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    We also reported challenges VA faces in making accurate 
calculations during budget formulation. VA made computation errors when 
estimating the effect of its proposed fiscal year 2006 nursing home 
policy, and this also contributed to requests for supplemental funding. 
We found that VA underestimated workload--that is, the amount of care 
VA provides--and the costs of providing care in all three of its 
nursing home settings.\10\ VA officials said that the errors resulted 
from calculations being made in haste during the OMB appeal 
process,\11\ and that a more standardized approach to long-term care 
calculations could provide stronger quality assurance to help prevent 
future mistakes. In 2006, we recommended that VA strengthen its 
internal controls to better ensure the accuracy of calculations it uses 
in preparing budget requests. VA agreed with and implemented this 
recommendation for its fiscal year 2009 budget justification by having 
an independent actuarial firm validate the savings estimates from 
proposals to increase fees for certain types of health care coverage.
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    \10\ VA provides nursing home care in VA-operated nursing homes, in 
state veterans' nursing homes, and in community nursing homes under 
local or national contract to VA.
    \11\ In late November, OMB ``passes back'' budget decisions to the 
agencies on the President's budget requests for their programs, a 
process known as ``passback.'' These decisions may involve, among other 
things, funding levels, program policy changes, and personnel ceilings. 
The agencies may appeal decisions with which they disagree.
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    Our 2006 report on VA's overall health care budget also illustrated 
that VA faces challenges making realistic assumptions about the 
budgetary impact of its proposed policies. VA made unrealistic 
assumptions about how quickly the department would realize savings from 
proposed changes in its nursing home policy. We reported the 
President's requests for additional funding for VA's medical programs 
for fiscal years 2005 and 2006 were in part due to these unrealistic 
assumptions.\12\ We recommended that VA improve its budget formulation 
processes by explaining in its budget justifications the relationship 
between the implementation of proposed policy changes and the expected 
timing of cost savings to be achieved. VA agreed and acted on this 
recommendation in its fiscal year 2009 budget justification.
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    \12\ In June 2005, the President requested a $975 million 
supplemental appropriation for fiscal year 2005, and in July 2005, the 
President submitted a $1.977 billion budget amendment for the fiscal 
year 2006 appropriation.
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    In January 2009, we found that VA's spending estimate in its fiscal 
year 2009 budget justification for noninstitutional long-term care 
services appeared unreliable, in part because this spending estimate 
was based on a workload projection that appeared to be unrealistically 
high in relation to recent VA experience.\13\ VA projected that its 
workload for noninstitutional long-term care would increase 38 percent 
from fiscal year 2008 to fiscal year 2009. VA made this projection even 
though from fiscal year 2006 to fiscal year 2007--the most recent year 
for which workload data are available--actual workload for these 
services decreased about 5 percent. In its fiscal year 2009 budget 
justification, VA did not provide information regarding its plans for 
how it would increase noninstitutional workload 38 percent from fiscal 
year 2008 to fiscal year 2009. We recommended that VA use workload 
projections in future budget justifications that are consistent with 
VA's recent experience with noninstitutional long-term care spending or 
report the rationale for using alternative projections. In its March 
23, 2009, letter to GAO, VA stated it concurs with this recommendation 
and will implement our recommendation in future budget submissions.
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    \13\ VA provides two types of long-term care: institutional long-
term care, which is provided almost exclusively in nursing homes, and 
noninstitutional long-term care, which is provided in veterans' own 
homes and in other locations in the community.
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    In January 2009, we also reported that VA may have underestimated 
its nursing home spending and noninstitutional long-term care spending 
for fiscal year 2009 because it used a cost assumption that appeared 
unrealistically low, given recent VA experience and economic forecasts 
of health care cost increases. For example, VA based its nursing home 
spending estimate on an assumption that the cost of providing a day of 
nursing home care would increase 2.5 percent from fiscal year 2008 to 
fiscal year 2009. However, from fiscal year 2006 to fiscal year 2007--
the most recent year for which actual cost data are available--these 
costs increased approximately 5.5 percent. VA's 2.5 percent cost-
increase estimate is also less than the 3.8 percent inflation rate for 
medical services that OMB provided in guidance to VA to help with its 
budget estimates. We recommended that in future budget justifications, 
VA use cost assumptions for estimating both nursing home and 
noninstitutional long-term care spending that are consistent with VA's 
recent experience or report the rationale for alternative cost 
assumptions. In its March 23, 2009, letter to GAO, VA stated it concurs 
with our recommendations and will implement these recommendations in 
future budget submissions.
Issues in Changing the Appropriations for VA Health Care
    Consideration of any proposal to change the availability of the 
appropriations VA receives for health care should take into account the 
current structure of the Federal budget, the congressional budget 
process--including budget enforcement--and the nature of the nation's 
fiscal challenge. The impact of any change on congressional flexibility 
and oversight also should be considered.
    In the Federal budget, spending is divided into two main 
categories: (1) direct spending, or spending that flows directly from 
authorizing legislation--this spending is often referred to as 
``mandatory spending''--and (2) discretionary spending, defined as 
spending that is provided in appropriations acts.
    It is in the annual appropriations process that the Congress 
considers, debates, and makes decisions about the competing claims for 
Federal resources. Citizens look to the Federal Government for action 
in a wide range of areas. Congress is confronted every year with claims 
that have merit but which in total exceed the amount the Congress 
believes appropriate to spend. It is not an easy process--but it is an 
important exercise of its Constitutional power of the purse.
    Special treatment for spending in one area--either through separate 
spending caps or guaranteed minimums or exemption from budget 
enforcement rules--may serve to protect that area from competition with 
other areas for finite resources. The allocation of funds across 
Federal activities is not the only thing Congress determines as part of 
the annual appropriations process. It also specifies the purposes for 
which funds may be used and the length of time for which funds are 
available. Further, annually enacted appropriations have long been a 
basic means of exerting and enforcing congressional policy.
    The review of agency funding requests often provides the context 
for the conduct of oversight. For example, in the annual review of the 
VA health care budget, increasing costs may prompt discussion about 
causes and possible responses--and lead to changes in the programs or 
in funding levels. VA health care offers illustrations of and insights 
into growing health care costs. This takes on special significance 
since--as we and others have reported--the nation's long-term fiscal 
challenge is driven largely by the rapid growth in health care costs.
    Both the Congress and the agencies have expressed frustration with 
the budget and appropriations process. Some Members of Congress have 
said the process is too lengthy. The public often finds the debate 
confusing. Agencies find it burdensome and time consuming. And the 
