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



 
                    LEGISLATIVE HEARING ON H.R. 4241

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



                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             March 3, 2010

                               __________

                           Serial No. 111-65

                               __________

       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

                                 ______

                         SUBCOMMITTEE ON HEALTH

                  MICHAEL H. MICHAUD, Maine, Chairman

CORRINE BROWN, Florida               HENRY E. BROWN, Jr., South 
VIC SNYDER, Arkansas                 Carolina, Ranking
HARRY TEAGUE, New Mexico             CLIFF STEARNS, Florida
CIRO D. RODRIGUEZ, Texas             JERRY MORAN, Kansas
JOE DONNELLY, Indiana                JOHN BOOZMAN, Arkansas
JERRY McNERNEY, California           GUS M. BILIRAKIS, Florida
GLENN C. NYE, Virginia               VERN BUCHANAN, Florida
DEBORAH L. HALVORSON, Illinois
THOMAS S.P. PERRIELLO, Virginia

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

                               __________

                             March 3, 2010

                                                                   Page
Legislative Hearing on H.R. 4241.................................     1

                           OPENING STATEMENTS

Chairman Michael Michaud.........................................     1
    Prepared statement of Chairman Michaud.......................    21

                               WITNESSES

U.S. Department of Veterans Affairs, James F. Burris, M.D., Chief 
  Consultant, Geriatrics and Extended Care, Veterans Health 
  Administration.................................................    13
    Prepared statement of Dr. Burris.............................    40

                                 ______

Maine Veterans' Homes, Augusta, ME, Kelley J. Kash, Chief 
  Executive Officer..............................................     9
    Prepared statement of Mr. Kash...............................    37

National Association of State Veterans Homes:

  Colleen Rundell, M.S., LNHA, President, and Administrator, 
    Vermont Veterans' Home, Bennington, VT.......................     3
      Prepared statement of Ms. Rundell..........................    21
  Gary Bermeosolo, Legislative Officer, and Administrator, Nevada 
    State Veterans Home, Boulder City, NV........................     7
      Prepared statement of Mr. Bermeosolo.......................    36
Tennessee State Veterans Homes Board, Murfreesboro, TN, Robert D. 
  Tuke, Chairman.................................................     4
    Prepared statement of Mr. Tuke...............................    24
Yukio Okutsu State Veterans Home, Hilo, HI, Keith T. Ribbentrop, 
  State Veterans' Home Liaison Officer...........................     6
    Prepared statement of Mr. Ribbentrop.........................    29

                       SUBMISSIONS FOR THE RECORD

American Legion, Jacob B. Gadd, Assistant Director for Program 
  Management, Veterans Affairs and Rehabilitation Commission, 
  statement......................................................    41
American Veterans (AMVETS), Raymond C. Kelley, National 
  Legislative Director, statement................................    42
Brown, Hon. Henry E. Brown, Jr., Ranking Republican Member, 
  Subcommittee on Health, and a Representative in Congress from 
  the State of South Carolina, statement.........................    43
Disabled American Veterans, Adrian M. Atizado, Assistant National 
  Legislative Director, statement................................    43
National Association of State Directors of Veterans Affairs, 
  Linda S. Schwartz, RN, MSN, DrPH, FAAN, Senior Vice-President, 
  and Commissioner, Connecticut Department of Veterans' Affairs, 
  Rocky Hill, CT, statement......................................    45
Paralyzed Veterans of America, statement.........................    47
Veterans of Foreign Wars of the United States, Robert E. Wallace, 
  Executive Director, letter.....................................    49

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:

    Hon. Michael Michaud, Chairman, and Hon. Henry E. Brown, Jr., 
      Ranking Republican Member, Subcommittee on Health, 
      Committee on Veterans' Affairs to Hon. Eric K. Shinseki, 
      Secretary, U.S. Department of Veterans Affairs, letter 
      dated March 9, 2010, and VA responses......................    50


                    LEGISLATIVE HEARING ON H.R. 4241

                              ----------                              


                        WEDNESDAY, MARCH 3, 2010

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

    The Subcommittee met, pursuant to notice, at 2:35 p.m., in 
Room 340, Cannon House Office Building, Hon. Michael H. Michaud 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Michaud, Perriello, Rodriguez, and 
Donnelly.

             OPENING STATEMENT OF CHAIRMAN MICHAUD

    Mr. Michaud. While waiting for another Subcommittee Member 
to arrive, if the first panel could come forward, please.
    I would like to call the hearing to order. I apologize for 
the delay. However, they called votes. In addition, the 
previous hearing we had scheduled, was snowed out. So I 
apologize to those who actually had come to DC, and were here 
waiting to testify a few weeks ago. I know I see some in the 
audience, as well as myself, who were here for that hearing.
    Today's legislative hearing is an opportunity for Members 
of Congress, veterans and other interested parties to provide 
their views on and discuss recently introduced legislation 
within this Subcommittee's jurisdiction. This is an important 
part of the legislative process and I would encourage everyone 
to be frank and open on how we can move forward with the 
legislation we have before us today.
    Today we will discuss H.R. 4241, a bill that I introduced 
to allow for increased flexibility in payment to State Veterans 
Nursing Homes. I look forward to hearing the views of the 
witnesses on this bill. I will just say a few words about the 
legislation that we have before us today. State Veterans 
Nursing Homes are one of the largest long-term care providers 
in the country.
    According to the National Association of State Veterans 
Homes (NASVH), there were 137 such Homes in 50 States and 
Puerto Rico, providing over 28,000 total beds.
    In 2006, Congress passed legislation with the intent to 
provide higher per diem payments to State Veterans Homes 
providing nursing home care for severely disabled veterans with 
service-connected disabilities.
    Unfortunately, the implementation of this enacted 
legislation has had the unintended consequence of lowering 
total per diem payment and does not cover the actual cost 
incurred by State Veterans Homes. This unintended consequence 
threatens the financial viability of many State Veterans Homes 
and is especially a problem for those 30 States that have 
Medicare and Medicaid-certified State Veterans Homes because 
they are unable to bill the unpaid balance of the veterans' 
care to Medicare and Medicaid.
    That is why this legislation is before us today. The 
legislation provides clarity of the language so that State 
Veterans Homes may bill Medicare and Medicaid for the balance 
of veterans' care remaining after the U.S. Department of 
Veterans Affairs (VA) makes the per diem payment.
    In addition, the bill clarifies the payment to State 
Veterans Homes to reflect the actual cost of care and 
authorizes contracts for the State Veterans Homes that are 
similar to the VA's Community Nursing Home Provider Agreement.
    And once again, I want to thank both panels for coming 
today and I will turn it over to Mr. Perriello for any opening 
statements he may have.
    [The prepared statement of Chairman Michaud appears on 
p. 21.]
    Mr. Perriello. I will hold off on a statement for now.
    Mr. Michaud. Thank you very much. And I want to thank you, 
Mr. Perriello, for all your hard work and advocacy on behalf of 
our veterans. You definitely are a true advocate for our 
veterans and I am very pleased to see you here today to listen 
to the important testimony that we will hear.
    So without any further ado, the first panel that we have 
before us is Colleen Rundell, who is the President of the 
National Association of State Veterans Homes, and Administrator 
of the Vermont Veterans' Home; Kelley Kash, who is the Chief 
Executive Officer of Maine Veterans' Homes in Augusta, Maine; 
Gary Bermeosolo.
    Mr. Bermeosolo. Close enough, sir.
    Mr. Michaud. Close enough. Okay. From the Nevada State 
Veterans Nursing Home--if we had Congresswoman Berkley here, I 
would have her pronounce your name or introduce you--we have 
Keith Ribbentrop----
    Mr. Ribbentrop. Ribbentrop, yes, sir.
    Mr. Michaud [continuing]. From the State of Hawaii, as well 
as Robert Tuke.
    Mr. Tuke. Tuke.
    Mr. Michaud. Tuke. Okay. From the Tennessee State Veterans 
Homes. So I want to thank all of you for coming here and we 
will start with Ms. Rundell.

STATEMENTS OF COLLEEN RUNDELL, M.S., LNHA, PRESIDENT, NATIONAL 
ASSOCIATION OF STATE VETERANS HOMES, AND ADMINISTRATOR, VERMONT 
   VETERANS' HOME, BENNINGTON, VT; ROBERT D. TUKE, CHAIRMAN, 
 TENNESSEE STATE VETERANS HOMES BOARD, MURFREESBORO, TN; KEITH 
  T. RIBBENTROP, STATE VETERANS' HOME LIAISON OFFICER, YUKIO 
    OKUTSU STATE VETERANS HOME, HILO, HI; GARY BERMEOSOLO, 
  LEGISLATIVE OFFICER, NATIONAL ASSOCIATION OF STATE VETERANS 
 HOMES, AND ADMINISTRATOR, NEVADA STATE VETERANS HOME, BOULDER 
 CITY, NV; AND KELLEY J. KASH, CHIEF EXECUTIVE OFFICER, MAINE 
                  VETERANS' HOMES, AUGUSTA, ME

            STATEMENT OF COLLEEN RUNDELL, M.S., LNHA

    Ms. Rundell. Mr. Chairman, Members of the Subcommittee, 
thank you for holding this hearing on H.R. 4241, legislation 
that would remedy the unintended consequences of the Section 
211(a) of the 2006 Veterans Benefits Act.
    Implementation of the 70-Percent Program is not only 
inhibiting the long-term care of service-connected disabled 
veterans, but it is also threatening the financial viability of 
many of the Nation's State Homes.
    I am the Administrator of the Vermont Veterans' Home and 
President of the National Association of State Veterans Homes. 
NASVH consists of the administrators and staff of State-
operated Veterans Homes throughout the United States. NASVH 
members currently operate 137 Veterans Homes, which provide 
approximately 28,000 skilled nursing home and domiciliary beds. 
We assist the VA by caring for more than 50 percent of their 
long-term care workload.
    The 70-Percent Program is creating very serious 
difficulties for State Homes throughout the country. NASVH has 
met with Dr. Burris and other VA officials in an attempt to 
address these problems. Contrary to his written statement, 
however, Dr. Burris informed us that the issue can only be 
resolved fully by a modification to the law.
    NASVH strongly supported, and still strongly supports, the 
intent of the 70-Percent Program. After the Millennium Act, a 
service-connected disabled veterans could receive cost-free 
care at a private nursing home, but that same veteran could not 
receive cost-free care at a State Veterans Home.
    The 70-percent legislation tried to achieve parity in the 
provision of nursing home benefits for our veterans. 
Unfortunately, the implementation of the program has failed to 
achieve this parity and has resulted in numerous problems and 
unintended consequences.
    Specifically, although the VA regulations state that they 
provide a higher per diem rate for veterans with service-
connected disabilities, the regulations actually result in 
significantly lower total amounts being paid to many of the 
State Homes. The program simply does not provide to many State 
Homes adequate reimbursement for their actual cost of care. In 
short, without exaggeration, it threatens the financial 
viability of our Homes.
    This problem is particularly acute in the 30 States that 
have Medicare and/or Medicaid-certified Homes. The impact is 
significant enough that several States have incurred 
substantial financial losses, and others have been forced to 
deny or limit admission for such veterans. Unfortunately, the 
implementation of the 70-Percent Program is having exactly the 
opposite result envisioned by Congress.
    One typical example comes from my Vermont Veterans' Home. 
Prior to the 70-Percent Program, Sergeant Jakob Lurie was 
admitted to my Home under Medicare after a 3-day hospital stay. 
Sergeant Lurie required skilled care and as a result, received 
3 hours of therapy each day.
    The average daily cost for Sergeant Lurie was $476. This 
includes physical, occupational and speech therapy, 
medications, physician visits, specialized medical treatments 
and room and board. Under the 70-Percent Program, however, my 
Home would have received $302 a day for Sergeant Lurie's Care, 
a loss of nearly $175 per day for just one resident. The math 
does not add up under the 70-Percent Program. Sergeant Lurie's 
case is typical.
    Since I have arrived in Washington this week, the Vermont 
Veterans' Home admitted our 11th veteran who qualifies for the 
70-Percent Program and this number will only go up.
    Among the first 10 veterans alone, I estimate an average 
loss for the Vermont Veterans' Home of $180,000.
    NASVH supports H.R. 4241, which would allow service-
connected disabled veterans to receive the nursing home care 
that Congress intended, while reimbursing State Veterans Homes 
fully and more accurately for such care.
    We would also support clarifying language to the 
legislation that made clear that a State Home cannot receive 
payment from the VA under more than one of the alternatives 
provided in the bill. State Homes do not want to be paid twice 
for anything that we do. However, we do want to be paid once 
for everything we do.
    NASVH believes that the enactment of the bill will resolve 
all of the problems that have arisen in the 70-Percent Program, 
and permit State Homes to admit covered Veterans without 
adverse financial consequences.
    We are pleased that there is widespread support for our 
efforts to address this issue. The National Association of 
State Directors of Veterans Affairs, the National Governors' 
Association, the American Health Care Association, the Military 
Order of the Purple Heart, the Catholic War Veterans, American 
Gold Star Mothers and the American Legion have all called for 
action to remedy these problems.
    I want to thank you, Mr. Chairman, the entire Subcommittee 
and its professional staff for the leadership and skill that 
you have shown in addressing the long-term care needs of our 
Nation's service-connected disabled veterans. I appreciate the 
opportunity to testify and will be very happy to answer any 
questions.
    [The prepared statement of Ms. Rundell appears on p. 21.]
    Mr. Michaud. Thank you very much.
    Mr. Tuke.

                  STATEMENT OF ROBERT D. TUKE

    Mr. Tuke. Mr. Chairman, Members of the Subcommittee, thank 
you for the opportunity to testify today. I am Robert Tuke, and 
I am Chairman of the Tennessee State Veterans Homes Board. As a 
Marine Vietnam Veteran with a minor service-connected 
disability, I am especially interested in supporting efforts to 
assist disabled veterans whenever possible. So it is a double 
privilege and honor to address you today.
    The Tennessee State Veterans Homes operate much in the same 
manner as private nursing homes. We do not receive funding for 
operations from our State. Instead, we must maintain financial 
viability just as any other nursing home organization. We 
operate three nursing homes, each with 140 beds, dually 
certified for Medicare and Medicaid. The revenues generated and 
collected by our Homes are our operating and capital fund.
    When the VA regulations for the 70-Percent Program became 
effective last May, we had a total of 13 residents in our three 
Homes who met the criteria for the 70-Percent Program. By the 
end of January 2010, 8 months later, the total of such 
residents was 23, an 85 percent increase. Of the 23 current 
residents, 18 require skilled nursing home care and the other 5 
require standard, custodial nursing care.
    We anticipate these numbers will continue to increase as 
more veterans become aware of the program and elect admission 
into the State Veterans Homes instead of community homes.
    Tennessee does not limit, and has no intention of limiting, 
admissions to its nursing homes based on payor source, and we 
do not intend to limit admissions under the 70-Percent Program. 
But for how long can we honor this commitment, especially given 
the consequences to revenues and expenses arising from the 70-
Percent Program. These threaten the long-term financial 
viability of the Tennessee State Veterans Homes and to State 
Veterans Homes nationwide.
    As I have pointed out, the vast majority of the new 
admissions under this program require skilled nursing care 
services. This means that the billings for services for these 
residents are submitted to the VA instead of to Medicare. 
Therefore, the loss of revenue calculations that we have 
presented today in my written testimony are based on actual 
payments received from VA compared to what our reimbursements 
would have been from Medicare.
    Additionally, many expense items that are reimbursed 
adequately under consolidated billing rules for Medicare are 
not reimbursed adequately under the 70-Percent Program. 
Examples include services by attending physicians, specialists, 
and emergency transportation. In essence, when we admit 
residents who qualify for the 70-Percent Program, we incur 
higher expenses and receive lower reimbursement for services, 
as compared to reimbursements from other applicable payor 
sources. This is because the 70-Percent Program reimbursement 
is based on the lesser of the prevailing rate as established by 
the Secretary for Veterans Affairs and the average daily cost 
of care for all residents based on actual expenses incurred by 
the home.
    The average daily cost of care calculation results in a 
reimbursement skewed by the much larger percentage of 
intermediate care residents in each home as compared to a 
skilled care resident. The expenses associated with custodial 
care are significantly lower on a per patient day basis than 
those for skilled care. Moreover, the 70-percent veterans incur 
expenses, which are higher than those incurred by our typical 
Medicare residents.
    When total expenses are divided by total resident days to 
obtain the average daily cost of care, the resulting average is 
much less than the actual cost of care for qualifying 
residents.
    The chart included in my written testimony outlines those 
charges and reimbursements for skilled services covered under 
Medicare and under the 70-Percent Program.
    In sum, the current reimbursement methodology for the 70-
Percent Program does not provide sufficient funding for State 
Homes. In fact, we estimate a loss of $338,000 in revenues over 
the last 8 months alone because of the funding constraints of 
the 70-Percent Program. My written testimony outlines the 
details.
    Obviously, the Tennessee State Veterans Homes Board cannot 
continue to absorb this increase in expenses and reduction in 
reimbursements without dire fiscal consequences, nor can others 
as you have heard.
    In addition, you have received written testimony in support 
of this legislation from veterans service organizations and 
others. I urge you to review in particular the testimony of 
Linda Schwartz on behalf of the State Directors of Veterans 
Affairs.
    Thank you again for the opportunity to testify. We urge 
support for H.R. 4241 and I would be happy to answer any 
questions that Members of the Subcommittee or, Mr. Chairman, 
you may have. Thank you.
    [The prepared statement of Mr. Tuke appears on p. 24.]
    Mr. Michaud. Thank you very much.
    Mr. Ribbentrop.

                STATEMENT OF KEITH T. RIBBENTROP

    Mr. Ribbentrop. Mr. Chairman and Members of the 
Subcommittee, my name is Keith Ribbentrop and I am the State 
Veterans' Home Liaison Officer to the Yukio Okutsu State 
Veterans Home in Hilo, Hawaii. I am retired from the United 
States Air Force, and as a disabled combat veteran of the 
Vietnam War, I am grateful for the opportunity to be here today 
and advocate for my fellow comrades-in-arms. Thank you for the 
honor to speak on their behalf.
    As you know, the Veterans Benefits, Health and Information 
Technology Act of 2006 authorized the Department of Veterans 
Affairs to make payments to State Veterans Homes that provide 
nursing home care to veterans with service-connected 
disabilities.
    VA regulations implementing the 70-Percent Program purport 
to provide a higher per diem rate for eligible veterans. 
However, the program, as implemented, actually results in 
significantly lower payments to many State Veterans Homes. 
Unless revised, the 70-Percent Program will not provide the 
actual cost of care to State Homes despite Congressional 
intent.
    The problem is particularly urgent in States that are 
Medicare and/or Medicaid-certified. Hawaii is one of the 30 
States across the Nation that is so certified. Under the 
current program, those veterans eligible for the higher per 
diem rate are not eligible for Medicaid funds. The tables and 
charts in my written testimony show the impact of the 70-
Percent Program on our Home.
    At the end of 2009, we had 12 veterans in our Home under 
the program. Because the program does not fully compensate our 
costs, our Home loses more than $50,000 a month on the care of 
those veterans.
    The more veterans we admit under the program, the greater 
our losses become. Over time, the program will clearly cut into 
our ability to provide long-term care to any veteran in our 
State.
    Hawaii is an island State. Our Home is located on a big 
island, which suffers from a critical shortage of doctors as 
well as specialty medical services. My written testimony 
details our physician needs. This shortage, at times, requires 
that we transport a resident 200 miles by air to the island of 
Oahu where speciality care could be available.
    The rapid growth of the 70-Percent Program eligible 
veterans in our Home is duplicated nationwide. Because of this 
growth and its financial implications, many States have 
constrained admission to veterans under the new program.
    Yukio Okutsu State Veterans Home is proud to report that it 
is nearing capacity. We are approaching 99 percent filled and 
soon will need to establish a waiting list. Our Home's wait 
list gives priority to service-connected veterans by order of 
service-connected disability rating.
    As the Yukio Okutsu State Veterans Home reaches capacity, 
our State Director of Veterans Services, Mr. Mark Moses, has 
begun to assess the need for Hawaii's next State Home. The 
losses under this 70-Percent Program will risk the construction 
of any future State Home in the State of Hawaii.
    Mr. Chairman, the 70-Percent Program, was intended to be a 
blessing for veterans and their families. As currently 
designed, however, it jeopardizes our ability to care for our 
most deserving veterans.
    The National Association of State Veterans Homes has 
proposed amendments to the 70-Percent Program that are 
reflected in H.R. 4241. The legislation will allow State Homes 
greater flexibility in admission and care for veterans with 
service-connected disabilities without risking the future of 
our Homes.
    As you and the Committee on Veterans' Affairs consider H.R. 
4241, please know that it will be beneficial to both the 
veterans as well as the Homes that were built to serve them. I 
urge you to pass this measure.
    Mr. Chairman, thank you for your dedication, and the 
dedication of the Committee on Veterans' Affairs in support of 
our Nation's veterans.
    [The prepared statement of Mr. Ribbentrop appears on p. 
29.]
    Mr. Michaud. Thank you very much.
    Mr. Bermeosolo.

                  STATEMENT OF GARY BERMEOSOLO

    Mr. Bermeosolo. Mr. Chairman, I am Gary Bermeosolo, and I 
thank you for inviting me to testify today.
    As the Legislative Officer of NASVH and the Administrator 
of the Nevada State Veterans Home, I am honored to be here with 
you to request your support of H.R. 4241.
    When Public Law 109-461 passed in 2006, its intent was to 
correct an inequity that existed in the system, whereby 
veterans with a 70 percent or greater service-connected 
disability rating couldn't come to a State Veterans Home at no 
cost, but they could go to a community nursing home at no cost. 
This was a well-intended law that we supported because we 
thought it would correct this inequity.
    However, the implementing regulations created more 
inequities than they corrected. Now, we are being required to 
admit these veterans under a program intended to cover their 
total cost of care, but one which actually does not. 
Consequently, many States can't admit these veterans because of 
this financial burden.
    Let me assure you, this is not an issue confined to any one 
State. This is a nationwide problem. NASVH is comprised of the 
137 State Veterans Homes across the country. Since the new law 
was implemented, I have been contacted by administrators and 
directors of State Homes from all over the country about the 
financial challenges this law has created. And, while I am very 
concerned as the Legislative Officer for NASVH, I am also very 
concerned as the Administrator of the Nevada State Veterans 
Home in Boulder City. Let me share just one of the many actual 
experiences I have had.
    On July 21st of 2009, the wife of a World War II veteran, 
whom we shall call Mr. Disabled Veteran, Mr. D.V., came to our 
Home seeking admission for her husband. She was desperate to 
get him into our Home where she could be confident he would 
receive quality care and have opportunities to socialize with 
other vets he could relate to.
    As we began discussing our daily cost of care, Mrs. D.V. 
indicated her husband had a 100-percent service-connected 
disability rating and, consequently, was not being charged for 
his care at his community nursing home. Well, we explained to 
Mrs. D.V. the difference between the VA's reimbursement 
policies for a community home and for a State Home. We shared 
with her that we cannot, under current law, provide care for 
her husband because VA reimbursement may not cover our costs.
    At this point, Mrs. D.V. began crying and asked how this 
could be possible since we aren't just a nursing home, but a 
nursing home especially for veterans. I told Mrs. D.V. how we 
arrived at this point and indicated I was working with other 
State Homes in Congress to fix this problem, but until it is 
fixed, we simply cannot assume the risk of admitting veterans 
under this program.
    Mrs. D.V. then retrieved her checkbook from her purse and 
she waived it in the air saying, ``But I'll pay for his care if 
you will just admit him.'' We responded that VA regulations 
won't allow her to pay for the cost of her husband's care. She 
began sobbing and she tried to come to terms with what we were 
telling her. At this point, I looked this woman in the eye and 
I promised her I would do everything possible to get this 
fixed.
    As our meeting concluded, we encouraged Mrs. D.V. to check 
back with us periodically to see if the law had been fixed. 
Mrs. D.V. did call me back in August, then again in September, 
again in October, and yet again in November, each time asking 
if the 70-percent thing was fixed. Each time, we had to tell 
her, no, we are still working on it.
    Mrs. D.V. doesn't call me anymore. Her husband died on 
December 16, 2009, never able to access the care he deserved as 
a 100-percent service-connected disabled veteran.
    It is impossible to convey how difficult it is to turn 
these folks away. State Home administrators across the country 
are unwilling to assume the risk of bankrupting their programs, 
which would have the catastrophic effect of displacing the 
current residents.
    Mr. Chairman and Members of the Committee, I implore you, 
please correct this injustice. We are turning away the very 
people who most deserve and need care in State Veterans Homes. 
H.R. 4241 corrects inequities and achieves the end result we 
are all hoping for and, most importantly, that our veterans 
deserve.
    Mr. Chairman, this concludes my statement. Thank you for 
permitting me to testify today on behalf of NASVH and the 
Nevada State Veterans Home Program. I will be pleased to answer 
any questions.
    [The prepared statement of Mr. Bermeosolo appears on p. 
36.]
    Mr. Michaud. Thank you very much, and thank you for sharing 
that story.
    I'd better not mess up this pronunciation, the next 
witness, Mr. Kash.

                  STATEMENT OF KELLEY J. KASH

    Mr. Kash. Thank you, Mr. Chairman and Members of the 
Subcommittee. Thank you for inviting me to testify here today. 
My name is Kelley Kash. I am the Chief Executive Officer of the 
Maine Veterans' Homes and also retired Air Force Officer 
Hospital Administrator and Commander.
    The Maine Veterans' Homes is a public not-for-profit system 
established 30 years ago by the government of the State of 
Maine. We operate 640 skilled nursing, long-term care and 
domiciliary beds at six locations
    All of our Homes are both Medicare and Medicaid-certified. 
We provide a considerable amount of skilled nursing care, 
including post-acute, post-operative, and rehabilitative care 
at no cost, or at very low cost, to Maine's veterans. Skilled 
nursing care, however, is precisely the type of nursing care 
for which the VA's new 70-Percent Program causes the greatest 
financial losses.
    We have estimated that if we were to admit every Maine 
veteran that reasonably could seek admission under the 70-
Percent Program, we would lose between $8 and $16 million per 
year. We would be bankrupt within 1\1/2\ to 3 years. We 
calculated this by reviewing the files of several typical 
skilled nursing residents. They showed us that we would lose an 
average of $238 per resident per day under this program 
compared to existing sources of funds with Medicare or 
Medicaid. Our data is consistent with the facts being reported 
here today by other Medicare and Medicaid-certified State 
Homes.
    Keep in mind, that this program applies to all admissions 
that are service-connected, not just those with a 70-percent or 
higher disability. A veteran with as little as a 10-percent 
disability could qualify.
    The only State Homes in the Nation that have any hope of 
not incurring substantial financial losses under this program 
are those State Homes, which are not Medicare or Medicaid-
certified or which provide only a minimal amount of skilled 
nursing care.
    As my colleagues have testified, the VA's numbers simply do 
not add up. Under the 70-Percent Program, the VA substantially 
underpays for skilled nursing care and as implemented, the 
program is a financial disaster for the State Homes. As a 
result, many States have avoided admitting any service-
connected disabled veterans. This is exactly the opposite 
result that Congress intended.
    As a medical professional, I find this places me in a moral 
dilemma. I must deny admission to some of our most deserving 
veterans in order to stay in business to continue to serve any 
veterans.
    Since the 70-Percent Program took effect last year, we have 
met several times with VA officials, including Dr. Burris. 
Frankly, I believe that Dr. Burris does not understand the 
problem or the enormity of the problem that the program creates 
in the majority of the State Homes in the Nation.
    In simple language, the 70-Percent Program does not pay 
State Veterans Homes enough to provide skilled nursing care to 
veterans. The VA in the past had said that it could cure the 
problems with the 70-Percent Program administratively, but it 
has not done so. The result has been a program in chaos. We 
have simply run out of patience with the VA. The VA can no 
longer hide its head in the sand with the disarray that it has 
created for our Nation's veterans in our State Homes.
    What should be done? Congress should allow State Veterans 
Homes the option of continuing to receive payments from 
Medicare or Medicaid, plus the basic VA per diem rate until the 
VA can devise a permanent system and adopt regulations paid to 
State Homes at rates comparable to existing Medicare rates. The 
VA should be required also to pay any co-pay required by the 
veteran for his Medicare benefits, so that such care is at no 
cost to the veteran. Payment in full by the VA to a State 
Veterans Home should mean payment in full.
    Congress should also allow State Veterans Homes to use the 
existing VA Community Nursing Home Provider Contract Program so 
that we can provide immediate long-term care services to 
service-connected disabled veterans at no cost to such 
veterans.
    The enactment of H.R. 4241 would give the VA the authority 
to accomplish both of these goals quickly, and we urge its 
speedy passage. We thank the Chairman and Members of the 
Subcommittee for the opportunity to testify today, and we look 
forward to working with both Congress and the VA to effect a 
permanent solution to the substantial problems of the current 
70-Percent Program.
    [The prepared statement of Mr. Kash appears on p. 37.]
    Mr. Michaud. Thank you very much. I want to thank all of 
you for your service to this great country of ours, as well.
    The first question I have is for Ms. Rundell. We have heard 
a lot about the Medicare and Medicaid-certified homes. How many 
of those State Veterans Nursing Homes are not Medicare or 
Medicaid-certified? Or are they all Medicare and Medicaid-
certified, but just some more than others.
    Ms. Rundell. There is no paintbrush that covers each State. 
There are some States that have Medicare and Medicaid-certified 
homes in the law, so within the State have a facility that is 
non-Medicare/Medicaid. At this point, slightly more than half 
of the State Veterans Homes in the Nation and Puerto Rico, are 
Medicare and Medicaid-certified.
    Mr. Michaud. After reading Mr. Burris' testimony, you 
suggest that a number of States are satisfied with the new rate 
for mandatory veterans, but others are not. How many State 
Veterans Nursing Homes have no problem with the new rate, those 
who----
    Mr. Bermeosolo. Mr. Chairman, I would like to take that 
question if I may. Gary Bermeosolo, for the record.
    We are currently having our mid-winter conference here in 
Washington, D.C. and I asked that question yesterday--how many 
of you are satisfied with the current law. No hands went up. 
None.
    I am not aware of any States that are satisfied with the 
current program. I am aware of a number of States that are in 
financial distress, some of them here at the table with Hawaii, 
Colorado, Maine, Tennessee, Idaho. The list goes on.
    But I don't know where he gets his information from or 
where he got that piece of information from, but the majority 
of the States within our association have definitely indicated 
that they have severe issues with the law.
    Mr. Michaud. Thank you. And do you believe that it is 
mandatory for your Homes to admit service-connected veterans 
even though you would incur losses by admitting such veterans?
    Mr. Tuke. Mr. Chairman, if I may address that. Each State 
has autonomy and discretion in admitting residents to its homes 
and so no category is mandatory, not even for people in the 70-
Percent Program, but some of us believe that it is our moral 
duty to admit these people. I am a Marine. We take care of our 
own. The only thing is, when we run a State Veterans Home that 
we do in Tennessee with three of them, we can't bankrupt our 
Homes caring for some because the VA won't pay for them and, 
therefore, imperils the care that we give to all.
    Mr. Bermeosolo. Mr. Chairman, if I might piggyback on to 
that. There are a number of States that have different 
admission criteria. For instance, many States only accept war-
time veterans. Some States accept peace-time veterans and yet 
other States would also accept spouses of veterans and Goldstar 
Care and it is up to 25 percent of the beds, which are allowed 
by law, so it varies from State to State.
    Ms. Rundell. Sir, if I may also add that every time that we 
have a 70-percent service-connected admission, I am faced with 
a moral dilemma because I need to, for the first time, really 
take a look at what it is going to cost and whether or not my 
facility is going to be able to handle the financial risks 
attached to that and still be able to be financially viable to 
take care of my other 142 veterans.
    Mr. Kash. And sir, if I might add a final note to that. The 
problem for me is identifying who those are, in fact. The 
question is do you know if they are 70 percent or if they are 
program eligible.
    As I mentioned before, I am not--I am intentionally not 
admitting any of these. When I report to the VA, I believe I 
have 9 of those. They came back to me and said, no, you, in 
fact, you have 27. Yesterday they informed me, no, you have 22 
more. You actually have 49. This afternoon I found out that one 
of the people we thought was 100 percent disabled was, in fact, 
not eligible for the program, the fact that he has been in our 
Home for 2\1/2\ years under this, quote, ``program.''
    So for me, it is really hard. How do you sort this out and 
you can't figure out if, in fact, your person qualifies for 70-
percent service-connected admission?
    Ms. Rundell. So if we admit them, believing they are 70-
percent service-connected, it is very difficult to go back and 
bill if they are not 70-percent service-connected. With 
Medicaid, I am only allowed to go back 90 days and pick up 
billing, and I don't think it is fair to hit a family member 
with a bill to say, hi, no, they weren't really 70-percent 
service-connected because I received the information from the 
Department of Veterans Affairs to know what my reality is or 
the family's or the veteran's.
    Mr. Ribbentrop. Mr. Chairman, in the State of Hawaii, we 
have the latitude to accept a lot of veterans because we are 
reaching capacity and the Board of Governors has said that we 
must establish a waiting list. That waiting list mandates the 
higher percentage service-connected disabled veterans be put to 
the top of the waiting list. In a very short period of time we 
will have a home for the 100-percent disabled veterans.
    Mr. Michaud. But by the same token, the more disabled 
veterans go to the top of your waiting list. The cost of taking 
care of those veterans will be much higher and, therefore, if 
the VA is not paying the actual cost of care, it would put you 
in bankruptcy even sooner.
    Mr. Ribbentrop. Yes, sir.
    Mr. Michaud. Mr. Donnelly.
    Mr. Donnelly. No questions.
    Mr. Michaud. Other Subcommittee Members might have 
additional questions if they are submitted in writing. I know 
Ranking Member Brown is very interested in this. Unfortunately, 
he had another Committee hearing he had to go to, but he is 
very interested in trying to solve this problem.
    I guess my final question and concern is, you said your 
Veteran Nursing Homes in Maine, will lose anywhere from $8 to 
$16 million, while another, Vermont, will lose $180,000. I 
assume that is because Maine has six Veteran Nursing Homes. I 
assume that number includes all six.
    Do you have any data from all the State Veterans Nursing 
Homes on what they actually would lose if the VA continues with 
the current policy? Or can you provide some more data to us?
    Mr. Kash. Sir, we are happy to share what data we have 
collected. We have not heard from every State, but certainly 
have a good sample of States, including the States here, as 
well as Idaho and we feel we can get a lot of those numbers. 
But I can you tell that consistently, in Maine, estimated 
conservatively when we first looked at this issue that we would 
be losing approximately $100 to $125 per day per resident. We 
are finding it much higher than that. I know Tennessee found 
that theirs were a little bit over $200 per day.
    But we would be happy, and we have committed ourselves all 
along with VA to work and collect data for them and provide 
them that data. We would be happy to provide what we have now.
    [The information follows:]

    Mr. Kelly supplied the data and analyses on the impact of the 70-
Percent Program implementation as requested. Extensive patient data and 
Medicare Cost Reports were also provided to the VA Deputy Assistant 
Secretary for Intergovernmental Affairs and the VA Office of Inspector 
General. The data and analyses readily show that VA's Higher Per Diem 
payment only covers the approximate cost of room, board, and basic 
nursing. The VA's Higher Per Diem payment does not pay adequately for 
skilled care, and in fact, appears to pay only about \1/2\ to \2/3\ of 
what Medicare or other payers would reimburse the State Veterans Homes 
for the same care for nearly every State reporting to us. [The data 
supplied to the Subcommittee will be retained in the Committee files.]

    Mr. Michaud. Thank you very much. I would like to thank 
each of you for your testimony today and I look forward to 
working with you as we move forward to resolve these issues. 
Thank you all.
    I invite up the next panel, Dr. Burris, who is the Chief 
Consultant for Geriatrics and Extended Care under the Veterans 
Health Administration (VHA), and he is accompanied by Walter 
Hall, who is the Assistant General Counsel for the Department 
of Veterans Affairs.
    I want to thank you, Doctor, for coming today. We look 
forward to your testimony and without any further ado, I will 
turn it over to you, Doctor.

     STATEMENT OF JAMES F. BURRIS, M.D., CHIEF CONSULTANT, 
 GERIATRICS AND EXTENDED CARE, VETERANS HEALTH ADMINISTRATION, 
 U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY WALTER A. 
  HALL, ASSISTANT GENERAL COUNSEL, OFFICE OF GENERAL COUNSEL, 
              U.S. DEPARTMENT OF VETERANS AFFAIRS

               STATEMENT OF JAMES F. BURRIS, M.D.