frequent need for continuing resolutions \14\ (CR) has been a source of 
frustration both in the Congress and in agencies. Although there is 
frustration with the current process, changes should be considered 
carefully. The current process is, in part, the cumulative result of 
many changes made to address previous problems. This argues for 
spending time both defining what the problem(s) to be solved are and 
analyzing the impact of any proposed change(s).
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    \14\ When Congress and the President do not reach final decisions 
about one or more regular appropriations acts by the beginning of the 
Federal fiscal year, October 1, they often enact a continuing 
resolution (CR). A CR provides agencies with funding for a period of 
time until final appropriations decisions are made or until enactment 
of another CR.
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    In considering issues surrounding the possibility of providing 
advance appropriations for VA health care--or any other program--it is 
important to recognize that not all funds provided through the existing 
appropriations process expire at the end of a single fiscal year. 
Congress routinely provides multi-year appropriations for accounts or 
projects within accounts when it deems it makes sense to do so. Multi-
year funds are funds provided in 1 year that are available for 
obligation beyond the end of that fiscal year. So, for example, multi-
year funds provided in the fiscal year 2010 appropriations act would be 
available in fiscal year 2010 and remain available for some specified 
number of future years.\15\ Unobligated balances from such multi-year 
funds may be carried over by the agency into the next fiscal year--
regardless of whether the agency is operating under a continuing 
resolution or a new appropriations act. For example, in fiscal year 
2009 about $3 billion of approximately $41 billion for VA health care 
programs was made available for 2 years. Congress also provides 
agencies--including VA--some authority to move funds between 
appropriations accounts. This transfer authority provides flexibility 
to respond to changing circumstances.
---------------------------------------------------------------------------
    \15\ Some of these funds are available for 2 years; some are 
available for a longer specified time; some are available ``until 
expended.''
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    Advance appropriations are different from multi-year 
appropriations. Whereas multi-year appropriations are available in the 
year in which they are provided, advance appropriations represent 
budget authority that becomes available one or more fiscal years after 
the fiscal year covered by the appropriations act in which they are 
provided. So, for example, advance appropriations provided in the 
fiscal year 2010 appropriations act would consist of funds that would 
first be available for obligation in fiscal year 2011 or later.
    In considering the proposal to provide advance appropriations, one 
issue is the impact on congressional flexibility and its ability to 
consider competing demands for limited Federal funds. Although 
appropriations are made on an annual cycle, both the President and the 
Congress look beyond a single year in setting spending targets. The 
current Administration's budget presents spending totals for 10 fiscal 
years.\16\ The concurrent Budget Resolution--which represents 
Congress's overall fiscal plan--includes discretionary spending totals 
for the budget year and each of the four future years.\17\ The 
provision of advance appropriations would ``use up'' discretionary 
budget authority for the next year. In doing so it limits Congress's 
flexibility to respond to changing priorities and needs and reduces the 
amount available for other purposes in the next year.
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    \16\ These are usually provided by budget category, by budget 
function, and by agency as well as for the total budget. The 
President's budget for fiscal year 2010 includes summary budget totals 
for the 10 years spanning fiscal year 2010 through fiscal year 2019.
    \17\ The FY 2010 budget resolution specifies discretionary spending 
amounts--both budget authority and outlays--in total and for each 
budget function for each of fiscal years 2010-2014. (It also specifies 
the amount of new appropriations and outlays for FY 2009).
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    Another issue would be how and when the limits on such advance 
appropriations would be set. Currently the concurrent Budget Resolution 
both caps the total amount that can be provided through advance 
appropriations and identifies the agencies or programs which may be 
provided such funding.\18\ It does not specify how the total should be 
allocated among those agencies.
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    \18\ A point of order can be raised against advance appropriations 
provided for those entities not identified by the Resolution.
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    A related question is what share of VA health care funding would be 
provided in advance appropriations. Is the intent to provide a full 
appropriation for both years in the single appropriations act? This 
would in effect enact the entire appropriation for both the budget year 
and the following fiscal year at the same time. If appropriations for 
VA health care were enacted in 2-year increments, under what conditions 
would there be changes in funding in the second year? Would the 
presumption be that there would be no action in that second year except 
under unusual circumstances? Or is the presumption that there would be 
additional funds provided? These questions become critical if Congress 
decides to provide all or most of VA health care's funding in advance. 
Even if only a portion of VA health care funding is to be provided in 
advance appropriations, Congress will need to determine what that share 
should be and how it should be allocated across VA's medical accounts.
    While providing funds for 2 years in a single appropriations act 
provides certainty about some funds, the longer projection period 
increases the uncertainty of the data and projections used. Under the 
current annual appropriations cycle, agencies begin budget formulation 
at least 18 months before the relevant fiscal year begins. If VA is 
expected to submit its budget proposal for health care for both years 
at once, the lead time for the second year would be 30 months. This 
additional lead time increases the uncertainty of the estimates and 
could worsen the challenges VA faces when formulating its health care 
budget.
Concluding Observations
    Given the challenges VA faces in formulating its health care budget 
and the changing nature of health care, proposals to change the 
availability of the appropriations it receives deserve careful 
scrutiny. Providing advance appropriations will not mitigate or solve 
the problems noted above regarding data, calculations, or assumptions 
in developing VA's health care budget. Nor will it address any link 
between cost growth and program design. Congressional oversight will 
continue to be critical.
    No one would suggest that the current budget and appropriations 
process is perfect. However, it is important to recognize that no 
process will make the difficult choices and tradeoffs Congress faces 
easy. If VA is to receive advance appropriations for health care, the 
amount of discretionary spending available for Congress to allocate to 
other Federal activities in that year will be reduced. In addition, 
providing advance appropriations for VA health care will not resolve 
the problems we have identified in VA's budget formulation.
    Mr. Chairman, this concludes our prepared remarks. We would be 
happy to answer any questions you or other Members of the Committee may 
have.
GAO Contacts and Staff Acknowledgments
    For more information regarding this testimony, please contact 
Randall B. Williamson at (202) 512-7114 or [email protected] or Susan 
J. Irving at (202) 512-8288 or [email protected]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. In addition to the contributors named 
above, Carol Henn and James C. Musselwhite, Assistant Directors; 
Katherine L. Amoroso, Helen Desaulniers, Felicia M. Lopez, Julie Matta, 
Lisa Motley, Sheila Rajabiun, Steve Robblee, and Timothy Walker made 
key contributions to this testimony.