    Dr. Burris. Thank you, Mr. Chairman and Members of the 
Subcommittee. I appreciate the opportunity to appear before you 
today to discuss H.R. 4241 and how VA has been working together 
with the State Veterans Homes to try to resolve issues that, as 
you know, are affecting a number of Homes.
    For background, I will use the term ``mandatory veterans'' 
to refer to veterans who have a service-connected disability 
rated 70 percent or more or who need nursing home care because 
of a service-connected disability at a lower rate. These are 
the group of veterans for whom VA has been mandated to pay for 
nursing home care.
    Under the State Home program, VA provides support to States 
to construct and operate nursing homes and domiciliaries for 
the care of veterans. In return, State Homes provide nursing 
home care to many of our Nation's veterans.
    In testimony, we will begin by describing some of the 
issues that have arisen during implementation of the most 
recent legislative changes and the rules and how we have been 
working to address them and then briefly address H.R. 4241 
specifically.
    For many years prior to the enactment of Public Law 109-
461, VA paid the full cost of the mandatory veterans' care in 
VA or private nursing homes. For State Homes, VA only paid a 
fixed basic per diem rate for all veterans. In 2006, Congress 
directed VA to pay State Homes the full cost of nursing home 
care for mandatory veterans. VA regulations implementing this 
Congressional mandate became effective last May.
    Although some States are satisfied with the new rates VA 
pays for mandatory veterans, many have reported problems. Some 
States report that they are now receiving smaller total 
payments from all payors for the care of these veterans because 
they believe they are no longer able to bill veterans or other 
payors. Some States report that VA payments do not cover their 
actual costs and, as a result, they can no longer afford to 
admit mandatory veterans. Others reported that VA facilities 
stopped providing specialty physician services to their 
mandatory veterans. I want to assure impeding Subcommittee that 
VA is committed to the State Home Program and when we ascertain 
circumstances for the intent of Public Law 109-461, we are 
working hard and have been working for some time to try to find 
solutions and avoid adverse impact on veterans.
    In an effort to better understand these difficulties, VA 
has met on several occasions with representatives of the 
National Association of State Directors of Veterans Affairs, 
the National Association of State Veterans Homes, the National 
Governors' Association and Congressional staff. As a result of 
these discussions, we believe that there are non-legislative 
actions that VA, working in cooperation with the State Veterans 
Homes, can take to ameliorate some of these issues.
    We have asked the States to share with us supporting 
documentation that demonstrates how their actual costs for the 
care of ambulatory veterans exceed the allowable VA per diem 
payment under the current law and some of the States have 
provided those data, including Maine and Idaho and Vermont. 
With this information, we will be in a better position to 
understand the impact of Public Law 109-461 and address the 
States' concerns.
    As you will note in my written testimony, we will also need 
that data to come to a conclusion on one element of the 
legislation we are here to discuss today, the provision related 
to using contracts for the State Homes.
    VA has already taken steps toward resolving one of the 
reported difficulties. On October 19, 2009, VA issued guidance 
to its field facilities that the full per diem payment to State 
Homes covers nursing home services only and that VA facilities 
are to continue providing most specialty care to mandatory 
veterans as they did prior to the initiation of the new 
payments. This has assured veterans of access to needed care 
and provided cost avoidance for the State Homes.
    There are also interagency discussions taking place because 
other Federal agencies payment rules form part of the Homes' 
support and we need to make sure everyone is clear on the 
interpretation of those regulations.
    Further, we believe that some States may need assistance in 
understanding the provisions of Office and Management and 
Budget (OMB) Circular A-87, which States must use to calculate 
their actual cost of care for mandatory veterans. VA has 
offered to work individually with States to improve their 
understanding of Circular A-87 cost-accounting rules and 
enhance their cost recovery.
    VA's official positions on the provisions of H.R. 4241 are 
stated in the written testimony which was submitted, so I won't 
reiterate that now but I will summarize that VA cannot support 
the legislation as it now written.
    Mr. Michaud. Thank you for--are you all done?
    Dr. Burris. Just to emphasize, as I did earlier this week 
at the winter meeting of the National Association of State 
Veterans Homes, that we are committed to finding a solution, we 
will continue to work with the State Homes and other partners 
to ensure these veterans are properly served. And please note 
that we are happy to meet with you and your staff at any time 
to discuss these issues and provide technical assistance. Thank 
you, sir.
    [The prepared statement of Dr. Burris appears on p. 40.]
    Mr. Michaud. Thank you very much, Doctor, and I want to 
thank you, Mr. Hall, for coming here today as well, and I 
appreciate your willingness. You say that you can fix this 
without legislation. However, as a Member who is sitting on 
this side of the aisle who passed the bill and has seen it take 
2\1/2\, 3 years to implement, I have a concern with what has 
happened or is going to happen to our veterans who need long-
term care.
    We heard a devastating story of a veteran in Nevada. That 
is unconscionable and that is something that I would not be 
very proud of if I were over at VA.
    Also, you mentioned in your testimony that the language in 
Public Law 109-461 stated that the veterans State nursing homes 
should be paid the full cost. What is your interpretation of 
``full cost?''
    Dr. Burris. Well, Public Law 109-461 specifies that VA is 
to pay the full cost of nursing home care and the elements of 
nursing home care are defined in our regulations and include, 
for example, basic primary physician care, skilled nursing, 
nutrition and dietary services, routine and emergency 
medications, rehabilitation services and then there are some 
additional services that the Home is required to make available 
to veterans living there, but those other services, such as 
dental services, can be charged for.
    So our sense is that the speciality medical services that 
the State Homes have referred to, such as dialysis or 
speciality physician care, would fall outside of the services 
that we're paying for with the per diem and that potentially 
those other services could be billed for. We have had staff 
level discussions with Medicare and Medicaid, staff level folks 
who have clarified for us that under the Centers for Medicare 
and Medicaid Services (CMS) rules, Medicare and Medicaid pay 
for a bundled set of services in the nursing home, but the 
unbundled services that fall outside of that package can be 
billed for.
    We have recently met with the legislative office at the 
U.S. Department of Health and Human Services and the policy 
office at CMS to explain problems that have arisen in the 
implementation of the law and they have said that they will 
take that under consideration, go back to their general counsel 
and discuss it and try to come forward with a clarifying letter 
on what their policy is.
    Mr. Michaud. And when do you expect that to happen, next 
year or the year after? I mean, I don't want to be sarcastic 
about it, but I am concerned that I see our veterans are not 
being taken care of because of what I feel is improper 
implementation of the law that we passed. It is probably our 
fault for not specifying in more detail what full cost means, 
but it is our hope as legislators that we don't want to tie 
administrators hands so that they have no wiggle room. We 
expect common sense to be used.
    But by the same token, we don't want to have legislation 
that would give you that flexibility, and at the same time be 
contrary to what the intent of the law was. Now, you mentioned 
that some services can be billed. It is my understanding that 
once the VA makes its payment to a State veterans nursing home, 
then they can no longer bill Medicare and Medicaid because that 
is considered payment in full.
    So if that isn't payment in full, then you have a lot of 
State Veterans Nursing Homes that have a high population of 
Medicare and Medicaid, then they are on the short end of the 
stick, so who are they going to bill if they can't bill 
Medicare and Medicaid.
    You know, that is the problem that we are facing and we do 
have a lot of nursing homes with both Medicare and Medicaid 
patients. So who are they going to bill? You mentioned that 
they can bill for those other services. If it is not Medicare 
or Medicaid, then who are they going to bill?
    Dr. Burris. Well, there is quite a bit of variation from 
State to State in the way the Homes are funded. Some State 
Homes do receive a direct appropriation from the State. Many do 
not. They fall under different lines of authority in the State. 
Some are under the State Department of Veterans Affairs. Some 
are under the State Department of Public Health.
    So it is very difficult to give a single answer to your 
question. But if the veteran had long-term care insurance, that 
might cover some of the services that are not part of our 
defined bundle of nursing home services.
    If the veteran is eligible for care from VA, many services 
can be provided through the VA health care system.
    Mr. Michaud. The VA runs long-term care facilities as well, 
correct.
    Dr. Burris. Yes, sir, that is correct.
    Mr. Michaud. How many veterans in your long-term care 
facilities have long-term care health insurance?
    Dr. Burris. I don't know that number, sir.
    Mr. Michaud. Would you have to go after that insurance 
first before the VA pays for it.
    Dr. Burris. No. No. The VA per diem payment to the State 
would be made irrespective of what other sources are paying.
    Mr. Michaud. Well, I am talking about the veterans that are 
in the VA facilities. You mentioned collecting payments from 
long-term care insurance, but I doubt very much that many 
veterans have long-term care health insurance. So my point is, 
if, in fact, you are taking care of veterans in the VA's long-
term care facilities, you must have some idea of how many of 
those have long-term care health insurance, that you could 
probably go after third-party billing for. Would that be 
possible?
    Dr. Burris. I do not have that data.
    Mr. Michaud. Do you have to go after third-party billing 
for veterans in the long-term care facilities.
    Mr. Hall. I believe for care provided for a non-service-
connected disability, we may collect against third-party 
insurers.
    Mr. Michaud. You may?
    Mr. Hall. Yes.
    Mr. Michaud. Have you?
    Mr. Hall. I honestly couldn't tell you, sir.
    [The VA met with Committee staff regarding the State Homes 
issues.]
    Mr. Michaud. Well, my point is when the doctor mentioned 
collecting payments from veterans with long-term care 
insurance, I doubt very much if you are going to find veterans 
who need nursing home care if they have long-term care health 
insurance, so I think that argument is not valid.
    My next question is, you mentioned that a number of States 
are satisfied with the new rates that the VA pays for mandatory 
veterans. What States are satisfied with the rules? You said 
``a number of States.'' So could you let me know what States 
are satisfied and whether or not they have a high Medicare or 
Medicaid population?
    Dr. Burris. Well, I have only heard from a few States 
either directly either for or against.
    Mr. Michaud. What are the few? In your testimony you say 
``a number.'' You're saying a few, so what are the States that 
are satisfied?
    Dr. Burris. The State of Connecticut, the State of Utah. 
There was a third.
    Mr. Michaud. If you could provide to the Committee the 
States that are satisfied, I would also like to know how many 
veteran nursing homes they have within those States and whether 
or not they are Medicare and Medicaid eligible.
    [The VA provided the information in the response to 
Question 8 in the Post-Hearing Questions and Responses for the 
Record, which appears on p. 53.]
    Mr. Michaud. My next question is, would a reimbursement 
schedule that bases payment on the actual acuity of each 
patient such as the VA does with the Resource Utilization 
Group, be an effective mechanism to properly and accurately 
reimburse State Veterans Homes on 70-percent veterans?
    Dr. Burris. We have had discussions about that point. We 
believe that it might. We have not been able to--many of the 
State Homes are providing rough data for us now, but not all, 
so we wouldn't be able to implement that at the present time, 
but with the cooperation of the States to provide the data and 
a change in the method by which we calculate the prevailing 
rate, we would be able to do that.
    Mr. Michaud. Once you have that information, how quickly do 
you think you might be able to put that system in place?
    Dr. Burris. That would require a change in the regulations 
and it is, as you know, that is a fairly lengthy process. At 
best, a year. More likely a year and a half to two.
    Mr. Michaud. If we were to get what you would want for 
regulations and actually put it in the Appropriations bill so 
it would go into effect immediately without waiting a year or 2 
years, would that be satisfactory.
    Mr. Hall. Yes, sir, if you could accommodate all the 
requirements of the regulations and statute, they are--
unfortunately it is a very--as you know, the regs are very 
detailed and require, as these regulations did, careful 
cooperation of working with the State Homes themselves, State 
Home organizations to hopefully try to avoid the problems we 
have with these regulations.
    And once they are in statute, they are much more difficult 
to change than they are when they are in regulations even.
    Mr. Michaud. In your testimony you state that H.R. 4241 
will increase the VA cost by $17.5 million next year and $200 
million over a 10-year period. I am not sure whether that 
number is accurate, but it implies that either the current 
system is underpaying the State Veterans Homes by an equal 
amount or that more 70-percent veterans will receive nursing 
home care under this bill. Is that a fair assumption.
    Dr. Burris. The estimate was made by--the States have told 
us that--let me back up one more step. The law specifies that 
we must pay either the prevailing rate or the actual cost of 
care, whichever is less. The States have told us that in most 
cases the actual cost of care determined in accordance with OMB 
Circular A-87 is less than the prevailing rate, so the way that 
that figure was derived was to say that if we are currently 
paying the States the actual cost of care, and under this law 
would instead pay them at the prevailing rate, then difference 
between calculating the actual cost and the prevailing rate 
would result in those numbers.
    Mr. Michaud. And in your testimony you mentioned you were 
concerned about double dipping. If it is made clear that there 
is no double payment in this, would that change that fiscal 
number at all.
    Dr. Burris. It wouldn't alter the cost to VA.
    Mr. Michaud. There are currently laws on the books that 
would prevent double dipping and quite frankly no one wants to 
get paid twice for the job that they are doing once. And that 
is clearly not the intention of this legislation. So you know, 
it is my intent to actually make that very clear that there 
will not be double dipping.
    My next question is, you heard from the previous panel, 
that there is a lot of concern that some of the State Veterans 
Nursing Homes will experience financial hardship depending upon 
the acuity of care and the number of veterans on Medicare or 
Medicaid who are eligible.
    Quite frankly, you also heard that they will not be taking 
veterans because they cannot operate in the red for too long.
    And the other issue that we heard is that, yes, some State 
Veterans Homes might still take some of the veterans, even 
though they might be operating in the red, but they will have 
to make a determination on whether or not they are going to 
have to exclude the veterans who have the most acuity, the 
veterans that really need the help.
    I guess my question, Doctor, is when you said you could do 
this administratively, how quickly can you solve the problems 
that you have heard here today administratively.
    Dr. Burris. Now, we have already addressed the issue of VA 
providing specialty care. That is done. And we have not 
continued to receive concern about that issue from the States. 
I have asked them to let me know if there are needs where care 
is denied.
    We have met with CMS and we will push--the VA Chief of 
Staff is taking direct interest in this issue. He has offered 
to call--in fact, did call his counterpart to start this 
process going. So we feel a sense of urgency about getting the 
Medicare and Medicaid business cleared away and clear guidance 
to both our field personnel and to the State Homes. We have 
offered to provide assistance on the cost accounting principles 
in OMB Circular A-87, to any of the States that feel they might 
benefit from that.
    In terms of a change in regulation to base the prevailing 
rate on acuity of care, that would require a regulatory change 
and that would take some time.
    Mr. Michaud. Some time meaning a year or 2 years?
    Dr. Burris. Yes, sir. And whatever time is needed for the 
States to ramp up to provide us the data.
    Mr. Michaud. Both the majority and minority staff will be 
submitting additional questions for the record. I just want to 
reemphasize, Doctor, that it appears that there are two, maybe 
three States that have no problem, which means that the 
overwhelming majority of the States do have a huge problem with 
the rules that were implemented to implement the statute.
    As other Members of Congress hear more about what is 
happening at the State Veterans Nursing Homes, they are getting 
upset and rightfully so. And I don't want to have to deal with 
my colleagues from all around the country wanting to know why 
VA is not addressing this particular problem when we know they 
have known about it for some time.
    I appreciate your working with the State Veterans Nursing 
Homes and I would encourage you to continue working with them 
because we have to solve this problem.
    By the same token, it is my intent to move forward with 
this legislation in the event that you are not able to work 
something out and are willing to work with the State Veterans 
Homes to fine tune legislation to make clear what we intended 
when we passed the original law. I can't sit back and not do 
anything and expect VA to ask, because it is not all in your 
control. You had mentioned CMS. They have jurisdiction so I 
can't wait a year or 2 years in the meantime to hear similar 
stories to what we heard earlier today from the Nevada State 
Veterans Nursing Home, especially if you look at the service 
that they provide.
    It is my understanding when you compare the cost of the 
State Veterans Nursing Home, to the cost of the VA long-term 
care, the State home is much cheaper. I don't know if that is 
still true today, but I assume that it is, so you are 
definitely getting your money's worth. But more importantly you 
are taking care of the veteran that needs that help, and that 
is something I want to work with you on. But by the same token, 
having talked with Ranking Member Brown, we don't want to take 
chances and have nothing get done.
    So we will work to move this legislation forward. At the 
same time, hopefully, you are able to work within your separate 
agencies to try to solve this as quickly as possible.
    As I mentioned earlier in my testimony, I have always been 
under the belief that we ought to allow those agencies the 
flexibility to work within the law to implement the intention 
of the law without having to have it very strict. I believe 
that you need that flexibility because we cannot envision all 
the problems that might occur down the road, and therefore, 
that flexibility should be there.
    But by the same token, I also believe and I have seen over 
and over again, whether in the Maine legislature, when I was in 
the legislature there or here in Congress, some agencies tend 
to go beyond what the intent of the law was, whether because it 
is poorly written or whether it was written appropriately but 
those who are implementing the law just might like it, so they 
are doing whatever they want to do to implement it.
    This is an issue that is extremely important. I talked to 
Senator Akaka yesterday at the Joint Hearing with the Senate 
Veterans' Affairs Committee and I will be working with him as 
well on this legislation. We have to solve the problem and I 
know that you understand the importance of it, and hopefully, 
with the testimony that you have heard today and with the 
individual State Veterans Nursing Home talking to you about the 
concerns they have, we can work together and solve these 
problems and take care of the veterans that we are supposed to 
be taking care of.
    So I want to thank you, Doctor, for coming here and, Mr. 
Hall, for coming here and I look forward to working with you 
along with the State Veteran Nursing Homes across this country 
to address this big concern that we are faced with today.
    So thank you very much and we will provide additional 
questions to the VA, as well as the State Veterans Nursing 
Homes in writing and hopefully you can get the responses in 
quickly.
    If there is no other statement, then I would adjourn this 
hearing. Thank you for coming, I appreciate it.
    [Whereupon, at 3:42 p.m. the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              


        Prepared Statement of Hon. Michael H. Michaud, Chairman,
                         Subcommittee on Health
    I would like to thank everyone for coming today.
    Today's legislative hearing is an opportunity for Members of 
Congress, veterans, the VA and other interested parties to provide 
their views on and discuss recently-introduced legislation within the 
Subcommittee's jurisdiction in a clear and orderly process. This is an 
important part of the legislative process that will encourage frank 
discussions and new ideas.
    Today, we will discuss H.R. 4241, which allows for increased 
flexibility in payments for State Veterans Homes.
    I look forward to hearing the views of our witnesses on this bill 
before us.

                                 
 Prepared Statement of Colleen Rundell, M.S., LNHA, President, National
    Association of State Veterans Homes, and Administrator, Vermont
                     Veterans Home, Bennington, VT
    Mr. Chairman and Members of the Committee, on behalf of the 
National Association of State Veterans Homes (``NASVH''), thank you for 
holding this hearing on H.R. 4241, legislation that would remedy the 
unintended consequences of the implementation of section 211(a) of the 
Veterans Benefits, Health Care, and Information Technology Act of 2006 
(Pub. L. No. 109-461) (the ``70-Percent Program''). Implementation of 
the 70-Percent Program is not only inhibiting the long-term care of 
service-connected disabled Veterans (the opposite of its intended 
effect), but it is also threatening the financial viability of many of 
the nation's State Veterans Homes.
    NASVH consists of the administrators and staff of State-operated 
Veterans homes throughout the United States and the Commonwealth of 
Puerto Rico. NASVH members currently operate 137 Veterans Homes in all 
50 States and Puerto Rico. Our nursing homes provide approximately 
28,000 nursing home and domiciliary beds for Veterans and their 
spouses, and the gold-star parents of Veterans. Our nursing homes 
assist the United States Department of Veterans Affairs (``VA'') by 
caring for approximately 53 percent of the VA's long-term care workload 
at the very reasonable cost of only about 12 percent of the VA's long-
term care budget.
    The national State Veterans Home system is an economical 
alternative to other VA long-term care programs. In fact, the VA Office 
of Inspector General has reported:

         A growing portion of the aging and infirm veteran population 
        requires domiciliary and nursing home care. The SVH [State 
        Veterans Home] option has become increasingly necessary in the 
        era of VAMC [VA Medical Center] downsizing and the increasing 
        need to discharge long-term care patients to community based 
        facilities. VA's contribution to SVH per diem rates, which does 
        not exceed 50 percent of the cost to treat patients, is 
        significantly less than the cost of care in VA and community 
        facilities.

    Implementation of the 70-Percent Program, however, is creating very 
serious difficulties for State Veterans Homes throughout the country. 
This program authorized payment of different per diem amounts by VA to 
State Veterans Homes which provide nursing home care to Veterans with 
service-connected disabilities. The VA did not issue regulations to 
implement the 70-Percent Program until April 29, 2009, and problems 
arose immediately with its implementation. NASVH has met with VA 
officials in an attempt to address these problems administratively, but 
the VA has informed us that the issue can only be resolved fully by a 
modification of the law.
    NASVH strongly supported, and strongly supports, the intent of the 
70-Percent Program, which originated in legislation drafted by Senator 
Daniel Akaka and Congressman Jeb Bradley. In fact, after the enactment 
of the Veterans' Millennium Health Care and Benefits Act in 1999 (the 
``Millennium Act''), NASVH noted a disparity in the long-term care 
treatment of service-connected disabled Veterans. Specifically, after 
enactment of the Millennium Act, a service-connected disabled Veteran 
could receive cost-free care at a private community nursing home under 
a VA community nursing home contract, but that same service-connected 
disabled Veteran could not receive cost-free treatment at a State 
Veterans Home. Accordingly, Senator Akaka, Chairman of the Senate 
Committee on Veterans' Affairs, and Congressman Bradley introduced 
legislation to eliminate this disparity.
    Chairman Akaka's legislation tried to achieve parity in the 
provision of nursing home benefits for our Veterans between community 
nursing homes and State Veterans Homes. Unfortunately, the 
implementation of Chairman Akaka's legislation has failed to achieve 
such parity and has resulted in numerous problems and unintended 
consequences.
    Specifically, although the VA regulations implementing the 70-
Percent Program state that they provide a ``higher per diem rate'' for 
Veterans with service-connected disabilities, the regulations actually 
result in significantly lower total amounts being paid to many State 
Veterans Homes providing nursing home care to Veterans with service-
connected disabilities. As implemented, the program simply does not 
provide to many State Veterans Homes adequate reimbursement for their 
actual cost of care for disabled Veterans, despite congressional intent 
that it do so. To the extent that State Veterans Homes continue to 
admit service connected disabled veterans under the 70-Percent Program, 
it threatens the continued financial viability of such State Veterans 
Homes.
    This problem is particularly acute in the 30 States that have 
Medicare-certified and/or Medicaid-certified State Veterans Homes. The 
impact is significant enough to have caused several such States already 
to incur substantial financial losses on the care of service-connected 
disabled Veterans under the 70-Percent Program, and others to refrain 
from admitting Veterans with service-connected disabilities, in order 
to avoid such financial losses. Accordingly, the implementation of the 
70-Percent Program is having exactly the opposite result envisioned by 
Congress.
    Although numerous representatives from NASVH, the American Health 
Care Association, the National Governors' Association, and others have 
all met with senior VA officials including Dr. James Burris to attempt 
to remedy the problems with the 70-Percent Program, we have been 
frustrated by the fact that senior VA officials appear simply to be 
unable or unwilling to address the 70-Percent Program's serious 
financial problems.
    These problems can be illustrated by many examples from State 
Veterans Homes, several of which the Committee will hear today. One 
typical example comes from my home State of Vermont. Prior to 
implementation of the 70-Percent Program, Sergeant Jakob Lurie (a 
pseudonym for a 70 percent service-connected disabled veteran) was 
admitted to the Vermont Veterans' Home, which is Medicare and Medicaid 
certified. He had experienced a three-day hospital stay and was 
admitted to the Vermont Veterans' Home thereafter under Medicare. 
Sergeant Lurie had an acute medical condition that required 
rehabilitation. As a result, Sergeant Lurie received three hours of 
therapy each day, including an hour each day of physical, occupational, 
and speech therapy.
    As detailed below, the average daily cost for Sergeant Lurie was 
$476.51. Under the 70-Percent Program, however, the Vermont Veterans' 
Home would have received only $302 a day for Sergeant Lurie's Care. The 
math does not add up under the 70-Percent Program, especially for 
Veterans requiring skilled nursing care.
    In this example from the Vermont Veterans' Home:


Physical therapy                                                              $47.11 an hour including benefits
Occupational therapy                                                          $53.83 an hour including benefits
Speech/language therapy                                                       $60.57 an hour including benefits
Medications                                                                                $22.00 daily average
Physician visits\1\                                                                        $11.00 daily average
Wound vac machine for pressure area                                                        $33.00 daily average
Room and board                                                                                  $249.00 per day

\1\ Per Federal regulations, a Veteran must be seen by a physician within 48 hours of admission for a full
  history and physical; then every 30 days for the first 90 days; then every 60 days. This schedule applies only
  if the Veteran is medically stable. Often, Veterans are not medically stable and must be seen more frequently.


    (Room and Board, includes all nurses, aides, meals, dietary, social 
work staff, electricity, fuel for heat, medical supplies, adult briefs, 
etc.)


Total actual average daily cost for Sergeant                 $476.51/day
 Lurie:


    Compared to a 70-Percent Program calculated payment of only $302/
day, this is a loss to the Vermont Veterans' Home of $174.51/day for 
just one resident.
    After I calculated the loss that the Vermont Veterans' Home would 
have incurred on Sergeant Lurie under the 70-Percent Program, I 
calculated the substantial actual losses and minor gains that the 
Vermont Veterans' Home has experienced for other Veterans under the 70-
Percent Program. These losses and gains are as follows:
    Currently, the Vermont Veterans' Home has ten Veterans who qualify 
for the VA 70-Percent Program and this number is expected to grow. At a 
70-Percent Program payment of $302 per day, below are the actual 
financial results for these ten Veterans:


Veteran #1                                                                                  loss of $108.77/day
Veteran #2                                                                                   loss of $39.53/day
Veteran #3                                                                                  loss of $127.91/day
Veteran #4                                                                                  loss of $126.42/day
Veteran #5                                                                                   loss of $42.01/day
Veteran #6                                                                                  loss of $124.76/day
Veteran #7                                                                              above cost by $7.14/day
Veteran #8                                                                              above cost by $7.13/day
Veteran #9                                                                             above cost by $17.14/day
Veteran #10                                                                            above cost by $41.79/day



    On the average, the 70-Percent Program rate will result, for just 
the first ten veterans admitted under the Program, in an annual loss to 
the Vermont Veterans' Home of $181,113.
    As Veterans age, their medical needs often increase and further 
aggravate the shortfall between a State Veterans Home's costs and VA 
payments under the 70-Percent Program.
    NASVH supports H.R. 4241, introduced by Congressman Michael H. 
Michaud. The enactment of H.R. 4241 would allow service-connected 
disabled veterans to receive the nursing home care that Congress 
intended, while reimbursing State Veterans Homes fully and more 
accurately for such care.
    H.R. 4241 would do four things. First, it would allow State 
Veterans Homes to serve service-connected disabled veterans, at no cost 
to such veterans, under the VA's existing community nursing home 
contract program. This was Senator Akaka's original intent in proposing 
the legislation which became the 70-Percent Program, and we believe 
that such intent should be honored now.
    Second, if a community nursing home contract cannot be arranged 
between the VA and a State Veterans Home for a service-connected 
disabled Veteran, H.R. 4241 would require that payments under the VA's 
70-Percent Program be computed according to a State Veterans Homes' 
actual cost to care for a Veteran, and not computed according to OMB 
Circular A-87, which in almost all instances allows a lesser 
reimbursement than the prevailing rate determined by the Secretary of 
the VA.
    Third, H.R. 4241 would clarify that State Veterans Homes and 
private medical providers could continue to receive payment from 
sources other than the VA for services not reimbursed under the 70-
Percent Program and required for the medical treatment of service-
connected disabled veterans residing in State Veterans Homes.
    Fourth, H.R. 4241 would clarify, consistent with existing law, that 
payments made to a State Veterans Home under the 70-Percent Program 
cannot be offset against any other payment made to assist a service-
connected disabled veteran.
    In addition, NASVH would support a clarification to H.R. 4241 to 
emphasize the fact that a State Veterans Home cannot receive payment 
from the VA under more than one of the following alternative programs: 
(1) the community nursing home contract program; (2) the 70-Percent 
Program; or (3) the VA's basic (lower) per diem program, plus Medicaid 
or Medicare, for a Veteran residing in a State Veterans Home, and that 
a State Veterans Home cannot receive payment more than once for the 
same service provided to any Veteran by a State Veterans Home. These 
requirements generally are already subject to normal audits by the VA, 
Medicare, and Medicaid under existing law, and can be enforced easily 
under existing auditing processes. Lastly, we believe that the VA 
should pay any co-pay required for the receipt of Medicare or Medicaid 
services under the 70-Percent Program by a veteran so that such care is 
provided at no cost to such veteran. Payment in full by the VA for a 
veterans care means payment in full by the VA.
    NASVH believes that enactment of H.R. 4241 will resolve the 
problems that have arisen in implementing the 70-Percent Program, and 
permit all State Veterans Homes to admit 70 percent Veterans without 
adverse financial consequences. We welcome the efforts of this 
Committee, the Senate Committee on Veterans' Affairs, and the VA to 
work together to solve at the earliest possible time the reimbursement 
problems with the 70-Percent Program.
    There is widespread support for our efforts to address this issue 
promptly. In addition to NASVH, the National Association of State 
Directors of Veterans Affairs, the National Governors' Association, and 
the American Health Care Association have all called for action to 
remedy the reimbursement problems associated with the 70-Percent 
Program. I have attached copies of resolutions and letters from these 
organizations in support of our efforts. Other Veterans service 
organizations such as the Military Order of the Purple Heart, the 
Catholic War Veterans, American Gold Star Mothers, and the American 
Legion all have indicated their support for H.R. 4241 as well.
    It has been asked whether the reimbursement deficiencies under the 
70-Percent Program could be resolved by the use of ``fee basis care'' 
payments from the VA to State Veterans Homes to cover costs not covered 
by per diem payments under the 70-Percent Program. NASVH does not 
believe that fee basis care payments ultimately can resolve this 
problem. Fee basis care payments are discretionary by the VA, are 
largely not designed for long-term nursing home care, and do not cover 
many services required for nursing home care.
    NASVH believes that the fairest and most accurate way to reimburse 
Medicare-certified and Medicaid-certified State Veterans Homes for the 
care of service-connected disabled Veterans under the 70-Percent 
Program is for the VA to use the example of the existing Medicare 
payment system as much as possible. Under Medicare, reimbursements for 
nursing home care fluctuate according to the acuity (degree of illness) 
of individual patients. Required pharmaceuticals and specialty care are 
automatically reimbursed, if legitimately required. Nursing homes do 
not ordinarily lose substantial amounts of money for patient care under 
the Medicare program. Accordingly, NASVH believes that Congress should 
not require the 30 States which operate Medicare-certified and 
Medicaid-certified State Veterans Homes to change fundamentally the way 
they fund their State Veterans Homes. Congress rather should require 
the VA to coordinate its reimbursement schedules under the 70-Percent 
Program, to the extent possible, with the example of the existing 
Medicare system.
    I want to thank you, Mr. Chairman, the entire House Veterans' 
Affairs Committee, and its professional staff, for the leadership and 
skill that you have shown in addressing the long-term care needs of our 
nation's service-connected disabled Veterans within the State Veterans 
Home system. I am sure that, working together, we can promptly remedy 
the serious problems that exist in the VA's current 70-Percent Program.
    Attachments [The attachments are being retained in the Committee 
files.]

                                 
    Prepared Statement of Robert D. Tuke, Chairman, Tennessee State
                 Veterans Homes Board, Murfreesboro, TN
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to submit testimony to you today. I am Robert Tuke, and I 
am the Chairman of the Tennessee State Veterans Homes Board. As a 
Marine Vietnam Veteran with a minor service connected disability, I am 
especially interested in supporting efforts to assist disabled veterans 
whenever possible. So it is a double privilege and honor to address you 
today.
    The Tennessee State Veterans Homes operate much in the same manner 
as private nursing homes. The Tennessee State Veterans Homes Board does 
not receive funding for operations from the State. Instead, it must 
maintain financial viability just as any other nursing home 
organization. The Tennessee State Veterans Homes Board operates three 
nursing homes, each with 140 beds, dually certified for Medicare and 
Medicaid. The revenues generated and collected by our Homes are the 
operating funds for the organization, from which the Board pays its 
employees, vendors, debt service, repair and replacement of equipment 
and buildings, and from which it funds its capital purchases.
    As you know, the VA Regulations promulgated pursuant to the 
Veterans Benefits, Health Care, and Information Technology Act of 2006 
became effective on May 29, 2009. At that time, there were a total of 
13 residents in our three homes who met the criteria for the VA 70-
Percent Program. By the end of January 2010, eight months later, the 
total of such residents was 23, an 84.7 percent increase. Of the 23 
current residents, 18 require skilled nursing home care and the other 5 
require standard, custodial nursing care. Based on the average daily 
census of our three homes, 5 percent of the patient population are 
covered by the VA 70-Percent Program.
    We anticipate these numbers to continue to increase as more 
veterans become aware of the program and elect admission into the state 
veterans homes. Tennessee does not limit and has no intention of 
limiting admissions to its nursing homes on the basis of payor source, 
and we will not limit admissions under the VA 70-Percent Program. 
However, there are consequences to revenues and expenses arising from 
the VA 70-Percent Program that are problematic to the long-term 
financial viability of the Tennessee State Veterans Homes, just as 
there are to state veterans homes nationwide.
    As I have pointed out, the vast majority of the new admissions 
under this program require skilled nursing care services. This means 
that the billings for services for these residents are submitted to the 
VA instead of to our fiscal intermediary for Medicare reimbursement. 
Therefore, the loss of revenue calculations we are presenting today are 
based on actual payments received from VA compared to what our 
reimbursement from Medicare would have been had we been able to bill 
Medicare. Additionally, many expense items that are reimbursed 
adequately under the consolidated billing rules for Medicare are not 
reimbursed adequately under the VA 70-Percent Program. Examples include 
services by an attending physician, specialists, and emergency 
transportation. In addition, we can no longer bill Medicare Parts B and 
D for services on this segment of our patient population. In essence, 
when we admit residents who qualify for the VA 70-Percent Program, we 
incur higher expenses and receive lower reimbursements for services 
than we are able to bill for those same services to other applicable 
payor sources.
    The VA 70-Percent Program reimbursement is based on the lesser of 
the prevailing rate as established by the Secretary for Veterans' 
Affairs or the average daily cost of care for all residents based on 
actual expenses incurred by the nursing home. The average daily cost of 
care calculation results in a reimbursement skewed by the much larger 
percentage of intermediate care residents in each home as compared with 
skilled care residents. For example, if 5 percent of the resident 
population in a given home qualify for the VA 70-Percent Program and 15 
percent of residents in the home are covered by Medicare, the remaining 
80 percent require only intermediate or custodial nursing care. The 
expenses associated with custodial care are significantly lower on a 
per patient day basis than those for skilled care. Moreover, as the 
calculation that follows shows, the VA 70-Percent Program residents 
incur expenses which are higher than those incurred by our Medicare 
residents. When the total expenses are divided by the total patient 
days to obtain the `average daily cost of care,' the resulting average 
is much less than the actual cost of care for the residents qualifying 
under the VA 70-Percent Program.
    A comparison between the charges and reimbursements for skilled 
services billed to Medicare and billed to the VA 70-Percent Program 
follows.


----------------------------------------------------------------------------------------------------------------
                          Description                                   Medicare                  VA 70%
----------------------------------------------------------------------------------------------------------------
Room & Board                                                                     $6,572                   $6,572
----------------------------------------------------------------------------------------------------------------
Attending Physician                                                                   -                      200
----------------------------------------------------------------------------------------------------------------
Specialist                                                                            -                      300
----------------------------------------------------------------------------------------------------------------
Pharmacy                                                                            728                      728
----------------------------------------------------------------------------------------------------------------
Medical Supplies                                                                    380                      380
----------------------------------------------------------------------------------------------------------------
Oxygen                                                                              900                      900
----------------------------------------------------------------------------------------------------------------
Physical Therapy                                                                  1.860                    1,860
----------------------------------------------------------------------------------------------------------------
Speech Therapy                                                                    2,720                    2,720
----------------------------------------------------------------------------------------------------------------
Laboratory                                                                           70                       70
----------------------------------------------------------------------------------------------------------------
Radiology                                                                           150                      150
----------------------------------------------------------------------------------------------------------------
Inhalation Therapy                                                                   16                       16
----------------------------------------------------------------------------------------------------------------
Total Charges                                                                   $13,396                  $13,896
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Estimated due from Medicare                                                     $12,400                        -
----------------------------------------------------------------------------------------------------------------
Billed to VA 70% Program                                                                                   7,564
----------------------------------------------------------------------------------------------------------------
VA Standard per diem                                                              2,387
----------------------------------------------------------------------------------------------------------------
Total Reimbursement                                                             $14,787                   $7,564
----------------------------------------------------------------------------------------------------------------
Revenue Loss                                                                                              $7,223
----------------------------------------------------------------------------------------------------------------


    As you can see, the current reimbursement methodology does not 
provide sufficient funding to the State Veterans Homes. Tennessee 
estimates the loss of $338,000 in revenues from May 29, 2009 to the 
present because of the funding constraints of the VA 70-Percent 
Program. Please see the attached graphic demonstrations. This 
substantial loss does not include the realized increase in provision of 
care costs experienced by the State Veterans Homes as prescribed under 
the VA 70-Percent Program.
    Obviously, the Tennessee State Veterans Homes Board cannot continue 
to absorb this increase in expenses and reduction in reimbursement 
without dire fiscal consequences. Therefore I urge you to support H.R. 
4241.
    Thank you.


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         VA 70%             MCR A             VA Supp        MCR plus VA Supp      Difference      Days
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Resident 1                $24,382.00         $48,928.30          $7,445.00         $56,373.30       ($31,991.30)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Resident 2                   $24,382         $43,972.74          $7,445.00         $51,417.74       ($27,035.74)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Resident 3                $24,382.00         $39,210.20          $7,445.00         $46,655.20       ($22,273.20)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Resident 4                   $19,506         $35,323.00          $5,956.00         $41,279.00       ($21,773.40)      80
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Resident 5                $17,311.22         $27,494.56          $5,285.95         $32,780.51       ($15,469.29)      71
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Total                                                                                              ($118,542.93)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1/20 admit                      Resident 6                                                                                                 $0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
1/21 admit                      Resident 7                                                                                                     0
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
Used actual 70 percent rate $243.82 vs Actual MCR rate per day per resident including supplement........................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residents that were eligible to access MCR Part A since May-09..........................................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------


[GRAPHIC] [TIFF OMITTED] 55233.001



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      VA 70%             MCR A              VA Sup        MCR plus VA Supp      Difference      Days
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 1                             $23,867.00         $33,227.00          $7,442.00         $40,669.00       ($16,802.00)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 2                                $10,024         $12,883.54          $3,256.26         $16,139.80        ($6,115.66)      42  DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 3                             $23,867.00         $38,623.70          $7,442.00         $46,065.70       ($22,198.70)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 4                                $19,332         $29,788.55          $6,028.02         $35,816.57       ($16,484.30)      81  DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 5                              $6,921.43         $12,140.91          $2,158.18         $14,299.09        ($7,377.66)      29  DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 6                                 $5,251         $12,140.91          $1,637.24         $13,778.15        ($8,527.41)      22  DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Resident 7                             $23,867.00          23,017.10           7,753.00          30,770.10        ($6,903.10)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total                                                                                           Total Loss       ($84,408.83)
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
Used Actual 70 percent Rate for Humboldt $238.67 vs Actual MCR rate per day per resident................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residents that were eligible to access MCR Part A since May-09..........................................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------


[GRAPHIC] [TIFF OMITTED] 55233.002



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       VA 70%       MCR A       VA Supplement      MCR with VA       Difference       Days
--------------------------------------------------------------------------------------------------------------------------------------------------------
x                                Resident 1          $21,828.00   $23,373.00          $7,656.59      $31,029.59         ($9,201.59)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 2             $20,300   $30,734.47          $7,210.29      $37,944.76        ($17,644.72)      93
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 3          $13,533.36   $22,246.50          $4,800.04      $27,046.54        ($13,513.18)      62
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 4              $1,528    $2,733.78            $542.71       $3,276.49         ($1,748.53)       7     DC 10/16
--------------------------------------------------------------------------------------------------------------------------------------------------------
x                                Resident 5          $21,828.00   $41,414.00          $7,753.00      $49,167.00        ($27,339.00)     100
--------------------------------------------------------------------------------------------------------------------------------------------------------
x                                Resident 6             $18,336   $36,355.00            6512.52      $42,867.52        ($24,532.00)      84
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 7          $19,429.92   $33,559.00            6900.17      $40,459.17        ($21,029.25)      89
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 8             $16,589   $21,490.00          $5,892.28      $27,382.28        ($10,793.00)      76
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Resident 9          $10,695.72   $16,357.00          $3,798.97      $20,155.97         ($9,460.25)                   49
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Total                                                                                ($135,261.52)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Used Knoxville VA 70 percent Rate of                                                 ($219,670.35)
                                  $218.28 vs Actual MCR rate per day per
                                  resident
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Residents that were eligible to access MCR Part A since  May-
                                  09
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                                                                             [GRAPHIC] [TIFF OMITTED] 55233.003
                                                                                                                                             

                                 
       Prepared Statement of Keith T. Ribbentrop, State Veterans
    Home Liaison Officer, Yukio Okutsu State Veterans Home, Hilo, HI
    Mr. Chairman and Members of the Subcommittee:
    My name is Keith Ribbentrop. I am the State Veterans' Home Liaison 
Officer to the Yukio Okutsu State Veterans Home in Hilo Hawaii. I am 
retired from the United States Air Force, and as a disabled combat 
veteran of the Vietnam War, I am here today, grateful for the 
opportunity to advocate for my comrades-in-arms. Thank you for the 
honor to speak on their behalf.
    The Veterans Benefits, Health Care, and Information Technology Act 
of 2006 (Pub. L. No. 109-461) authorized the United States Department 
of Veterans Affairs (VA) to make payments to State Veterans Homes that 
provide nursing home care to certain veterans with service-connected 
disabilities (also known as the 70-Percent Program).
    VA regulations implementing section 211(a) of the statute that took 
effect earlier this year purport to provide a higher per diem rate for 
70-Percent Program eligible veterans. However, the program as 
implemented has actually resulted in significantly lower payments to 
many State Veterans Homes. Unless revised, the 70-Percent Program will 
not provide the actual cost of care to State Veterans Homes despite 
congressional intent.
    The problem is particularly urgent for states that are Medicare and 
Medicaid (CMS) certified. There are 30 states across the nation with 
CMS certified Homes, one of which is Hawaii. Our Home receives payment 
for the care of veterans with service-connected disabilities for a 
limited period of time under the Medicare program. However, those 
veterans eligible for the higher per diem rate are not eligible for 
Medicaid funds. The following table and charts reflect that as the 
number of veterans eligible for the higher per diem rate increases 
(1200% in Hawaii since June 2009), the disparity between per diem and 
cost increases as well thereby threatening the State Homes' viability.


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Total Monthly Expenses                                                                        Monthly Un-
                         2009 70% Program                             Number in      Pgm. Eligible's \1\      Avg Daily Expense Pgm.     Daily Excess     Total Per Diem Paid      Reimbursed
                                                                      Residence                                    Eligible's              Costs                 \2\                Expenses
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Feb                                                                           1               $ 2,331.00                  $ 388.50              $ 57.15           $ 1,988.10            $ 342.90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Mar                                                                           1              $ 12,043.50                  $ 388.50              $ 57.15          $ 10,271.85          $ 1,771.65
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
April                                                                         1              $ 11,655.00                  $ 388.50              $ 57.15           $ 9,940.50          $ 1,714.50
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
May                                                                           1              $ 12,747.75                  $ 411.22              $ 79.87          $ 10,271.85          $ 2,475.90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jun                                                                           1              $ 13,950.46                  $ 465.02             $ 133.67           $ 9,940.50          $ 4,009.96
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jul                                                                           3              $ 32,103.09                  $ 785.80             $ 888.85          $ 18,555.60         $ 27,554.40
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Aug                                                                           5              $ 51,382.62                  $ 582.44           $ 1,255.47          $ 30,152.85         $ 38,919.46
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sep                                                                           4              $ 59,622.29                  $ 496.85             $ 662.01          $ 39,762.00         $ 19,860.29
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Oct                                                                           7              $ 98,969.32                  $ 495.82           $ 1,153.85          $ 67,519.92         $ 35,769.34
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nov                                                                          11             $ 129,318.19                  $ 485.97           $ 1,704.86          $ 89,695.58         $ 51,145.73
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dec                                                                          12             $ 152,088.23                  $ 474.91           $ 1,713.12         $ 111,209.28         $ 51,393.63
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Actual expenses incurred by 70-Percent Program eligible veterans for the number in-residence days at the State Veterans Home under the 70-Percent Program.
\2\ Daily VA per diem rate from February through October 2009 $331.35; from October 2009 through December 2009 $330.98.