                                 
              Prepared Statement of Hon. Eric K. Shinseki,
             Secretary, U.S. Department of Veterans Affairs

    Chairman Filner, Congressman Buyer, distinguished Members of the 
Committee: Thank you for this opportunity to discuss advance 
appropriations and the challenge of projecting VA's budget needs 2 
years into the future.
    It has been a very busy 3 months at VA, as we have begun laying the 
groundwork for fulfilling the President's vision of transforming VA 
into a 21st century organization. On April 9, the President himself 
announced the joint VA-DoD initiative to create one virtual lifetime 
electronic health record for all members of our armed forces, to stay 
with them from the day they put on the uniform to the day they are laid 
to rest.
    In making that announcement, the President repeated his concern 
that the care our veterans receive should never be hindered by budget 
delays. I share the President's concern as well as his support for 
advance appropriations as a way to provide uninterrupted care. Having 
lived with continuing resolutions in another life, I know how 
inefficient they can be, especially to health care and other services 
provided to Veterans. One advance funding proposal under consideration 
targets three critical medical care accounts of the Veterans Health 
Administration: Medical Services, Medical Support and Compliance, and 
Medical Facilities. These are vital accounts that should never fall 
prey to interruptions of funding.
    Implementing an advance funding mechanism is not without challenges 
and careful planning is needed to ensure timely funding without 
unintended consequences. Budget projections are rarely right on the 
mark, and the further out they are made, the farther off the mark they 
are likely to be. For an advance appropriations mechanism to function 
effectively, it must be linked to a forecasting model that is both 
reliable and accurate, to the extent possible. Today I will concentrate 
on VA's principal forecasting model--the Enrollee Health Care 
Projection Model.
    The Enrollee Health Care Projection Model, or VA Model, is a 
comprehensive enrollment, utilization, and expenditure projection 
model. It was originally developed in 1998 in partnership with 
Milliman, Inc., the largest actuarial firm in the country. Through the 
past 11 years of periodic updates and continuous refinement, VA and 
Milliman have developed a strong partnership that has resulted in a 
powerful modeling tool. VA guides the overall development of the VA 
Model and ensures that it meets the needs of stakeholders. VA program 
staff provide expertise on the unique needs of Veterans, patterns of 
practice in the VA health care system, and how the system is expected 
to evolve over the next 20 years. Milliman brings specialized 
expertise, access to extensive amounts of health-care utilization data 
VA, and excellent research to the overall modeling effort.
    The VA Model produces multi-year projections to inform the VHA 
budget process, estimate the impact of proposed policies, and support 
strategic and capital planning. For each year, the VA Model projects:

      the number of veterans expected to be enrolled;
      the priority level, age, gender, and geographic location 
of enrolled veterans;
      the total health care demand for enrolled veterans across 
58 health care services;
      the portion of that care enrollees are likely to receive 
from VA versus other health care providers; and
      the expenditures associated with the projected 
utilization.