[GRAPHIC] [TIFF OMITTED] 55233.004


[GRAPHIC] [TIFF OMITTED] 55233.005


[GRAPHIC] [TIFF OMITTED] 55233.006


[GRAPHIC] [TIFF OMITTED] 55233.007


    I believe the VA has done all that it can under current law. 
However, the VA's administrative measures only relieve a portion of the 
financial burden. Hawaii Island, where the State Veterans Home is 
located, suffers from a critical shortage of doctors (see attachment) 
as well as specialty medical services. This shortage requires transport 
of a resident 200 miles by air to the island of Oahu where care would 
be available.
    The rapid growth of the 70-Percent Program eligible veterans in our 
Home is duplicated nationwide. Because of this growth and the financial 
implications, many states have constrained admission of veterans under 
the new program. The Yukio Okutsu State Veterans Home is proud to 
report that it is nearing capacity. We are 99 percent filled and soon 
will need to establish a waiting list. Our Home's wait list is 
established with priority given to service connected disabled veterans 
by rank order of disability rating.
    The 70-Percent Program has been a blessing for many veterans and 
their families. As the Yukio Okutsu State Veterans Home--Hilo reaches 
capacity, Mr. Mark Moses, State Director, Office of Veterans Services 
has begun to assess the need for Hawaii's next State Home. The 70-
Percent Program will have a profound impact on his planning and 
implementation.
    The National Association of State Veterans Homes has proposed 
technical amendments to the 70-Percent Program that are reflected in 
H.R. 4241, introduced by Representative Michael H. Michaud, a member, 
House Committee on Veterans' Affairs. The amendments contained in H.R. 
4241 will allow all State Veterans Homes greater flexibility for 
admission and for care of veterans with service-connected disabilities 
without jeopardizing the future of the Homes. As you and the Committee 
on Veterans' Affairs deliberate H.R. 4241, please know that it will be 
beneficial to both veterans as well as the Homes built to serve them. I 
urge you to support this measure.
    Mr. Chairman, thank you for your dedication, and the dedication of 
the Committee on Veterans' Affairs in support of our nation's veterans.

                                                                    Physician Needs Estimate Provided by Hilo Medical Center
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                           Specialty                              2010 Service    2010 Adjusted     Total Estimated     Number of    Estimated    Estimated    2010 Estimated    2011 Estimated
----------------------------------------------------------------      Area        Service Area      Physician Need       Existing    Reduction    Reduction      Net Need          Net Need
                                                                   Population    Population \1\ ----------------------  Physicians       in           in
                                                                --------------------------------                      -------------  Practicing   Practicing -----------------------------------
                                                                                                                                     Physicians   Physicians
                                                                                                     Hi        Low                    2010 \2\     2011 \2\
                                                                                                                                   --------------------------    Hi      Low       Hi      Low

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
General/Family Practice                                                   85381           63438       20.7       15.9           18            5            3      7.7      2.9     10.7      3.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
General Internal Medicine                                                 85381           63438       18.7       18.1           16            4            2      6.7      6.1      8.7     10.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Pediatrics                                                                85381           63652         10        7.9            5            1            0        6      3.9        6      6.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
OB/Gyn                                                                    85381           77364        9.7        7.7            7            1            0      3.7      1.7      3.7      2.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Neonatal/Perinatal                                                        85381           74905        0.7          0            0            0            0      0.7        0      0.7        0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Pediatric Subspecialties                                                  85381           79012        1.3          0            0            0            0      1.3        0      1.3        0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cardiology                                                                85381           77833        5.1        2.5            3            1            0      3.1      0.5      3.1        0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Endocrinology                                                             85381           69637        0.8        0.6            0            0            0      0.8      0.6      0.8      1.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Gastroenterology                                                          85381           79293        2.7        2.1            3            2            0      1.7      1.1      1.7      0.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Hematology/Oncology                                                       85381           67733        1.8        2.5            1            1            0      1.8      2.5      1.8        4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Infectious Diseases                                                       85381           74794        0.9        0.7            0            0            0      0.9      0.7      0.9      1.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nephrology                                                                85381           76314        1.3        0.9            1            0            0      0.3     -0.1      0.3     -0.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Pulmonology                                                               85381           74597        1.9        1.1            1            1            0      1.9      1.1      1.9      1.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rheumatology                                                              85381           69372        0.8        0.5            0            0            0      0.8      0.5      0.8        1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Allergy & Immunology                                                      85381           79012        0.9        0.7            0            0            0      0.9      0.7      0.9      1.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dermatology                                                               85381           70602        2.2          2            2            0            0      0.2        0      0.2        0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
General Surgery                                                           85381           58939        5.9        5.7            3            1            1      3.9      3.7      4.9      7.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Colon & Rectal Surgery                                                    85381           79012        0.3          0            0            0            0      0.3        0      0.3        0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Neurology                                                                 85381           79012        2.8        1.8            1            1            0      2.8      1.8      2.8      2.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Neurosurgery                                                              85381            7317        0.1        0.1            0            0            0      0.1      0.1      0.1      0.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ophthalmology                                                             85381           92893        5.5        4.4            3            0            0      2.5      1.4      2.5      2.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Orthopedic Surgery                                                        85381           67989        4.6        4.2            1            1            0      4.6      4.2      4.6      7.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ENT                                                                       85381           55353        1.7        1.8            1            0            0      0.7      0.8      0.7      1.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Plastic Surgery                                                           85381           79012        1.6        0.9            0            0            0      1.6      0.9      1.6      1.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Thoracic Surgery                                                          85381           79012        1.3        0.7            0            0            0      1.3      0.7      1.3      1.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Urology                                                                   85381           63609          2          2          1.5          0.5            0        1        1        1      1.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Psychiatry                                                                85381           69859        9.2       11.1            3            2            0      8.2     10.1      8.2     18.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rehabilitation                                                            85381           79012        1.6        1.3            2            0            0     -0.4     -0.7     -0.8     -1.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Population adjusted for market share.
\2\ Reduction estimates based on number of physicians who will turn 65 within time frame.

  Prepared Statement of Gary Bermeosolo, Legislative Officer, National
  Association of State Veterans Homes, and Administrator, Nevada State
                    Veterans Home, Boulder City, NV
    Mr. Chairman and other Distinguished Members of the Subcommittee on 
Health of the U.S. House of Representatives Committee on Veterans' 
Affairs, thank you for inviting me to testify at this legislative 
hearing.
    As the Legislative Officer of the National Association of State 
Veterans Homes (NASVH) and as the Administrator of the Nevada State 
Veterans Home (NSVH), I am honored to be here with you this afternoon 
to request your support for H.R. 4241, a bill to amend chapter 17 of 
title 38, of the United States Code, to allow for increased flexibility 
in payments for state veterans homes.
    When Public Law 109-461 passed in 2006, its intent was to correct 
the inequities that existed in the system, whereby veterans with a 70 
percent or greater service connected disability rating couldn't come to 
a state veteran home at no cost, but they could go to a community 
nursing home at no cost. This was a well-intended law and we thought it 
would correct this inequity.
    However, when Public Law 109-461 took effect, on April 29, 2009, 
the regulations implementing it created more inequities than it 
corrected. In essence, state veterans homes are being offered a flat 
rate to assume all responsibility for the veteran's care, which has and 
will continue to create financial hardships on state veterans homes.
    Previously, we were able to admit veterans with a 70 percent or 
greater service connected disability as ``private pay'' residents. Now, 
we are being required to admit them under a program intended to cover 
their total cost of care, but one which actually places the cost of 
their care on the state. Consequently, many states can't admit these 
veterans because of this financial burden.
    It is difficult to calculate the actual cost of this burden and/or 
the number of states currently impacted because many states aren't 
accepting these veterans because they don't have the funds to provide 
the required care. They are simply unwilling to assume the risk by 
exposing their states to the financial uncertainties of this new 
program.
    Let me assure you, this is not an issue confined to any one state. 
This is a nation-wide problem. NASVH is comprised of the 137 state 
veterans homes across the country. Since Public Law 109-461 was 
implemented, I have been contacted by administrators and directors of 
state home programs from all over the United States requesting my 
assistance, as NASVH's Legislative Officer, with the financial 
challenges this law has created for their states.
    And, while I am very concerned as the Legislative Officer for 
NASVH, I am also very concerned as the Administrator of the Nevada 
State Veterans Home in Boulder City. Let me share with you just one of 
the many experiences I have had in Nevada in recent months.
    The wife of an applicant, who we'll call Mr. Disabled Veteran 
(D.V.), came to our Home on July 21, 2009, seeking admission for her 
husband, a World War II veteran. She was desperate to get him in our 
Home where she could be confident he would receive quality care and 
have opportunities to socialize with other vets who he could relate to.
    We gave her a tour and brought her back to the office to review our 
Home's offerings and application process. As we began discussing our 
daily cost of care, Mrs. D.V. indicated her husband had a 100 percent 
service connected disability rating and, consequently, she was not 
being charged for his care at the community nursing home where he 
currently resided. We explained to Mrs. D.V. the difference between the 
community nursing home's and the state home program's reimbursement 
arrangement with VA and shared with Mrs. D.V. that we cannot, under the 
current law, provide care for her husband because of the potential 
financial implications for the State of Nevada.
    At this point, Mrs. D.V. began crying and asked how this could be 
possible, since we aren't just a nursing home, but a nursing home 
especially for veterans. I gave Mrs. D.V. a history of how we arrived 
at this point and indicated I was working with other state home 
programs and Congress to fix this problem, but until it's fixed, we 
simply can't assume the risk of admitting 70 percent or more disabled 
veterans.
    Mrs. D.V. then reached in her purse and retrieved her check book. 
As she waived it in the air she stated, ``But I'll pay for his care if 
you'll just admit him.'' We then shared with her that VA Regulations 
won't allow her to pay for the cost of her husband's care. She began 
sobbing as she tried to come to terms with what we were telling her. At 
this point, I looked this woman in the eyes and I promised her I would 
do everything possible to get this fixed.
    As our meeting concluded, we encouraged Mrs. D.V. to check back 
with us periodically to see if the law had been fixed. Mrs. D.V. called 
me back in August, then again in September, and again in October, and 
again in November, each time asking if ``the 70 percent thing'' was 
fixed yet. Each time, we had to tell her ``no, but we're still working 
on it.''
    Mrs. D.V. doesn't call me anymore. Her husband died on December 16, 
2009, never able to access the care he deserved as a 100 percent 
service connected disabled veteran.
    It is impossible to convey how difficult it is to turn these folks 
away. State home administrators across the country are unwilling to 
assume the risk of bankrupting their programs, which would have the 
catastrophic effect of displacing their current residents.
    Mr. Chairman and Members of the Committee, I implore you--please 
correct this injustice. We are turning away the people who most deserve 
and need care in state veterans homes. H.R. 4241 corrects the 
inequities and achieves the end result we were all hoping for and, most 
importantly, that our veterans deserve.
    Mr. Chairman, this concludes my statement. Thank you for permitting 
me to testify today on behalf of the National Association of State 
Veterans Homes and the Nevada State Veterans Home Program. I will be 
pleased to answer any questions.

                                 
     Prepared Statement of Kelley J. Kash, Chief Executive Officer,
                   Maine Veterans' Homes, Augusta, ME
    Mr. Chairman, and Members of the Subcommittee, thank you for 
inviting me to testify here today at this hearing on H.R. 4241. My name 
is Kelley J. Kash, and I am the Chief Executive Officer of the Maine 
Veterans' Homes. The Maine Veterans' Homes strongly supports H.R. 4241.
    The Maine Veterans' Homes is a public non-profit system of State 
Veterans Homes established by the government of the State of Maine. We 
currently operate 640 skilled nursing, long-term care nursing, and 
domiciliary beds at six locations throughout the State of Maine, at 
Augusta, Bangor, Caribou, Scarborough, South Paris, and Machias. The 
Maine Veterans Homes operates its nursing facilities entirely with its 
own employees, under a Board of Trustees appointed by the Governor of 
Maine, and we have no management arrangements with private corporate 
entities.
    The Maine Veterans' Homes is located in one of the 30 States in the 
nation that have Medicare-certified and/or Medicaid-certified State 
Veterans Homes. In fact, all nursing facilities of the Maine Veterans' 
Homes are both Medicare and Medicaid certified, and we have operated 
successfully in this manner for almost 30 years. As such, the Maine 
Veterans' Homes provides in conjunction with the Medicare and Medicaid 
payment systems a wide range of post-acute, post-operative, and 
rehabilitative services to Maine veterans, at no cost, or at very low 
cost, to such veterans. Such post-acute, post-operative and therapeutic 
care is known in the health care community as ``skilled nursing care.'' 
The Maine Veterans' Homes provides a lot of skilled nursing care to 
Maine veterans, and as you have heard here today, skilled nursing care 
is precisely the type of nursing care for which the VA's new 70-Percent 
Program causes a State Veterans Home to incur the greatest financial 
losses.
    The more skilled nursing care that a State Veterans Home provides 
to veterans under the 70-Percent Program, the larger are its losses. In 
fact, the Maine Veterans' Homes has estimated that, based on the 
demographics of the Maine Veteran Population, if we were to admit every 
veteran in Maine that reasonably could seek admission to the Maine 
Veterans' Homes under the 70-Percent Program, the Maine Veterans' Homes 
would sustain a net loss of between $8 and $16 million per year, and be 
bankrupt within 1\1/2\ to 3 years. Concerning this fact, it is 
important to note that the 70-Percent Program in its final form, 
contrary to Senator Akaka's original intent, does not serve only those 
``severely-disabled service-connected veterans'' with a 70 percent or 
greater disability. The 70-Percent Program serves any veteran with a 
service-connected disability of as low as 10 percent if that service-
connected disability in any way requires nursing home care. 
Furthermore, if a State Veterans Home were to provide any significant 
amount of skilled nursing care, post-acute care, post-operative care, 
or therapeutic care to a veteran under the 70-Percent Program (to say 
nothing of kidney dialysis services, hospice services, therapeutic 
radiation, oncology services, expensive drugs, or even dentistry) a 
State Veterans Home is almost guaranteed of incurring substantial 
financial losses under the 70-Percent Program.
    This is why the testimony of the President of the National 
Association of State Veterans Homes (NASVH), Colleen Rundell, from the 
State of Vermont, argues the VA's numbers simply do not add up and that 
the VA's 70-Percent Program substantially underpays a State Veterans 
Home for providing skilled nursing care to service-connected disabled 
veterans. This is why the testimony from the State of Hawaii State 
Veterans Home demonstrates that it is losing money at the rate of more 
than $600,000 per year, in its only home, under the 70-Percent Program, 
and has lost money consistently under the 70-Percent Program since the 
Program became effective on May 29, 2009. This is why the State of 
Hawaii previously has called the 70-Percent Program a ``financial 
disaster.'' This is why the State of Tennessee reports that its State 
Veterans Homes are currently incurring losses of approximately $1.4 
million per year under the 70-Percent Program and anticipates that 
these losses will increase. This is why NASVH's National Legislative 
Director from the State of Nevada has called the reimbursement methods 
under the VA's 70-Percent Program a ``nation-wide problem,'' and why 
the Nevada State Veterans Home has entirely avoided admitting any 
service-connected disabled veteran under the 70-Percent Program since 
the Program became effective. This is also why the Maine Veterans' 
Homes has admitted no veteran intentionally under the 70-Percent 
Program since the Program became effective. This is exactly the 
opposite result that Congress hoped to achieve by the enactment of the 
legislation that became the 70-Percent Program.
    In order to illustrate the financial losses that would be incurred 
by the Maine Veterans' Homes if we were to provide skilled nursing care 
to substantial numbers of service-connected disabled veterans at our 
nursing facilities under the 70-Percent Program, as opposed to being 
reimbursed under Medicare or Medicaid, we pulled the files of six 
typical skilled nursing residents at our facilities. These files showed 
that we would lose an average of $238 per resident per day under the 
VA's 70-Percent Program compared to existing sources of funds such as 
Medicare or Medicaid. These data are consistent with the facts being 
reported here today by other Medicare-certified and Medicaid-certified 
State Veterans Homes and also by such homes in other States throughout 
the nation. The only State Veterans Homes in the nation that have any 
hope of not incurring substantial financial losses under the VA's new 
70-Percent Program are those State Veterans Homes which are not 
Medicare or Medicaid-certified or which only provide a minimal amount 
of skilled nursing care. The financial summary of our investigations of 
actual resident records is appended to my testimony.
    Since the 70-Percent Program became effective on May 29, 2009, we 
have met several times with VA officials including Dr. James Burris, 
who testified before you today. Frankly, Dr. Burris does not understand 
the problem that the 70-Percent Program poses for State Veterans Homes 
that provide skilled nursing services under Medicare and Medicaid, and 
he does not understand the enormity of this problem for the majority of 
the States in the nation. In simple language, the VA's 70-Percent 
Program does not pay State Veterans Homes enough to provide skilled 
nursing care to veterans.
    In short, in implementing the 70-Percent Program, the VA replaced a 
payment system that pays adequately for skilled nursing care at State 
Veterans Homes (Medicare/Medicaid) with a payment system that pays 
inadequately for skilled nursing care at State Veterans Homes (the 70-
Percent Program). This has caused Medicare and Medicaid-certified State 
Veterans Homes to avoid or refuse admission to service-connected 
disabled veterans requiring skilled nursing. This is clearly not what 
was intended by Congress when it passed the legislation that eventually 
became the 70-Percent Program.
    To make matters worse, shortly after this hearing was scheduled, 
the Togus VA Medical Center at Augusta, Maine, on February 1, 2010, 
advised the Maine Veterans' Homes by telephone, that upon the oral 
``direction'' of the VA central office, it was withholding all VA per 
diem payments from the Maine Veterans' Homes because it suspected that 
some eligible veterans in Maine were not being enrolled mandatorily in 
the 70-Percent Program--the same program that could cost Maine 
Veterans' Homes an estimated minimum of $8 million per year. The VA's 
illegitimate and wholesale withholding of all VA per diem payments 
without justification by itself could have cost the Maine Veterans' 
Homes an estimated $800,000 per month unless we had successfully 
complained to the VA that it was unlawfully withholding funds from us. 
The VA in the past has said that it could cure the problems with the 
70-Percent Program administratively, but it has not done so. The result 
has been a 70-Percent Program in chaos. We have simply run out of 
patience with the VA. The VA can no longer hide its head in the sand 
from the disarray that it has created for our nation's veterans and our 
nation's State Veterans Homes.
    What should be done about this? First, Congress should allow State 
Veterans Homes the option of continuing to receive payments from 
Medicare or Medicaid, plus the basic (lower) VA per diem rate for the 
care of service-connected disabled veterans, until the VA can devise a 
permanent system and adopt regulations under the 70-Percent Program to 
pay State Veterans Homes at rates comparable to those available from 
Medicare and Medicaid, plus the basic (lower) VA per diem rate. The VA 
should be required also to pay any co-pay required by a veteran for the 
receipt of Medicare or Medicaid benefits under the 70-Percent Program, 
so that such care is at no cost to the veteran. ``Payment in full'' by 
the VA to a State Veterans Home for a veteran's nursing home care means 
``payment in full'' to a State Veterans Home for a veteran's nursing 
home care. Second, Congress should allow State Veterans Homes to use 
the existing VA Community Nursing Home Contract program so that we can 
provide immediate long-term care services to service-connected disabled 
veterans at no cost to such veterans.
    The enactment of H.R. 4241 would give the VA the authority to 
accomplish both of these goals quickly, and we urge its speedy passage. 
We thank the Chairman and members of the Subcommittee for the 
opportunity to testify today, and we look forward to working with both 
Congress and the VA to effect a permanent solution to the substantial 
financial problems of the VA's current 70-Percent Program.