    The enrollment modeling process begins with comprehensive and 
accurate veteran population data developed by VA's Office of the 
Actuary using a ``VetPop'' model. The Office of the Actuary projects 
veteran populations over 30 out-years using data from the Census 
Bureau, the Department of Defense, and mortality and supplemental data 
to develop refined estimates of the current veteran population and 
projected future levels. In 2005, independent verification and 
validation of the VetPop model by the Institute for Defense Analysis 
found the baseline veteran population estimate to be accurate in 
providing baseline estimates broken out by demographic characteristics 
such as age and gender. Additionally, VA completes a detailed 
validation annually to assure confidence in the VetPop output. This 
includes extensive peer review of our methodology and assumptions for 
parameters as well as of our programs, logs and output lists. All 
results are examined for consistency and compared with previous data 
and census estimates. It should be noted the accuracy of the total 
veteran population is unlikely to change significantly over the short 
term because the veteran population changes little over the short term. 
The accuracy of the long-term forecast is largely dependent on the 
accuracy of the projections of deaths and military separations.
    Projections for health-care services VA offers that are comparable 
to the private sector, including inpatient, surgical, and ambulatory 
care, are based on private-sector benchmarks, which are adjusted for 
the demographics of the veteran enrollee population and the VA health-
care delivery system. Private-sector benchmarks used in the VA Model 
come from the Milliman Health Cost Guidelines, which are updated and 
expanded annually. These guidelines are a combination of consultants' 
expertise, research, and actuarial judgment; they also represent the 
health care utilization of over 60 million Americans. The guidelines 
have been validated and used extensively by private-sector health 
plans. The guidelines also provide extensive information on the impact 
of age and gender, changes in health care benefits, and changes in 
copayments on health care utilization. The enormous volume of data 
allows VA to develop projections at a very detailed level. Projections 
for services that are unique to VA, such as blind rehabilitation, and 
services where VA has a unique practice pattern, such as prosthetics, 
are developed based on analyses of historical VA data.
    The VA Model is supported by in-depth analyses of VA data, 
including enrollment rates, enrollee mortality, morbidity, and reliance 
on VA versus other health care providers, and VA's level of health care 
management. An annual VHA Survey of Enrollees provides data on enrollee 
insurance coverage, income, period of service, and self-reported health 
status. The 2008 Survey included new questions developed to identify 
the key drivers of Veterans' decision to enroll and use VA health care.
    The VA Model uses utilization and cost trends to project modeled 
services forward 20 years into the future from the most recently 
completed fiscal year, or base year. Assumptions about future trends 
are developed by a workgroup of VA staff and Milliman experts on health 
care trends. The workgroup reviews VA historical trends and historical 
and estimated future trends in the broader health care industry in 
developing the assumptions. While there are differences between VA's 
closed-panel, integrated system and the fee-for-service environment in 
Medicare and the private sector, the broader health care industry 
trends serve as a frame of reference for how future changes in the 
provision of health care will impact VA. These trends include expected 
changes in medical-care practice and custom. For example, gall bladder 
surgery is now routinely performed on an outpatient basis, so trends 
and projections now include a reduction in inpatient surgery 
utilization rates based on this shift.
    The projections are developed at a very detailed level and then 
aggregated to provide national projections. Projections are developed 
by 13 priority levels and by 5-year age bands. Projections are also 
developed separately for enrollees who used VA health care before 
eligibility reform since they have unique demographic and utilization 
patterns. Geographically, the projections are developed at the sector 
level, which is the lowest geographic area for which credible 
projections can be developed at the level of detail used in the model. 
A sector consists of one or more complete counties and is fully 
contained within a single submarket. Over 3,100 counties are mapped 
into 506 sectors. Sector-level projections are then aggregated into 103 
submarkets, 80 markets, 21 Veterans Integrated Service Networks 
(VISNs), and the national level.