                    Maine Veterans' Homes--Sample of 70-Percent Disabled Veterans Admissions
----------------------------------------------------------------------------------------------------------------
             Resident                    A            B            C            D            E            F
----------------------------------------------------------------------------------------------------------------
Payor                                  Medicare  Private Pay     Medicaid     Medicare     Medicare     Medicaid
----------------------------------------------------------------------------------------------------------------
Days                                         89           30           30           14           31           31
----------------------------------------------------------------------------------------------------------------
Room & Board                            $24,933       $8,310       $7,560       $3,878       $8,990       $8,122
----------------------------------------------------------------------------------------------------------------
Pharmacy                                 $4,273                                 $4,311       $5,605
----------------------------------------------------------------------------------------------------------------
Lab                                        $222
----------------------------------------------------------------------------------------------------------------
IV Therapy                                                                      $1,465
----------------------------------------------------------------------------------------------------------------
Radiology                                                                         $298       $1,193
----------------------------------------------------------------------------------------------------------------
Therapy (PT, OT, & ST)                  $20,610       $2,450                    $4,670       $8,540      $11,490
----------------------------------------------------------------------------------------------------------------
Total Charges                           $50,038      $10,760       $7,560      $14,622      $24,328      $19,612
----------------------------------------------------------------------------------------------------------------
Total Reimbursements                    $43,236       $7,462       $5,350       $7,752      $15,875      $12,345
----------------------------------------------------------------------------------------------------------------
Difference                             ($6,802)     ($3,298)     ($2,210)     ($6,870)     ($8,453)     ($7,267)
----------------------------------------------------------------------------------------------------------------
VA basic rate per diem                   $5,135       $2,223       $2,233       $1,042       $2,307       $2,307
----------------------------------------------------------------------------------------------------------------
Difference after per diem              ($1,667)     ($1,075)          $23     ($5,828)     ($6,146)     ($4,960)
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
VA ``Higher Per Diem'' Payment          $21,154       $7,931       $6,479       $3,328       $7,368       $7,368
----------------------------------------------------------------------------------------------------------------
Difference                            ($28,884)     ($2,829)     ($1,081)    ($11,294)    ($16,960)    ($12,244)
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Average daily reimbursement                $543         $323         $253         $628         $587         $473
 (includes basic rate per diem)
----------------------------------------------------------------------------------------------------------------
VA ``Higher Per Diem'' Rate                $238         $264         $216         $238         $238         $238
 (lesser of prevailing or OMB A-
 87)
----------------------------------------------------------------------------------------------------------------
Difference                               ($305)        ($59)        ($37)       ($390)       ($349)       ($235)
----------------------------------------------------------------------------------------------------------------


          Maine Veterans' Homes--Projected Losses from 70-Percent Disabled Veterans Program Admissions
----------------------------------------------------------------------------------------------------------------
             Resident                    A            B            C            D            E            F
----------------------------------------------------------------------------------------------------------------
Primary Payor                          Medicare  Private Pay     Medicaid     Medicare     Medicare     Medicaid
----------------------------------------------------------------------------------------------------------------
Days                                         89           30           30           14           31           31
----------------------------------------------------------------------------------------------------------------
Reimbursements (with basic rate         $48,371       $9,685       $7,583       $8,794      $18,182      $14,652
 per diem)
----------------------------------------------------------------------------------------------------------------
VA ``Higher Per Diem'' Payments         $21,154       $7,931       $6,479       $3,328       $7,368       $7,368
----------------------------------------------------------------------------------------------------------------
Total Reimbursements                   $107,267
----------------------------------------------------------------------------------------------------------------
Total 70% Program HPD Payments          $53,628
----------------------------------------------------------------------------------------------------------------
Difference                            ($53,639)
----------------------------------------------------------------------------------------------------------------
Total Bed Days                              225
----------------------------------------------------------------------------------------------------------------
Average Loss per Resident Day            $(238)
----------------------------------------------------------------------------------------------------------------


                                 
     Prepared Statement of James F. Burris, M.D., Chief Consultant,
     Geriatrics and Extended Care, Veterans Health Administration,
                  U.S. Department of Veterans Affairs
    Good afternoon Mr. Chairman and Members of the Committee. I 
appreciate the opportunity to appear before you today to discuss H.R. 
4241 and the mechanism by which the Department of Veterans Affairs (VA) 
supports the States' operation of their nursing homes for mandatory 
Veterans. I will use the term ``mandatory Veterans'' to refer to 
Veterans who have a service connected disability rated 70 percent or 
more or need nursing home care for their service connected disability. 
Under the State home program, VA provides support to States to 
construct and operate nursing homes and domiciliaries for the care of 
Veterans. In return, State homes provide nursing home care to many of 
our Nation's Veterans. Today, there are 137 State homes, and every 
State operates at least one. Last fiscal year, 27,413 Veterans were 
cared for in these homes.

IMPLEMENTATION OF NEW PER DIEM FOR MANDATORY VETERANS

    For many years prior to the enactment of Public Law 109-461, VA 
paid the full cost of these Veterans' care in VA or private nursing 
homes but not in State homes. By law, VA could only pay one rate for 
all eligible Veterans in a State home. The rate was the lesser of one-
half of the cost of the care in the State home or an amount established 
by VA each year. This changed when, in 2006, Congress directed VA to 
pay State nursing homes a new rate for mandatory Veterans: the lesser 
of a prevailing rate determined by VA or the actual cost of care in the 
State home. VA regulations implementing this congressional mandate were 
effective May 29, 2009, with provision for retroactive payment to March 
21, 2007.
    Although a number of States are satisfied with the new rates VA 
pays for mandatory Veterans, several have reported problems. Some 
States report that after the enactment of Public Law 109-461, they now 
receive smaller total payments for the care of these veterans because 
they are no longer able to bill Veterans or other payors. Some States 
report that the VA payments do not cover their actual costs and as a 
result, they cannot afford to admit mandatory Veterans anymore. Other 
States reported that VA facilities stopped providing specialty 
physician services to their mandatory Veterans. We are committed to 
taking steps to ascertain circumstances where the intent of Public Law 
109-461 is not being met, and work with the State home program for 
remedies to avoid any adverse impact upon Veterans.
    In an effort to further understand these reported difficulties, VA 
has met with representatives of the National Association of State 
Directors of Veterans Affairs, the National Association of State 
Veterans Homes, the National Governors Association, congressional 
staff. We believe that with the help of the State Veterans Homes 
represented here today there are non-legislative steps that can be 
taken to resolve the difficulties reported by the States. We have asked 
States to share with us supporting documentation that demonstrates how 
their actual costs for the care of these veterans exceed the allowable 
VA per diem payment under current law. With this information, we will 
be better positioned to understand the impact of Public Law 109-461 and 
address their concerns.
    VA has already taken steps toward resolving one of those reported 
difficulties. On October 19, 2009, VA issued guidance to its field 
facilities that the ``full per diem payment'' to State homes covers 
nursing home services only and that VA facilities must continue to 
provide most specialty care to mandatory Veterans as they did prior to 
the initiation of the new payments. That clarification eliminated one 
source of confusion.
    Further, we believe that some States need assistance in 
understanding the provisions of the Office of Management and Budget 
(OMB) Circular A-87, which States must use to compute their actual cost 
of care for mandatory Veterans. VA has offered to work individually 
with States to improve their understanding. We will continue to work 
with the State homes and our other partners to ensure that Veterans are 
being served appropriately.

                               H.R. 4241

    H.R. 4241 contains several provisions intended to resolve the 
difficulties that States have with the new VA payments for mandatory 
Veterans. Section 1(a)(3) of the bill would authorize VA to enter into 
agreements with State homes to provide care for mandatory Veterans 
under VA's contract nursing home care authority in lieu of making per 
diem payments. As noted, different State homes have widely varying 
circumstances and patient populations - without a complete 
understanding of how State homes are currently being impacted by Public 
Law 109-461, we are unable to comment on whether a contract mechanism 
would be a viable solution to the reported problems.
    Section 1(b) of the bill would delete the requirement in current 
law that VA pay the actual cost of care if that cost is less than the 
prevailing rate (i.e., VA would simply pay the prevailing rate, which 
for most States is higher than the calculated actual cost). VA opposes 
this provision, as it would result in VA paying more than the actual 
cost of care.
    Section 1(c) would provide that VA's ``full per diem'' payments for 
mandatory Veterans' nursing home care is payment in full only with 
respect to other VA payments under title 38, United States Code. State 
homes could thus bill other payors for this care, including the 
mandatory Veterans themselves. VA's payment is intended to be payment 
in full with respect to the Veteran, and elimination of Veteran billing 
(and the resulting disparity with VA Community Living Centers and 
contracted arrangements) was part of the purpose of the changes made in 
Public Law 109-461. We therefore oppose this provision.
    Section 1(d) would permit State homes to bill Medicare and Medicaid 
for nursing home care provided to mandatory Veterans without these 
payments being reduced by the amount of the VA payments. As noted 
above, VA's payment for mandatory Veterans is intended to be payment in 
full for nursing home care. Because this provision could result in the 
Federal government making duplicate payments for the same care, we 
oppose it as well.
    We anticipate that enactment of H.R. 4241 would require additional 
VA expenditures of approximately $17.5 million in the first year and 
more than $200 million over 10 years.
    Thank you once again for the opportunity to testify. We are 
prepared to address your questions.

                                 
                 Statement of Jacob B. Gadd, Assistant
         Director for Program Management, Veterans Affairs and
               Rehabilitation Commission, American Legion
    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to submit The American Legion's views 
on H.R. 4241, to amend Chapter 17 of title 38, United States Code 
(USC), to allow for increased flexibility in payments for State 
Veterans Homes. Thank you Mr. Chairman for introducing this much needed 
and greatly appreciated proposal to improve the Department of Veterans 
Affairs' (VA's) per diem payments to State Veterans Homes for providing 
quality nursing home care to service-connected disabled veterans.
    When enacted this legislation would improve per diem payments from 
the Department of Veterans Affairs (VA) to State Veterans Homes which 
reflects the actual geographic cost of care furnished in a non-VA 
nursing home made payable at the prevailing rate.
    Title 38, United States Code (USC) authorizes VA to pay per diems 
for care in State Veterans Homes for the care of service-connected 
disabled veterans awarded a VA disability rating of 70 percent or 
greater. Currently, VA pays State Veterans Homes a per diem that covers 
approximately one-third of the cost of providing nursing home care for 
eligible veterans.
    Public Law (PL) 109-461, the Veterans Benefits, Health Care, and 
Information Technology Act of 2006, authorized VA to pay State Veterans 
Homes to provide nursing home care to veterans with service-connected 
disabilities. This program commonly was referred to as ``the 70-Percent 
Program'' within the State Veterans Home community. The original intent 
of the program was to amend PL 106-117, the Veterans Millennium Health 
Care and Benefits Act of 1999, to permit State Veterans Homes to 
provide the same no-cost care to veterans as provided under the VA's 
Veterans Health Administration's Community Nursing Home Provider 
Agreements. Eligibility for ``the 70-Percent Program'' was expanded to 
any veteran who has a service-connected disability needing nursing home 
care for their disability.
    Regrettably, the final VA regulation actually resulted in 
significantly lower payments and fails to cover the actual cost of 
nursing home care because the calculations of ``the daily cost of 
care'' cannot include any medically-necessary services provided outside 
of the State Veterans Homes, which covers the spectrum from 
chemotherapy to dialysis to specialized care to just x-rays. Therefore, 
the State Veterans Homes must forfeit any allowable Centers for 
Medicare and Medicaid Services (CMS) reimbursements for these medical 
treatment and services, to include those covered under Medicaid, 
Medicare Part A, Part B or Part D.
    Because of this fiscal discrepancy, the National Association of 
State Veterans Homes (NASDVA), which represents the 137 state veterans 
homes throughout our nation, approved a resolution requesting Congress 
pass a clarification amendment to Section 211, Title II of the Veterans 
Benefits, Health Care and Information Technology Act of 2006 (PL 109-
461) postponing the mandatory implementation of the program.
    The American Legion supports legislation to amend Subchapter V, 
Chapter 17, title 38, USC to provide clarification of CMS and VA per 
diem reimbursements to State Veterans Homes for nursing home care. The 
American Legion supports legislation to increase VA's per diem payments 
to a rate of 50 percent of the national average cost of providing care 
in a State Veterans Home to more closely align with the CMS rate.
    Historically, VA has had a long and beneficial relationship with 
State Veterans Homes and was able to negotiate nursing home care costs 
at a much lower rate than other local community providers or VA Nursing 
Home Units. The American Legion recommends Congress treat the full 
needs of veterans within State Veterans Homes and not rely on state 
budgets to offset costs of eligible veterans.
    The American Legion believes that under the provisions of ``the 70-
Percent Program,'' enrollment for nursing home care in State Veterans 
Homes will result in significant budgetary shortfall for each eligible 
veteran admitted. The unintended consequences could very well deter or 
severely limit State Veterans Homes' willingness to accept eligible 
service-connected disabled veterans. This unfortunate scenario would 
require VA to consider more costly alternatives.
    The American Legion appreciates the congressional intent in the 
original VA per diem program, which expanded eligibility for any 
veteran with a VA disability rating equal to or greater than 10 
percent; however, the reimbursed costs of care must reflect the full 
continuum of care for services delivered while residing in State 
Veterans Homes. These same costs are routinely applied to veterans 
utilizing VA Domiciliaries or private Nursing Homes in the community. 
The American Legion urges Congress to conduct a thorough review of 
``the 70-Percent Program'' and to authorize VA to pay State Veterans 
Homes for the ancillary costs needed by service-connected disabled 
veterans.
    Mr. Chairman and Members of the Subcommittee, The American Legion 
sincerely appreciates the opportunity to submit testimony. Thank you.

                                 
                Statement of Raymond C. Kelley, National
            Legislative Director, American Veterans (AMVETS)
    Chairman Michaud, Ranking Member Brown, and Members of the 
Subcommittee, thank you for the opportunity to submit for the record 
AMVETS' views regarding the ``Increased Flexibility in Payments for 
State Veterans Homes,'' H.R. 4241.
    In 2006, Congress approved payment of differing per diem rates to 
State Veterans Homes that provide nursing home care for service-
connected veterans through the ``Veterans Benefits, Health Care, and 
Information Act of 2006.'' The intent of the act was to pay higher per 
diem rates, however, once enacted the payments to many of the State 
Veterans Homes did not cover the cost to care for these veterans. 
Without immediate intervention, the current rate could threaten the 
ability of many State Veterans Homes to function financially.
    Without implementing H.R. 4241, inadequate funding will continue to 
cause states to not take additional veterans into their facilities 
because of funding shortages as well as provide only 70 percent of the 
funding needed to care for the veterans who are already in these homes.
    Our veterans have earned and deserve only the highest quality of 
care, and under the current regulation they do not. AMVETS wholly 
supports H.R. 4241 and its effort to fix the unintended funding 
shortage to so many State Veterans Homes.
    Mr. Chairman, this concludes my testimony and I will be happy to 
answer any questions you might have.

                                 
       Statement of Hon. Henry E. Brown, Jr., Ranking Republican
        Member, Subcommittee on Health, and a Representative in
               Congress from the State of South Carolina
    I want to thank Chairman Michaud for holding this hearing to 
discuss H.R. 4241, a bill he introduced to allow for an increase in 
flexibility regarding payments to State veterans homes.
    The partnership between the Federal Government and States to 
provide nursing home care to a broad range of veterans is a long-
standing and honored tradition of cost sharing.
    To my understanding, the intent of H.R. 4241 is to provide a remedy 
for problems certain State homes are experiencing with the 
implementation of what is known as ``the 70-Percent Program.'' The 
program, established under Public Law 109-461, requires VA to reimburse 
State homes at a higher rate for the cost of care provided to veterans 
with a 70 percent or higher service-connected condition.
    The 70-Percent Program was meant to provide equity of access to VA 
resources for service-connected veterans residing in State Homes. 
However, despite our best intentions, this initiative has regrettably 
resulted in unintentional consequences.
    The 70-Percent Program was meant to assist State Veterans Homes in 
providing the highest quality nursing home care to veterans. And, if 
the 70-Percent Program is in fact doing the opposite and making it 
harder to meet that worthiest of goals, then it is a problem I am 
anxious to correct.
    I look forward to hearing from our panelists as we examine this 
issue and am very hopeful that as a result of this hearing, we will be 
able to find a way to resolve this issue without the need of a 
legislative remedy.
    I thank our witnesses for their time and participation.

                                 
               Statement of Adrian M. Atizado, Assistant
       National Legislative Director, Disabled American Veterans
    Mr. Chairman and Members of the Subcommittee:
    On behalf of the more than 1.3 million members of the Disabled 
American Veterans (DAV) and its Auxiliary, I wish to express my 
appreciation for this opportunity to present the Subcommittee our views 
for the record on legislation pending before the Subcommittee. Mr. 
Chairman, as you know, DAV is an organization devoted to advancing the 
interests of service-connected disabled veterans and their dependents 
and survivors. For more than eight decades, the DAV has devoted itself 
to a single purpose: building better lives for our nation's disabled 
veterans and their families.
    First, DAV wishes to thank this Subcommittee for establishing and 
helping enact what became section 211 of Public Law 109-461, the 
Veterans Benefits, Health Care, and Information Technology Act of 2006. 
This Act validated and completed the 1999 Congressional decision to 
provide seriously disabled service-connected veterans a guaranteed 
benefit of Department of Veterans Affairs (VA) nursing home care if 
their need for such care was based on a service-connected disability or 
for any condition if they were 70 percent or more disabled from 
service-connected disabilities. The Act extended that eligibility to 
these high-priority veterans in the nation's 137 state veterans homes.
    H.R. 4241, a bill introduced by the Chairman, would amend chapter 
17 of title 38, United States Code, to allow for increased flexibility 
in payments to State veterans homes for the care of service-connected 
veterans. DAV has a longstanding resolution, No. 238, adopted by our 
membership at our most recent National Convention, as follows: ``[i]n 
accordance with Public Law 109-461, VA [must] pay the full cost, on an 
equitable basis, for the care of veterans in need of State Home nursing 
care for a service-connected disability, and for any disability of a 
veteran with a service-connected disability rated at 70 percent or 
more.'' Therefore, we support the purposes of this bill, but point out 
some concerns that should be addressed before final passage.
    Section 1 of the bill would make seven technical changes to 
existing statutory language governing VA's authority to reimburse state 
veterans homes their cost of care for service-connected veterans 
resident in state homes. One primary purpose of the amendment would 
give the Secretary a new discretionary authority to employ the 
authority of section 1720 of title 38, United States Code, as a basis 
for entering into payment agreements with a state home caring for 
service-connected veterans. Another purpose of the section would 
replace the payment rate determination in existing law, currently 
subsiding in subsection 1745(a)(2), with a linkage to the prevailing 
geographic rate paid by VA under section 1720 to community nursing 
homes under contract with VA for the care of eligible veterans. A final 
focus of the amendment would be to circumscribe VA's reimbursement 
policy so that some state veterans homes may continue to participate in 
Medicare and Medicaid reimbursement programs. Continuation of this 
participation was cast into doubt with issuance of VA instructions 
under the new reimbursement program for service-connected veterans in 
state homes.
    Public Law 109-461 was enacted in December 2006, but unfortunately 
VA only promulgated regulations to carry out its intent in April 2009. 
Since publication of these regulations, Mr. Chairman, we have been 
informed by the administrators of some state facilities that the 
``full'' reimbursement rates governed by VA regulations will net some 
state veterans facilities less than their combined payments (from 
veterans, their state governments, the Department of Health and Human 
Services, and from VA under the traditional per diem payment subsidy) 
received before these regulations were issued. Your bill is intended to 
remedy this inequity.
    Current law establishes state veterans home reimbursement rates for 
service-connected veterans using two formulas: a geographically 
adjusted per diem rate established by the Secretary as a corollary to 
the rates VA currently pays community nursing homes; or, a rate 
determined by the administrator of a state veterans home based on the 
calculated daily cost of care at that home. Existing law requires the 
Secretary to reimburse state veterans homes for the care of service-
connected veterans at the lesser of these two rates.
    As we understand it, these rate choices available to VA and the 
state veterans homes have been discovered to be complicated 
significantly by the governing financial and accounting policy of the 
Office of Management and Budget as expressed in OMB Circular A-87. This 
circular establishes principles and standards for determining costs for 
federal awards carried out through grants, cost reimbursement 
contracts, and other agreements with State and local governments. Under 
the rules of this circular, a state home in determining its daily cost 
of care, cannot include in that cost structure the depreciation of 
buildings that were recipients of VA construction grants. As stated in 
the circular, ``[t]he computation of depreciation or use allowances 
will exclude: . . . (2) Any portion of the cost of buildings and 
equipment borne by or donated by the Federal Government irrespective of 
where title was originally vested or where it presently resides.'' This 
restriction on counting depreciation as a part of a home's daily cost 
of care significantly depresses the payable reimbursement rates. As a 
result of the state homes' excluding these significant amounts, the 
rates determined by the existing statutory formula will invariably 
become the OMB Circular A-87-determined rates. Therefore, in the view 
of the National Association of State Veterans Homes and other 
observers, the current statutory language in section 1745(a)(2) is 
unworkable for the purpose intended by Congress. The unworkability of 
these rates has served as a denial of access to nursing home care in 
state extended care facilities to the highest priority veterans, those 
who need nursing home care for residuals of chronic illnesses and 
injuries they incurred in military service to America.
    While your bill would appear to us to address the problems in the 
current statutory language and VA's current regulations, and would 
provide sharper guidance to VA in amending those regulations, we are 
concerned that the language of this bill may not alter the impact of 
the OMB policy that governs the overall federal-state cost accounting 
relationship. We ask that the Subcommittee consider requesting counsel 
of VA and OMB to assure the Subcommittee that the proposed language of 
your bill to restructure section 1745 will have its intended outcome of 
permitting disabled service-connected veterans to be reimbursed 
equitably and fully covered by state veterans homes.
    Mr. Chairman, this concludes DAV's testimony. Again, we thank the 
Subcommittee for its leadership and for requesting our views on this 
legislation.