    The VA Model has evolved significantly since 1998 and continues to 
evolve. Plans for future model enhancements are developed through an 
assessment of the predictive capability of various model components or 
the identification of new data sources. For example, we recently 
assessed the accuracy of the 2008 enrollment and patient projections 
from the 2006 Model, which supported the 2008 Budget. The 2006 Model 
projected Veteran enrollment to within 0.3 percent, or 26,607, of 
actual 2008 enrollment, while it over-projected patients by 161,166, or 
3.3 percent. In the last five fiscal years, the average variance 
between the VA Model's projection of enrollees and the actual enrollee 
population was 0.54 percent under-forecast. In other words, slightly 
more veterans enrolled than were projected to enroll. In the same 5 
years, the average variance between the VA Model's projection of 
veteran patients and actual patients was 1.7 percent over-forecast. In 
other words, slightly fewer patients were actually enrolled than 
projected.
    Regarding the latest generation of veterans with service in 
Operation Enduring Freedom (OEF), Operation Iraqi Freedom (OIF), or 
other theaters, VA initially had difficulty modeling this population 
because we did not have estimates of the total force expected to be 
deployed in these conflicts. However, since 2007 VA has used a future 
force deployment scenario developed by the Congressional Budget Office 
to estimate the number of future OEF/OIF Veterans. We have conducted 
extensive analyses of the enrollment and health care utilization of 
this population, and with each additional year of data, we gain more 
insight into their unique characteristics. The VA Model reflects the 
fact that OEF/OIF enrollees have exhibited significantly different VA 
health care utilization patterns than non-OEF/OIF enrollees. For 
example, OEF/OIF enrollees have an increased need for dental services, 
physical medicine, prosthetics, and outpatient psychiatric and 
substance use disorder treatment. Alternatively, OEF/OIF enrollees seek 
about half as much inpatient acute surgery care from VA as non-OEF/OIF 
enrollees.
    While the VA Model addresses many areas of the health care budget, 
it does not account for all areas of the VA medical care funding. 
Approximately 16 percent of the VA's health care budget is developed 
through alternative models and estimations, which each present 
challenges in projecting future costs.
    Long-Term Care (both Institutional and Non-Institutional) estimates 
are developed in accordance with the VA's Long-Term Care Strategic Plan 
and historical cost and workload trends. The VA will continue to focus 
its long-term care treatment in the most clinically appropriate and 
least restrictive setting by providing more non-institutional care than 
ever before and making more care available to veterans closer to their 
homes.
    The Civilian Health and Medical Program of the Department of 
Veterans Affairs (CHAMPVA), the Foreign Medical Program, the Spina 
Bifida Program, and Children of Women Vietnam Veterans estimates are 
based on the current benefit structure, the mix of users, and workload 
estimates that reflect historical trends.
    Readjustment Counseling estimates reflect historical trends and the 
establishment of new Veterans Centers and provide for the three major 
functions of direct counseling for issues related to combat service, 
outreach, and referral.
    Non-Veteran health-care cost estimates reflect collateral care, 
consultations and instruction for spouses, reimbursable workload from 
affiliates (such as sharing agreements with the Department of Defense), 
humanitarian care, and preventive health occupational immunizations for 
VA employees, and are based on historical workload and cost trends 
adjusted to reflect the current benefit structure.
    As noted earlier, while VA's methodology for health-care budget 
development is sound, we recognize the realities of economic, policy 
and other uncontrollable factors which alter the requirements for care 
and the ultimate costs of it. This limitation should be recognized in 
any proposal to implement an advance appropriations process. Any such 
proposal should provide flexibility for near-term changes in workload 
or performance needs.
    We support the intent of H.R. 1016 and are committed to working 
with Congress to provide our veterans with the timely, accessible, and 
high-quality care that they expect and deserve. Finally, in the coming 
months close consultation between Congress, the Administration, and 
other stakeholders is necessary to develop the details in overcoming 
the challenges for the implementation of an advance appropriations 
proposal. Today's hearing, I believe, recognizes that necessity.
    I look forward to hearing the Committee's views on advance 
appropriations and to answering any questions I can about VA budget 
projections. Thank you.

                                 
             Statement of Coalition of Former VA Officials

    As physicians, network and facility health care administrators, 
budget formulators and managers, and agency heads with hundreds of 
years of combined experience in the Department of Veterans Affairs (VA) 
and other health care systems, we are united in urging the Committee 
and the Congress to approve the Veterans Health Care Budget Reform and 
Transparency Act to provide advance appropriations for veterans' health 
care.
    For most of the past two decades, VA budgets have been late, which 
has caused serious delays and interruptions in service for veterans 
being treated at the system's hospitals and clinics. In response, some 
in Congress have promised to bring VA budgets in on time, and we 
welcome that promise, just as we did in the past and would in the 
future. But the reality is that only three times in two decades have 
those promises been kept. It is not the intentions of Congress that 
have resulted in this failure; it is the very nature of the budget and 
political process. We strongly urge you to set a safety mechanism--
advance appropriations--to make certain good intentions are met. To 
those who claim this bill is not necessary, we simply would point to 
the 86% failure rate of delivering veterans' health care budgets on 
time in the last two decades.
    We know well the challenge of managing the Nation's largest 
integrated health care delivery system when, year after year, we did 
not know what level of funding we would receive or when it would 
arrive. Having been granted the privilege of serving on the frontlines 
of health care for America's veterans has given us close-up perspective 
of the agonizing results of uncertain budgets and continuing 
resolutions and the anxieties they inflict upon the delivery of health 
care. Among the recurring problems: drug and medical equipment 
purchases are stalled; hiring of health care professionals and other 
staff are delayed or deferred; repairs and replacement work to fix and 
modernize facilities are put on hold; and veterans medical appointments 
are pushed back.
    Late budgets are not just a matter of numbers and money, they lead 
to an inability to properly manage and, ultimately, interrupted and 
diminished health care quality and patient safety. The impact of 
deferred obligations is manifested in reduced efficiency of operations 
as needed resources to support programs and purchases are withheld and 
resources available at prior year levels are used to fund only the most 
critical services. In many ways these funding restraints thwart efforts 
by VA to fully implement or carry out the intent of Congress and the 
Administration with regard to VA programs, such as the mandate to 
expand access to care, which has been a high priority.
    Restricted funding levels can prevent a VA medical center from 
investing in personnel, equipment, supplies, contracts and leases to 
support expanded operations designed to increase access, thereby 
precluding VA from accomplishing the very goals set for it by Congress 
and the Administration. A system as vast and integral to the Nation's 
health care, especially one serving our most venerated constituency, 
should never be held hostage to late and unpredictable funding. Forcing 
health care administrators and professionals to await months-late 
budgets that dictate delayed strategies, planning and action is no way 
to run a health care system.
    President Obama made a promise on the campaign trail to ensure the 
VA gets its budget on time by requesting advance appropriations, 
something he also supported as a senator and for which he publicly 
reaffirmed his support earlier this month. Advance appropriations still 
allows Congress to decide how much money to allocate to veterans' 
health care, it simply would be determined 1 year before VA needs those 
funds. While the actual dollars would not flow until the start of each 
new fiscal year, it would allow VA administrators and directors 
sufficient time to properly plan how best to use the money. This is no 
different than how a family budgets and spends based on expected 
income. Congress already provides advance appropriations for a number 
of programs, including Head Start, Job Corps and the Corporation for 
Public Broadcasting, and we strongly believe that providing health care 
to our Nation's veterans should be given the same funding 
consideration.
    We urge the Committee and Congress to use your authority to adopt 
this simple budgeting tool to help ensure that VA has the resources to 
continue meeting the health care needs of veterans. We urge you to 
pass, and the President to sign, legislation to provide advance 
appropriations for veterans' health care.
Coalition of Former VA Officials:
    Hon. Anthony J. Principi, Secretary (2001-2004)
    Hon. Hershel W. Gober, Deputy Secretary (1993-2001)
    Hon. Gordon H. Mansfield, Deputy Secretary (2005-2008)
    Hon. Kenneth Kizer, MD, MPH, Under Secretary for Health (1994-1999)
    Hon. Thomas L. Garthwaite, MD, Under Secretary for Health (1999-
2002)
    Hon. Robert H. Roswell, MD, Under Secretary for Health (2002-2004)
    Hon. Jonathan B. Perlin, MD, PHD, Under Secretary for Health (2004-
2006)
    Frances M. Murphy, MD, MPH, Deputy Under Secretary for Health
    Laura J. Miller, MPA, MPH, Deputy Under Secretary for Health
    C. Wayne Hawkins, Deputy Under Secretary for Health
    J. Arthur Klein, Director of Budget and Forecasting Service, VHA
    Kenneth J. Clark, VISN 22 Director (CA, NV)
    Larry Deal, VISN 7 Director (AL, GA, SC)
    James J. Farsetta, FACHE, VISN 3 Director (NJ, NYC)
    Dennis M. Lewis, FACHE, VISN 20 Director (WA, OR, ID, AK)
    Robert E. Lynch, MD, VISN 16 Director (AR, LA, MS, OK)
    Fred Malphurs, VISN 2 Director (NY)
    James J. Nocks, MD, MSHA, VISN 5 Director (DC, MD, WV)
    Clyde Parkis, FACHE, VISN 10 Director (OH)
    James W. Dudley, VA Medical Center Director, Richmond, VA
    John R. Fears, VA Medical Center Director, Phoenix, AZ
    Joseph M. Manley, VA Medical Center Director, Spokane, WA
    Robert A. Perreault, VA Medical Center Director, Charleston, SC
    Wayne C. Tippets, MHA, VA Medical Center Director, Boise, ID
    Timothy B. Williams, VA Medical Center Director, Seattle, WA

                 POST-HEARING QUESTIONS FOR THE RECORD
                                     Committee on Veterans' Affairs
                                                    Washington, DC.
                                                       May 13, 2009

Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our Full Committee hearing entitled ``Funding the 
VA of the Future'' on April 29, 2009, I would appreciate it if you 
could answer the enclosed hearing questions by the close of business on 
June 26, 2009.
    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.
    Due to the delay in receiving mail, please provide your response to 
Debbie Smith by fax at 202-225-2034. If you have any questions, please 
call 202-225-9756.

            Sincerely,
                                                         BOB FILNER
                                                           Chairman

CW:ds

                               __________
                        Questions for the Record
                   The Honorable Bob Filner, Chairman
                  House Committee on Veterans' Affairs
                             April 29, 2009
                      Funding the VA of the Future

    Question 1: With the President's support of advance appropriations, 
and your stated support, please explain why the VA did not provide a 
2011 budget request when the 2010 budget was released in May? When can 
we expect this request? What steps must the VA undertake to provide an 
accurate 2-year budget forecast for purposes of advance appropriations?