                                 
          Statement of Linda S. Schwartz, RN, MSN, DrPH, FAAN,
   Senior Vice-President, National Association of State Directors of 
                                Veterans
 Affairs, and Commissioner, Connecticut Department of Veterans Affairs,
                             Rocky Hill, CT
    NASDVA is an organization with a history dating back to the Second 
World War. Our membership is composed of State Directors of Veterans 
Affairs and State Department of Veteran Affairs staff. Our members 
represent each State as well as the District of Columbia, American 
Samoa, Northern Mariana Islands, Puerto Rico and the Virgin Islands.
    As you may know each State has a designated ``Office of Prime 
Responsibility'' for service to veterans that is uniquely situated to 
be a vital resource which augment Federal programs, improve the 
identification of needs, coordinate local resources and ultimately 
enhance the quality of care and services to America's veterans now and 
in the future. NASDVA is a rich resource which had not been fully 
recognized nor utilized in caring for America's returning military/
veterans and their families. Collectively State governments commit more 
than $4 billion annually, which makes them second only to the Federal 
VA, in resource allocations to provide programs, benefits and services 
to the men and women who serve and defend our nation.
    Unlike ``Veteran Service Organizations'' State Departments are 
government agencies not membership organizations. Our members are 
tasked by their respective State with the responsibility to address the 
needs of all veterans irrespective of time in service, branch of 
military or disability status. On a daily basis, State Directors are 
confronted with unique situations which could not possibly be addressed 
in a timely manner by larger systems like DoD and VA. State Directors 
are held accountable by the citizens of their individual State and do 
effect changes and solve problems because they know who, where and how 
to orchestrate a successful outcome at the local level.
    In many respects, all veterans and their needs are our agenda. Over 
28,000 Nursing Home beds come directly under the administrative 
responsibilities of our members which means the subject of today's 
hearing is of major concern to our members because they bear the 
consequences of the recently implemented Regulations which are the 
focus of this hearing today. We appreciate this opportunity to provide 
testimony and comments on today's issues which are extremely important 
to our members.

Per Diem Reimbursement in State Veterans Homes

    Under the Millennium Health Care Act of 1999, Congress, in the name 
of the American people, directed the Department of Veteran Affairs (VA) 
to pay for nursing home care for veterans with a service connected 
disability rating of 70 percent or more and veterans who have sustained 
service-connected disabilities that require nursing home care. While VA 
provides full cost of care in either a VA or community contracted 
nursing home this has not been the case for State Veterans Homes. Not 
only is this a costly disparity in applying the per diem payments based 
on the facility in which a veteran receives their care, it penalizes 
veterans in State Homes. Despite the intent of Congress, over ten years 
have passed and the uniform application of this benefit has not been 
implemented.
    For years, NASDVA has consistently supported equity in the per diem 
payment system to veterans regardless of where they receive their care. 
We believe that Congress authorized the benefit to the veteran, not the 
facility in which they receive their care. The leadership and members 
of NASDVA have come, year after year both in testimony to the Congress 
and advocacy with VA seeking a fair and equitable solution to the 
inconsistency and inequality of these policies. This issue has also 
caught the attention of National Governors Association which has issued 
statements in support of full cost of care reimbursement for State 
Homes each year since 2002.
    In some jurisdictions, VA case managers routinely send veterans to 
contract homes because the full cost of care is absorbed by VA which 
prevents veterans from having to meet the stringent financial 
requirements of Title 19 Medicaid. Hundreds, probably thousands, of 
veterans meeting the criteria originally set forth in the 1999 
Millennium Act, did not receive this relief, or the benefits Congress 
intended. During this time lapse, veterans who served this nation 
honorably and incurred severe disabilities, injuries and illnesses have 
lost assets, personal savings and pride in order to meet the costs of 
care levied on them. Additionally State Directors have struggled to 
meet their fiduciary responsibilities and maintain the quality of care 
these veterans earned and deserve,
    With the enactment of the 2006 ``Veterans Benefits, Health Care, 
and Information Technology Act of 2006'' (Pub. L. No. 109-461, 
Sec. 211(a), codified at 38 U.S.C. Sec. 1745(a)), Congress approved 
payments by the VA to State Veterans Homes which meet the rigorous 
requirements required to qualify for per diem reimbursement and 
authorized VA to place severely disabled service-connected veterans 
directly in State homes and stipulated that VA was required to 
reimburse State homes for the full cost of such care.'' NASDVA as well 
as many veterans and the National Governors Association believed that 
the situation had been resolved.
    The notice of ``Regulations'' required for the implementation of 
this legislation languished for years. Despite the need and the urgency 
for these rules, Congress, providers and veterans had to wait while the 
cost of care continued to increase. All parties expected the statute to 
take effect 90 days after its enactment (March 21, 2007); but VA did 
not issue regulations to implement the program until April 29, 2009 
(effective May 29, 2009). This 2\1/2\-year delay in issuing regulations 
to implement the new per diem program has caused enormous difficulties 
and hardships not only with recordkeeping and administrative problems, 
veterans and their families did not receive the financial relief they 
were promised.
    Even as these Regulations finally became public in November of 
2008, VA restricted the ``comment period'' to only 30 days instead of 
the usual 60 days. On first read of the proposed Regulations, it was 
clear that the spirit and intent of this process was a casualty of time 
and bureaucracy. How ironic that Congressional legislation to update 
the basic per diem rates for veterans in State Homes was enacted in 
2006, consumed over 2 years of VA time to develop and publish the 
Regulations and resulted in only 30 days over the Christmas Holiday for 
comment. Despite the economic realities of the times, VA presented a 
very convoluted, confusing and disappointing proposal for the 
implementation of this landmark legislation.
    The program did not provide State Veterans Homes with the actual 
cost of care for disabled veterans, despite the intent of Congress. In 
fact in many States that had Medicare and/or Medicaid-certified 
Veterans Homes, the stipulation that any funding from these sources had 
to be repaid after 2 years was pejorative and naive on VA's part. How 
do you return the lost assets, homes, cars and savings to veterans who 
did spend down to qualify for Medicaid? How do you ``regulate'' and 
disqualify the use of Medicare to veterans who had contributed to that 
fund throughout their lifetime? How do you square these new policies 
for veterans who died waiting for these benefits.
    NASDVA worked for and expected that the new ``per diem'' rate for 
veterans, who meet the mandatory eligibility, would be equal to the 
same rate paid to VA Contracted Nursing Homes. The Regulations that 
went into effect in 2009 failed to adequately reimburse State Homes and 
State governments for the level of care required by VA. More 
importantly unintended consequences of the present reimbursement rates 
threatens the continued financial viability of many State Veterans 
Homes systems and raises questions about the future viability of the 
entire State Nursing Home Program, The specifications and the 
limitations required by the present Regulations are not in keeping with 
the original intent of Congress.

2009 GAO Report on VA Long-Term Care

    Information published in the 2009 GAO Report ``VA HEALTH CARE Long-
Term Care Strategic Planning and Budgeting Need Improvement'' 
identified a considerable difference in estimates of long term care 
demands and gaps in service with VA budget estimates and strategic 
planning. GAO found that VA's estimates were based on cost assumptions 
and workload projections that appeared to be low and unrealistic for 
both nursing home and non-institutional care. VA's model was flawed and 
underestimated its own nursing home spending because the projected 
increase in cost was estimated at 2.5 percent which is considerably 
lower than market costs. GAO reported that VA had plans to increase 
workload for certain veterans for who they are required to provide care 
but did not include nursing home workload plans for most veterans 
already on VA roles.
    GAO found that VA used cost assumptions which seriously 
underestimated the actual cost of care, minimized workload estimates 
and miscalculated the number of veterans using this system. Not only 
did this cast a great deal of doubt on the ``Strategic Plan'', these 
major discrepancies also raised questions about the reliability of VA's 
spending estimates and the extent to which VA was actually closing the 
gaps in the long-term system of care for America's veterans. These 
findings strongly suggest that present problems in VA reimbursement 
policies may be linked to the faulty budget projections and unrealistic 
data used in the development of the Strategic Plan reviewed by GAO.
    NASDVA has and continues to support changes to the present program 
that would insure that:

          VA develop a strategic plan for long-term care 
        services that maximizes the role of State veterans homes in 
        providing care and minimizes VA cost of Long Term Care for our 
        Nation's Veterans.
          VA provides veterans in State Nursing Homes meeting 
        the mandatory eligibility requirements the same ``per diem 
        rates'' paid to VA or community contracted nursing homes.
          Congress authorize sufficient funding to keep the 
        existing backlog of projects in the State Extended Care 
        Facilities Construction Grant Program at a manageable level to 
        assure life safety upgrades and new construction are timely.
          A implement measures to assure that States are paid a 
        more equitable per diem rate representing the 50 percent of the 
        States' average costs, as allowed by law, and that the policies 
        governing the program be amended to allow new State veterans 
        homes up to 50 percent of the total cost of care paid 
        retroactively from the date of the first veteran's admission to 
        the new home.

Conclusion

    States are the second largest providers of service to veterans in 
the America and commit over $4 billion dollars annually to provide 
direct services and support to veterans and their families. We augment 
and enhance VA programs and initiatives at the local level. We provide 
vital services and support to veterans and their families through State 
Benefit Offices, Cemetery and Memorial Affairs, Domiciles, Homeless 
programs, Substance Abuse and Skilled Nursing care. As of the beginning 
of this fiscal year 2009, there were nearly 28,000 State Veteran 
Nursing Home beds, more than 6,000 veterans domiciliary beds in 135 
State veterans' facilities throughout the Nation. In fact, States 
provide the majority of VA Authorized long-term and nursing home care. 
In essence we are ``where the rubber meets the road.'' More importantly 
we are accountable to our Governors and the citizens of our State for 
the quality and responsiveness of our activities. Partnerships with 
States Departments of Veterans Affairs and State Veterans Homes are 
both cost-efficient and effective in utilization of resources and the 
creation of a quality continuum of care for all of America's Veterans. 
We must all work together in real partnership to assure veterans now 
and in the future receive the services and programs the need and 
deserve.

                                 
               Statement of Paralyzed Veterans of America
    Chairman Michaud, Ranking Member Brown, and members of the 
Subcommittee, Paralyzed Veterans of America (PVA) would like to thank 
you for the opportunity to submit our views on H.R. 4241, to allow for 
increased flexibility in payments for State veterans homes. This 
subject is covered in depth in the recently released version of The 
Independent Budget regarding the funding requirements for the VA health 
care system for FY 2011.
    PVA generally supports H.R. 4241 to allow for increased flexibility 
in payments for State veterans homes, but believes greater 
understanding of the problem is needed.
    The Department of Veterans Affairs (VA) State Veterans Home Program 
currently encompasses 137 nursing homes in 50 States and Puerto Rico, 
with more than 28,000 nursing home and domiciliary beds for veterans 
and their dependents. State veterans homes provide the bulk of 
institutional long-term care to the nation's veterans. The GAO has 
reported that State homes provide 52 percent of VA's overall patient 
workload in nursing homes, while consuming just 12 percent of VA's 
long-term care budget. VA's authorized ADC for State veterans homes was 
19,208 for FY 2008.
    VA holds State homes to the same standards applied to the nursing 
home care units it operates. State homes are inspected annually by 
teams of VA examiners, and VA's Office of Inspector General (OIG) also 
audits and inspects them when determined necessary. State homes that 
are authorized to receive Medicaid and Medicare payments also are 
subject to unannounced inspections by the CMS and announced and 
unannounced inspections by the OIG of the Department of Health and 
Human Services.
    VA pays a small per diem for each veteran residing in a State home, 
currently at a rate of $77.53 per day. This is less than one-third of 
the average cost of that veteran's care. The remaining two-thirds is 
made up of a mix of funding, including State support, Medicaid, 
Medicare, and other public and private sources. In contrast, VA pays 
Community Nursing Homes over $200 per day with the cost of care in VA 
Community Living Centers (VACLC) at almost $800 per day.
    Service-connected veterans should be the top priority for admission 
to State veterans homes, but traditionally they have not considered 
State homes an option for nursing home services because of lack of VA 
financial support. To remedy this disincentive, Congress provided 
authority for full VA payment.
    Unfortunately, veterans with severe disabilities may be put at a 
disadvantage in gaining access to State veterans homes. As part of P.L. 
109-461, the ``Veterans Benefits, Health Care, and Information 
Technology Act of 2006,'' Congress approved payment of different per 
diem amounts by VA to State veterans homes which provide nursing home 
care to veterans with service-connected disabilities, a program dubbed 
``the 70-Percent Program.'' VA issued regulations for this program in 
April 2009 and granted a higher per diem rate for veterans with 
service-connected disabilities. Unfortunately, PVA is hearing reports 
that these rates have resulted in lower payments to many State veterans 
homes and in some cases are less than the actual cost of care.
    PVA believes VA made a good faith effort in establishing the 
original rates, but may not have taken into consideration the 
significantly greater cost of care for those with severe disabilities, 
in particular those service connected veterans with 70 percent or 
greater ratings. As a result, we are concerned that many severely 
disabled veterans who would choose to use the State veterans homes will 
be denied access simply because the veterans home can not afford the 
cost of their care. This will cause a significant impact on our 
veterans most in need at a time when VA is continuing to reduce their 
capacity to provide long-term care facilities.
    PVA has been informed by representatives of the National 
Association of State Veterans Homes (NASVH) that VA seems resistant to 
modifications of the per diem rate or alternatives that may provide 
greater reimbursement rates. There is a sense that the VA believes the 
lower rate is appropriate because VA shoulders a great financial burden 
when it helps cover the cost of construction, rehabilitation, and 
repair of State veterans homes, providing up to 65 percent of the cost, 
with the State providing at least 35 percent. If true, PVA believes 
this argument is invalid.
    In FY 2007 the construction grant program was funded at only $85 
million, the same amount Congress had provided in FY 2006. Based on a 
current backlog of nearly $1 billion in grant proposals, and with 
thousands of veterans on waiting lists for State beds, The Independent 
Budget for FY 2008 recommended no less than $150 million for this 
program and Congress responded with $165 million for FY 2008 in the 
Omnibus Appropriations Act. For FY 2009, the IB recommended $200 
million for the State veterans home construction grant program, and 
Congress provided $175 million. Also in FY 2009 Congress provided State 
home construction $100 million in the Stimulus Act, giving VA a total 
of $265 million in availability for its construction grant program. For 
FY 2011, The Independent Budget recommends the construction grant 
program be funded at $275 million.
    The VA is using this grant program as an incentive to build more 
capacity to avoid the greater cost of building it themselves. PVA 
firmly believes that construction costs should not be mixed with health 
care costs. The per diem rate should be independent of any quid pro quo 
VA may believe exists with the State veterans homes due to construction 
funding. State veterans homes can provide high quality care at a rate 
cheaper than VA and should be rewarded for doing so, not punished.
    Mr. Chairman, PVA believes H.R. 4241 may help remedy this problem. 
But we believe the Subcommittee should go further. Currently there is 
only anecdotal information on perceived widespread, but individual, 
challenges facing State veterans homes due to this problem. With the 
challenges facing future VA budgets, abstract information is 
insufficient to make the critical decisions needed to support our 
veterans. PVA would recommend a study to determine what impact these 
funding shortfalls are having on State veterans homes. Also, due to the 
immediate impact of these financial shortfalls, we believe this report 
should be completed as soon as possible, but no later than September 
30, 2010. As the report is being conducted, one option might be for VA 
to raise their reimbursement rate to State veterans homes to be 
commensurate with the rate paid to Community Nursing Homes for similar 
services for 70 percent and greater service-connected disabled 
veterans.
    VA and Congress must continue to provide the construction grant and 
per diem funding necessary to support State veterans homes. Even though 
Congress has approved full long-term care funding for certain service 
connected veterans in State veterans homes, under P.L. 109-461 it must 
continue to provide resources to support other veteran residents in 
these facilities and to maintain the infrastructure. To that end, 
Congress should provide State veterans homes $275 million in 
construction grant funds for FY 2011.
    PVA would like to thank this Subcommittee for the opportunity to 
express our views relating to these important benefits for veterans. We 
look forward to working with this committee as they continue addressing 
the issues that effect America's veterans.

                                 

                      Veterans of Foreign Wars of the United States
                                                    Washington, DC.
                                                  February 18, 2010
The Honorable Michael Michaud
United States House of Representatives
1724 Longworth House Office Building
Washington, DC 20515

Dear Representative Michaud,

    On behalf of the 2.1 million members of the Veterans of Foreign 
Wars and our Auxiliaries, I would like to thank you for the invitation 
to testify on legislation H.R. 4241, to allow for increased flexibility 
in payments for State veterans homes. The VFW supports H.R. 4241, to 
correct the inadequate financing of long-term care for the most 
disabled veterans in State Veterans Homes.
    This bill seeks to correct the inadequate funding for the long-term 
care in a SVH for veterans rated at 70 percent or above for service 
connected disabilities. With the passage of PL 109-461, SVH's were 
afforded a higher per diem rate of reimbursement from the Department of 
Veterans Affairs. VA's regulations, issued April 29, 2009, indicate all 
medication and specific outpatient medical care for service-connected 
injuries to be provided by SVH's. Further, it bars SVH's from billing 
to Medicare and Medicaid for any and all additional costs that exceed 
the per diem rate. The current law and VA regulations create a 
disincentive for SVH's across the nation to care for the most severely 
disabled veterans. Several states indicate the potential loss of 
millions of dollars complying with VA regulations; others have limited 
or stopped accepting these veterans into their homes.
    Your legislation grants the VA Secretary the authority to enter 
into a state-by-state per diem arrangement with SVH's. Each state's 
rate would be comparable to the geographic area and the reimbursement 
rate available to a `non-department nursing home' or a private nursing 
home facility. Thus, correcting the existing health care funding 
shortfall for America's most disabled veterans.
    The VFW is pleased to support your legislation for America's 
veterans.
            Sincerely,

                                                  Robert E. Wallace
                                                 Executive Director
                   MATERIAL SUBMITTED FOR THE RECORD

                                     Committee on Veterans' Affairs
                                             Subcommittee on Health
                                                    Washington, DC.
                                                      March 9, 2010
Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20240

Dear Secretary Shinseki:

    Thank you for the testimony of Dr. James F. Burris, Chief 
Consultant for Geriatrics and Extended Care with the Veterans Health 
Administration, at the U.S. House of Representatives Committee on 
Veterans' Affairs Subcommittee on Health legislative hearing on H.R. 
4241 that took place on March 3, 2010.
    Please provide answers to the following questions by April 20, 
2010, to Jeff Burdette, Legislative Assistant to the Subcommittee on 
Health.

         1.  Prior to the passage of P.L. 109-461, could State Veterans 
        Homes bill the Department of Veterans Affairs (VA) and Center 
        for Medicare and Medicaid Services (CMS) for the same care 
        provided? If so, for what specific services are State Veterans 
        Homes billing both VA and CMS
         2.  It is our understanding that VA has been meeting with some 
        State Veterans Homes to explore non-legislative solutions to 
        this problem. Please explain the nature of these discussions 
        and the options that you have explored together. What is 
        prohibiting VA from moving forward with a non-legislative 
        solution?
         3.  VA opposes H.R. 4241 even though Medicaid and Medicare 
        certified State Veterans Homes have presented initial data 
        showing the negative financial implications of the new per diem 
        rate. Given the urgency of this issue, what solution can VA 
        offer since it opposes H.R. 4241?
         4.  It appears that one of the key reasons that the new per 
        diem payments do not work for Medicaid and Medicare certified 
        State Veterans Homes is that the new payments do not account 
        for outlier service costs such as dialysis, x-rays, and labs. 
        What are the pros and cons of mandating VA to include outlier 
        costs in the development of new per diem rates so that the 
        State Veterans Homes would not have to bill Medicare and 
        Medicaid?
         5.  Does CMS have a role to play in this situation? If yes, 
        what would it look like?
         6.  Would a reimbursement schedule that bases payments on the 
        actual acuity of each patient, such as that used by VA in its 
        Resource Utilization Group (RUG) scores for community nursing 
        homes, be an effective mechanism for properly and accurately 
        reimbursing State Veterans Homes for 70-percent veterans? Could 
        VA implement such a system for ``mandatory veterans'' under the 
        current law? If yes, how quickly could such a system be put 
        into place?
         7.  Your testimony states that H.R. 4241 will increase VA 
        costs by $17.5 million next year and $200 million over 10 
        years. Please describe in detail how you arrived at this cost 
        estimate. Does this indicate that the current payment system is 
        underpaying State Veterans Homes under the 70-Percent Program? 
        In your view, does the current payment system compromise the 
        quality of nursing care being provided to veterans under the 
        70-Percent Program? If not, please explain.
         8.  H.R. 4241 would authorize VA to enter into agreements with 
        State Homes to provide care for the ``70-Percent Program'' 
        under VA's contract nursing home care authority. What 
        challenges would this construct create for VA?
         9.  Might it help alleviate the current situation if State 
        homes were able to simply opt out of the 70-Percent Program if 
        they felt they would be better off without it?
        10.  In your testimony, you stated that ``although a number of 
        States are satisfied with the new rates VA pays for mandatory 
        Veterans, several have reported problems.'' Please provide a 
        list of those states homes that are satisfied and those state 
        homes that have reported issues.
        11.  What is VA's long-term strategy to improve the care 
        provided to women veterans and how does the fiscal year 2011 
        budget request for women veterans fit into this long term 
        strategy?
        12.  The Paralyzed Veterans of America (PVA) provided a 
        statement for the record. The statement suggests that before 
        rushing to a legislative solution, a study be conducted ASAP to 
        determine the immediate impact of the reported financial 
        shortfalls. Would you support this proposal?
        13.  Have you received responses from any states regarding your 
        request for ``documentation that demonstrates how their actual 
        costs for . . . care . . . exceeds the allowable VA per diem 
        payment?'' If so, please share those responses.
        14.  Are there any mechanisms in place to assess the accuracy 
        of the actual cost of care reported by state homes? If so, 
        please provide details.
        15.  What information, if any, are you lacking to gain a 
        complete understanding of how State homes are currently being 
        impacted by P.L. 109-461?