    Response: The Department of Veterans Affairs (VA) had not completed 
the development of estimates for advance appropriations for fiscal year 
(FY) 2011 at the time the President's 2010 budget was released. Since 
the release of the FY 2010 budget, the estimates for FY 2011 have been 
completed, and are detailed in the information that follows.
    VA is seeking support for $48.183 billion for the three medical 
care appropriations to support estimated growth to 6.1 million 
patients. This represents an increase of 8.3 percent over the 
President's FY 2010 appropriation request of $44.498 billion. The FY 
2011 total is comprised of $37.136 billion for Medical Services, $5.307 
billion for Medical Support and Compliance, and $5.740 billion for 
Medical Facilities. In addition to the appropriated resource level, we 
anticipate collections in the amount of $3.355 billion, for a total 
advance appropriations resource level of $51.538 billion.
    To prepare the FY 2011 advance appropriation estimate, VA used its 
enrollee health care projection model. This model uses FY 2008 as the 
base year, which is the most recent actual data available. Our estimate 
also factors in required funding increases provided in FY 2009 for 
programs that will continue in FY 2010 and FY 2011, which are not 
accounted for in the model. This estimate also includes resources for 
programs that are not projected by the model, such as long-term care 
and readjustment counseling.

    Question 2: What new steps must the VA undertake, or what must the 
VA do differently, in order to be able to provide us with an out-year 
request?

    Response: The response to Question 1 above describes the steps VA 
undertakes to develop an advance appropriation estimate. The advance 
appropriations request for FY 2011 was completed.

    Question 3: Mr. Secretary, you explained the importance of 
providing the VA with the flexibility for near-term changes in workload 
or performance needs because of the limitations of uncontrollable 
factors in implementing advance appropriations. Please explain what 
this flexibility would look like for advance appropriations for the VA?

    Response: VA will monitor medical care cost and performance 
indicators on a monthly basis. VA must have the flexibility to make any 
needed adjustments to the requested FY 2011 advance appropriation level 
during the regular process of formulating the President's Budget later 
this year.

    Question 4: The Agency for Healthcare Research and Quality 
testimony pointed out that actuarial and economic models are limited by 
available data. What data do you believe would be helpful to collect; 
that you are not collecting now, that would enable you to better 
forecast health care demand and costs in an advanced appropriations 
environment?

    Response: VA receives data from the Centers for Medicare and 
Medicaid Services (CMS) that identifies VA enrollees who have also 
enrolled in the Medicare drug benefit (Part D), but this data does not 
include the actual prescriptions dispensed. CMS is expected to make the 
2006 prescription drug data available this year and VA is pursuing a 
data sharing agreement with CMS to obtain this data as allowable under 
applicable laws. This data will greatly improve our ability to assess 
the impact of the Medicare drug benefit on enrollee demand for VA 
health care. The knowledge we gain from this analysis will assist VA in 
better understanding how other changes in public and/or private health 
care, including health care reform, may impact VA.

    Question 5: Mr. Secretary, your testimony trumpets the model's 
ability to forecast enrollment, stating that ``in the last five fiscal 
years, the average variance between the VA Model's projection of 
enrollees and the actual enrollee population was 0.54 percent under-
forecast.'' Over that same period of time, how accurate has the VA 
model been in estimating utilization rates and costs?

    Response: Comparing the projected utilization and unit costs that 
supported a VA budget request with the actual utilization and unit 
costs 3 years later does not necessarily provide an informative 
assessment of the model's accuracy. Results can be clouded by many 
factors, including changes in coding practices, initiatives that were 
not planned when the model was developed, and factors beyond VA's 
control, such as military conflicts, environmental disasters, or 
economic downturns.
    As part of its model development process, VA assesses the 
predictive capability of the various components of the model to 
identify opportunities to enhance future models. VA also continually 
updates the data and analyses that serve as inputs to the model. This 
process assures that the model always represents the best projection 
methodology and represents the best set of assumptions about the future 
that can be made at the time given the data and intelligence available.

    Question 6: Mr. Secretary, you state that ``in the coming months 
close consultation between Congress, the Administration, and other 
stakeholders is necessary to develop the details in overcoming the 
challenges for the implementation of an advance appropriations 
proposal.'' Can you provide more details as to the implementation 
challenges that you foresee?

    Response: First, in June of 2009, VA provided Congress with the 
estimate for FY 2011 advance appropriations of $48.183 billion for the 
three medical care appropriations. Since VA's estimates for FY 2011 
were developed earlier than under the previous procedure, VA will 
continue to jointly monitor medical care cost and performance 
indicators on a monthly basis and will make any needed adjustments to 
the requested FY 2011 advance appropriation level during the regular 
process of formulating the President's FY 2011 Budget this fall. In 
addition, funding for new medical care program initiatives will be 
considered in the formulation of the President's Budget later this 
year. Second, the current advance appropriations proposal involves only 
the three medical care appropriations. These three medical 
appropriations contain requirements that have related impacts on other 
appropriations managed by VA. During the formulation of the President's 
FY 2011 Budget later this year, we will also identify the resources 
needed to support medical information technology and capital 
construction program budgets. Third, we will still need the ability to 
transfer funds among the three medical appropriations, and we hope that 
Congress will continue to provide that flexibility. Fourth, since it is 
not clear what form the final legislation on advance appropriations 
will take, unexpected and additional challenges may arise.

    Question 7(a): RAND has testified that the ``EHCPM begins its 
expenditure projection with the VA's congressional budget allocation 
rather than an independent measure of resource needs'' and that ``the 
accuracy of the model is uncertain because there exists no expenditure 
information independent of the VA appropriation with which to formulate 
a ``gold'' standard against which to compare model projections.'' How 
accurate is the resulting projection if it is based on prior 
appropriations levels, which may or may not have been adequate to meet 
costs and demand?

    Response: VA health care utilization and unit costs are not 
independent of VA's appropriation since, by law, VA cannot spend more 
than is appropriated. However, VA's enrollee health care projection 
model projections are not based on historical utilization and unit 
costs, but on a set of assumptions about the future. While the 
assumptions are informed by historical data, we do not assume that VA 
of the future will look like VA of the past. Projected utilization 
rates and unit costs are adjusted, when necessary, to mitigate 
identified capacity constraints, reflect anticipated changes in 
practice patterns, incorporate policy initiatives, or respond to new 
events, such as military conflicts.

    Question 7(b): Do you believe that the ``accuracy of the model is 
uncertain'' or do you believe that the accuracy of the model is 
sufficient to support accurate out-year budget forecasts?

    Response: VA believes the model is an effective forecasting tool to 
inform the advance appropriations process. The RAND evaluation found 
that the model supports VA's short-term budget planning and that it 
represents a substantial improvement over the budgeting methodologies 
used by VA in the past. The model represents the best set of 
assumptions about the future that can be made at the time given the 
data and intelligence available. Actual events can differ from 
projected for many reasons. For example, the severe economic downturn 
in 2008 could not have been predicted by earlier models. If advance 
appropriations are implemented, we will need a mechanism to address the 
uncertainties and factors outside the model's capability to forecast.

    Question 8: The Congressional Research Service report ``Advance 
Appropriations for Veterans' Health Care: Issues and Options for 
Congress'' raised an issue regarding the effect of advanced 
appropriations on other VA accounts, such as the IT account. In the CRS 
example, the VA may not be able to purchase computer software although 
it has procured medical equipment that needs such software. Could you 
comment on this concern?

    Response: The main challenge will be properly synchronizing the 
requirements of the three medical appropriations covered by the advance 
appropriations with other accounts not covered by the advance 
appropriations because the requirements in the three medical accounts 
have related impacts on other accounts not part of the advance 
appropriations. However, we are committed to work with the Congress to 
ensure that the advance appropriations proposal is effectively 
implemented.

    Question 9: The CRS report also outlined other options for 
Congress, which included the creation of an independent entity modeled 
along the lines of the Medicare Payment Advisory Commission (MedPAC). 
The thought is that the creation of something like that could bring 
transparency to VHA's funding process and create credibility. Could you 
comment on this idea?

    Response: The VA's enrollee health care projection model has proved 
to be an excellent tool for forecasting the Veterans Health 
Administration's (VHA) annual budgetary requirements. These 
requirements are displayed in VA's annual budget request. A recent RAND 
study has validated the usefulness of the VA's model, and we would 
welcome similar reviews in the future, thus obviating the need for a 
standing independent body.

    Question 10: If we were to implement advance appropriations for the 
VA, what are your recommendations on the issue of carryover funding and 
the provision of 2-year funding for certain VA accounts?

    Response: VA anticipates requesting a similar, relative percentage 
of the Medical Services, Medical Support and Compliance, and Medical 
Facilities accounts for its second year request as the first year 
request. This would allow VA to account for unanticipated delays it may 
encounter, such as contracts that cannot be awarded before the first 
fiscal year's end or variations in program requirements not previously 
anticipated and accounted for in the original budget submission.

    Question 11(a): VSOs support the ability of the VA to request 
supplemental funding in instances where previously provided budget 
levels are insufficient to meet newly estimated demand or costs. Do you 
foresee the VA seeking annual supplemental appropriations in an 
advanced funding environment or would there be greater pressure on VA 
managers to get through the fiscal year in order to access the next 
year's budget amounts?

    Response: We do not foresee VA automatically seeking annual 
supplemental appropriations in an advanced funding environment. 
However, uncontrollable factors such as changes in patient demand, 
severe economic conditions or natural disasters may create the need for 
a supplemental appropriation.

    Question 11(b): If VA accounts were over-funded would you support 
rescissions to recapture these additional dollars?

    Response: In the event that funding for VA accounts is greater than 
anticipated need, VA would work through the normal budget process with 
the Office of Management and Budget to address appropriate adjustments.

                                 
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