    In addition, please answer the following question for Congresswoman 
Madeleine Bordallo:

         Over the past 18 months, I have requested that VA address the 
        issue of eligibility for Guam to participate in the VA State 
        Home Grant program. On July 10, 2009, VA published a proposed 
        rule in the Federal Register that would include Guam and the 
        other insular areas in the VA State Home Grant program. As of 
        November 2009, VA anticipated publishing the final rule by the 
        end of the year. I certainly appreciate the efforts of VA to 
        correct this oversight. However, please update me on the status 
        of this final rule and when we can reasonably expect VA to 
        publish the amended final rule that would include Guam in the 
        VA State Home Grant program.

    Thank you again for taking the time to answer these questions. The 
Committee looks forward to receiving your answers by April 20, 2010.

            Sincerely,





MICHAEL H. MICHAUD                            HENRY E. BROWN, Jr.
Chairman                                      Ranking Member


                               __________
                        Questions for the Record
                The Honorable Michael Michaud, Chairman
             The Honorable Henry Brown Jr., Ranking Member
                         Subcommittee on Health
                    House Veterans Affairs Committee
                    Legislative Hearing on H.R. 4241
                             March 3, 2010
    Question 1: Prior to the passage of Public Law 109-461, could State 
Veterans Homes bill the Department of Veterans Affairs (VA) and Center 
for Medicare and Medicaid Services (CMS) for the same care provided? If 
so, for what specific services are State Veterans Homes billing both VA 
and CMS?

    Response: Yes, prior to the passage of Public Law 109-461, State 
Homes could bill both the Department of Veterans Affairs (VA) and the 
Centers for Medicare and Medicaid Services (CMS) for the same care. 
Under an amendment to 38 USC 1741 made by Public Law 108-422, payments 
made by VA under this section cannot be used to offset or reduce any 
other payment made to assist Veterans. According to CMS, when State 
Veterans Homes charge their residents and patients to the extent of 
their ability to pay, or seek payment from available sources other than 
Medicare, Medicare benefits are payable for covered items and services 
furnished to Medicare beneficiaries. However, the State Home must 
charge the Medicare copayment in order to receive Medicare payments. 
(See Medicare Benefit Policy Manual, 100-02, Chapter 16, Sec. 50.3.3 
for details) VA does not have any information about the services for 
which the State Veterans Homes are billing CMS.

    Question 2: It is our understanding that VA has been meeting with 
some State Veterans Homes to explore non-legislative solutions to this 
problem. Please explain the nature of these discussions and the options 
that you have explored together. What is prohibiting VA from moving 
forward with a non-legislative solution?

    Response: VA has met on several occasions, and continues to meet 
with designated representatives of the National Association of State 
Veterans Homes and with the Executive Committee of the National 
Association of State Directors of Veterans Affairs. We have discussed 
the concerns of the State Homes and the limitations placed on VA by the 
current law. VA has explored options for modifying the method of 
determining the State Homes' cost of care and clarifying those services 
they can bill other payors. VA has done the following:

          Sent a memorandum to VA field facilities in October 
        2009, clarifying that they are to continue providing specialty 
        services to Veterans residing in State Homes;
          Met with the Office of Management and Budget (OMB) to 
        seek assistance in clarifying the cost accounting rules of OMB 
        Circular A-87 for the States;
          Offered to assist individual State Homes in correctly 
        determining their costs of care in accordance with OMB Circular 
        A-87.

    Addressing these issues will require detailed actual cost data as 
well as other information from State Veterans Homes, which VA requested 
on March 29, 2010, and received, in part, just this week. VA continues 
to pursue additional data from the States.

    Question 3: VA opposes H.R. 4241 even though Medicaid and Medicare 
certified State Veterans Homes have presented initial data showing the 
negative financial implications of the new per diem rate. Given the 
urgency of this issue, what solution can VA offer since it opposes H.R. 
4241?

    Response: VA believes that non-legislative approaches such as those 
described above will mitigate the problems experienced by the states 
and that legislation is not necessary at this time. VA has asked the 
State Homes to provide additional cost of care data so that we can 
better understand the financial implications and challenges they face. 
VA has already taken the actions noted above in its response to 
Question 2. Without the data from the States, VA has not been able to 
sufficiently clarify the scope of the problems being experienced by the 
State Homes. We continue to seek their cooperation.

    Question 4: It appears that one of the key reasons that the new per 
diem payments do not work for Medicaid and Medicare certified State 
Veterans Homes is that the new payments do not account for outlier 
service costs such as dialysis, x-rays, and labs. What are the pros and 
cons of mandating VA to include outlier costs in the development of new 
per diem rates so that the State Homes would not have to bill Medicare 
and Medicaid?

    Response: Public Law (PL) 109-461 specifies that VA is to pay a per 
diem payment for nursing home care. Nursing home care services are 
identified in VA regulations and do not include dialysis, x-rays, or 
other specialized services. Paying those costs would make the State 
Homes much more expensive for VA to support.

    Question 5: Does CMS have a role to play in this situation? If yes, 
what would it look like?

    Response: We defer to the CMS to describe their potential role in 
this situation.

    Question 6: Would a reimbursement schedule that bases payments on 
the actual acuity of each patient, such as that used by VA in its 
Resource Utilization Group (RUG) scores for community nursing homes, be 
an effective mechanism for properly and accurately reimbursing State 
Veterans Homes for 70 percent veterans? Could VA implement such a 
system for ``mandatory Veterans'' under the current law? If yes, how 
quickly could such a system be put into place?

    Response: VA would need to revise its regulation to implement such 
a system. While such system may be an effective mechanism for 
reimbursing State Veterans Homes for mandatory Veterans there are some 
limiting factors. For example, only approximately 60 percent of State 
Homes presently report RUG scores to VA; therefore, implementing such a 
system would require all State Homes to develop the capability to 
determine and report RUG scores. In addition, under current law VA is 
required to pay the lesser of the prevailing rate (i.e., the rate 
determined by the RUG score) or actual costs, so there is no assurance 
the State would receive the prevailing rate.

    Question 7: Your testimony states that H.R. 4241 will increase VA 
cost by $17.5 million next year and $200 million over 10 years. Please 
describe in detail how you arrived at this cost estimate. Does this 
indicate that the current payment system is underpaying State Veterans 
Homes under the 70-Percent Program? In your view, does the current 
payment system compromise the quality of nursing care being provided to 
Veterans under the 70-Percent Program? If not, please explain.

    Response: The State Home representatives have told VA that most 
states are receiving the actual cost rather than the prevailing per 
diem rate because the actual cost is less in most cases. To determine 
the cost estimate, VA multiplied the average daily census of Veterans 
residing in State Homes by the average cost of care, and subtracted 
that total from the total obtained by multiplying the average daily 
census by the average prevailing rate. The figure of $17.5 million 
therefore, reflects the additional amount VA would pay if the ``lesser 
of'' language were stricken from the law. The $200 million figure was 
obtained by adjusting the $17.5 million figure for inflation, and the 
anticipated growth in the average daily census over 10 years. The 
method of determining actual cost under OMB Circular A-87 is a standard 
method for grants to State, local, and Tribal governments. We are 
unable to determine whether the current payment system is underpaying 
State Veterans Homes under the 70-Percent Program because the States 
have not provided comprehensive data on their actual costs. We have not 
seen any evidence from our annual inspections of State Veterans Homes 
that the quality of nursing care being provided to Veterans has been 
compromised.

    Question 8: H.R. 4241 would authorize VA to enter into agreements 
with State Homes to provide care for the ``70-Percent Program'' under 
VA's contract nursing home care authority. What challenges would this 
construct create for VA?

    Response: A construct that would have two different per diem rates 
and a contract rate all in play would make the program more complex to 
administer for both VA and State Veterans Homes.

    Question 9: Might it help alleviate the current situation if State 
Homes were able to simply opt out of the 70-Percent Program if they 
felt they would be better off without it?

    Response: State Homes are at liberty to opt out of the 70-Percent 
Program under current law and bill other payors. However, VA cannot pay 
the basic per diem rate for a mandatory Veteran. The state agency 
responsible for the State Homes must opt out and not receive a VA per 
diem payment, or opt in and accept the higher VA per diem as the full 
cost of nursing home care.

    Question 10: In your testimony, you stated that ``although a number 
of States are satisfied with the new rates VA pays for mandatory 
Veterans, several have reported problems.'' Please provide a list of 
those State Homes that are satisfied and those State Homes that have 
reported issues.

    Response: VA does not have a comprehensive listing of each state's 
level of satisfaction with the new rates VA pays for mandatory 
Veterans. This is because only a few states have chosen to provide 
input to VA on this issue. Anecdotally, Maine, New Hampshire, New York, 
California, Nevada and Louisiana have specifically indicated they are 
dissatisfied. New York and Nebraska have said they would be satisfied 
if they could bill CMS for outlier costs. Missouri, Oklahoma, and Texas 
have reported they are satisfied with the new rates. The National 
Association of State Veterans Homes has reported that ``many'' states 
are dissatisfied with the new rates, but has not provided the number or 
the names of dissatisfied states. Forty-two states have applied to 
receive the new rates.

    Question 11: What is the long-term strategy to improve the care 
provided to women Veterans and how does the fiscal year (FY) 2011 
budget request for women Veterans fit into this long term strategy?

    Response: VA has continued long term strategic plans to enhance the 
provision of health services to women Veterans. The following elements 
are outlined as they relate to the FY 2011 Budget request:

Fully Implement Comprehensive Primary Care for Women Veterans

          Staffing: Providers proficient in women's health
          Staffing: Support staff for care coordination within 
        medical home care model in women's health
          Facility Resources: Construction enhancements 
        focusing on dignity, privacy, safety
          Equipment, Supplies: Necessary clinical enhancements 
        to deliver primary care
          Training: Retrain providers to care for women 
        Veterans
          Communication: Effective internal and external 
        communication about women Veterans

    Beginning with FY 2010, the New Model of Care Initiative supports 
the addition of primary care support staff, training, and some space 
configuration for women's health. In the FY 2011 Budget request, 
general medical services dollars will continue to support the overall 
medical care provision for women Veterans. In addition, the FY2011 
Budget line item request for women Veterans specifically increases the 
amount needed for gender-specific care such as cervical and breast 
cancer screenings.

Develop a High-Quality Continuum of Health Care for Women Veterans

    The strategic goal is to fully integrate specialty care services 
for women Veterans at the facility level. In FY 2011, the requested 
budget will support Comprehensive Care Services for women Veterans that 
includes:

          Mental Health
          Specialty Care
          Emergency Care
          Diagnostic Services
          Tele-Health
          Geriatric and extended care services
          Women's health and wellness screening and prevention 
        programs
          Rehabilitation health (catastrophically injured 
        women)

    VA has made a commitment to the development of health care for 
women Veterans and will continue to support and evaluate the 
implementation of this plan.

    Question 12: The Paralyzed Veterans of America (PVA) provided a 
statement for the record. The statement suggests that before rushing to 
a legislative solution, a study be conducted ASAP to determine the 
immediate impact of the reported financial shortfalls. Would you 
support this proposal?

    Response: VA concurs that a study to determine the immediate impact 
of the reported financial shortfalls and the underlying reasons for the 
shortfalls would help VA and Congress to better understand the 
financial challenges faced by the state homes and to develop responses 
to mitigate those challenges. VA has asked the state homes to provide 
additional cost of care data, but recently received some data from more 
states. If Congress were to mandate that VA carry out such a study, VA 
would request that Congress also mandate that the States provide the 
data necessary for VA to conduct the study.

    Question 13: Have you received response from any states regarding 
your request for ``documentation that demonstrates how their actual 
costs for . . . care . . . exceeds the allowable VA per diem payment?'' 
If so, please share those responses.

    Response: VA has received responses from Maine, Idaho, and Hawaii. 
(See attachments 1, 2, and 3)
    VA recently received data from 10 states, including additional data 
from Maine and Idaho, and is in the process of evaluating it.

    Question 14: Are there any mechanisms in place to assess the 
accuracy of the actual cost of care reported by state homes? If so, 
please provide details.

    Response: VA has not previously had a mechanism in place to review 
cost-reporting by the states at the level of detail required to address 
the challenges posed by the new per diem payment mechanism. 
Collaboration between the program and fiscal offices will be necessary 
to review the data now being reported by the states to VA.

    Question 15: What information, if any, are you lacking to gain a 
complete understanding of how State Homes are currently being impacted 
by P.L. 109-461?

    Response: VA has requested that the states provide Medicaid cost 
reports for those homes that are certified by the Centers for Medicare 
and Medicaid Services (CMS). Medicare cost reports may also be made 
available directly through the CMS. This will provide standardized and 
audited data on the states' actual costs that can be compared with the 
new rates paid by VA to the State Homes under P.L. 109-461. More than 
60 of the State Homes are CMS certified, but VA has received Medicaid 
cost reports from only 10 states which have a total of 30 State Homes. 
VA is seeking additional information from the states and is also 
exploring obtaining information directly from CMS.
                               __________
             The Honorable Congresswoman Madeleine Bordallo
    Question 1: Over the past 18 months, I have requested that VA 
address the issue of eligibility for Guam to participate in the VA 
State Home Grant program. On July 10, 2009, VA published a proposed 
rule in the Federal Register that would include Guam and the other 
insular areas in the VA State Home Grant program. As of November 2009, 
VA anticipated publishing the final rule by the end of the year. I 
certainly appreciate the efforts of VA to correct this oversight. 
However, please update me on the status of this final rule and when we 
can reasonably expect VA to publish the amended final rule that would 
include Guam in the VA State Home Grant program.

    Response: VA anticipates that the final rule will be published 
within 30 days after it completes concurrence.
                               __________
                   Attachment 1--Response from Maine
                          OMB A-87 Cost Report
          The OMB A-87 rate will almost always be less than the 
        VA Published Rate.
          This is so because OMB Circular A-87 disallows 
        certain costs that otherwise would be payable to a SVH.
          This means that almost all Medicare/Medicaid 
        certified Homes will be paid less than the published VA Rates 
        for the Program.
          The difference between the VA Published Rate and the 
        OMB A-87 Rate may be substantial.
                  Augusta SVH OMB A-87 Report, FY `08

1. Total Allowable Costs                                      $9,141,698
2. Total Income from Other Sources                          $(5,805,822)
3. Total Allowable Costs Less Income from Other               $3,335,876
 Sources
4. 1/2 Total Allowable Costs                                  $4,570,849
5. Total Claimed by Home from VA                              $2,228,789


             Detail For Augusta SVH FY '08 OMB A-87 Report

Total Costs                                                   $9,424,641
Less Disallowed Costs:
Employee Meals & Lodging                          $2,649
Donated Services                                  $9,790
Bad Debts                                        $40,220
Disallowed Advertising                            $5,927
Disallowed Depreciation *                       $221,372
Other                                             $2,985
Total Disallowed Costs
                                                         -----$(282,943)
Total Allowable Costs
                                                         --$9,141,698 **

*65% of depreciation expense on items purchased with a VA grant
**$9,141,69842,327 (total actual resident days) = $215.98

                Cost Report Settlement under the Program

VA Published Rate for 2008                                       $267.81
MVH OMB A-87 Rate
                                                                 $215.98
Difference                                                        $51.83


Both are below the actual daily cost of care.
                      OMB Disallowed Costs (Maine)

   Disallowed Costs for MVH Augusta                     $282,943
   Disallowed Costs for MVH Scarborough                 $328,027
   Disallowed Costs for MVH South Paris                 $117,341
   Disallowed Costs for MVH Bangor                      $252,752
   Disallowed Costs for MVH Caribou                      $80,186
OMB FY '08 TOTAL DISALLOWED COSTS:
                                                            ------------


                  The Problem Is Worse Than You Think
          For Medicare/Medicaid Certified Homes, both the VA 
        Published Rate and the OMB A-87 Rate are likely to be less than 
        a Home's actual cost of care.
          This is so because many services (such as physicians, 
        x-rays, and labs) are currently paid by Medicare Parts B and D 
        rather than State Veterans Homes.
          VA payments under the Program, however, are ``payment 
        in full to the State Homes,'' and the VA appears to prohibit 
        billing by State Homes to Medicare Parts B and D for veterans 
        covered by the Program.
          Therefore, State Homes must provide drugs, 
        physicians, and other services under the Program at their own 
        cost.
          Such costs can be thousands of dollars, per resident, 
        per month, and such ``Outlier Costs'' Are Not Paid under the 
        Program outside of the lesser of the VA Published Rates (which 
        almost nobody will be paid) or the OMB A-87 Rates (which are 
        below actual costs of care).
                 Examples of Outlier Costs That Are Not
                       Paid Separately by the VA

Dialysis supplies and services                                    $1,200
PET, CT Scans, MRI                                                $4,000
Chemotherapy                                                      $1,800
Radiation Therapy                                                 $2,000
Customized Prosthetics and Orthotics                                $500
Emergency Room Treatment                                            $500
Drugs                                                 Up to $3,000/month


                   Attachment 2--Response from Idaho
        Idaho Division of Veterans Services Boise Veterans Home
            Statement of Expenditures For the Month Ending:
                              September-09


                                                                  NURSING CARE    DOMICILIARY       TOTAL COST
                                                                                      CARE

FISCAL                                                             15,243.59           907.11       16,150.70
SECURITY                                                           18,927.01         3,399.52       22,326.53
FOOD SERVICE                                                       91,408.09        23,535.76      114,943.85
UTILITIES                                                          29,290.11         5,260.85       34,550.96
LAUNDRY                                                             4,422.91           276.14        4,699.05
VOLUNTEERS                                                          6,797.65         1,750.31        8,548.16
RELIGIOUS SERVICES                                                  1,434.28           369.30        1,803.58
SOCIAL SERVICE                                                     18,652.27         1,109.95       19,762.22
HOUSEKEEPING                                                       43,368.04         7,789.42       51,157.46
MED RECORDS                                                        15,014.56           893.48       15,908.04
PHYSICAL THERAPY                                                   57,637.86             0.00       57,637.86
ACTIVITIES                                                         17,704.45         1,053.55       18,758.00
PHARMACY                                                           43,242.21             0.00       43,242.21
ADMINISTRATION                                                     47,461.42         2,824.31       50,285.73
DIRECT CARE COSTS                                                 371,858.40        22,128.33      393,986.73
DIVISION CENTRAL OFFICE COSTS                                      28,796.56         1,713.61       30,510.17
OVA CENTRAL COST ALLOCATION                                         3,011.80           179.22        3,191.03
LESS CAPITAL OUTLAY                                               (7,877.20)       (2,028.22)      (9,905.42)
DEPRECIATION                                                       10,031.22         2,756.67       12,767.69
TOTAL COSTS
                                                                 $890,344.75
ELIGIBLE DAYS CARE                                                     3,613              938
PER DIEM COST                                                        224.111            78.81
ELIGIBLE DAYS CARE                                                  3,613.00           938.00
LESS: 70% or HIGHER DAYS CARE                                         351.00             0.00
TOTAL ELIGIBLE DAYS CARE
                                                                      938.00
PER DIEM @                                            74.42      $242,758.04
PER DIEM @                                            34.40                        $32.267.20
TOTAL PER DIEM                                                                                    $275,025.24
70% HIGHER DAYS CARE                                 224.11                        $78,662.61
TOTAL PER DIEM + 70% or HIGHER DAYS CARE                                                          $353,687.85


                   Attachment 3--Response from Hawaii
The 70 Percent Disabled Veterans Program, Public Law 109-461

    The 70 percent Disabled Veterans Program http://www.vagov/ogc/docs/
PLl09-461.pdf has become a controversial program. Initially, the Law 
looked good because it allowed state veterans homes (SVH) the option of 
providing long-term nursing care services, at no cost, to 70 percent 
and more disabled veterans. However, upon closer examination we learned 
the law could cause some States to close their doors because of the 
additional financial burden placed on them. Under this law, SVH have no 
choice in the level or source of payment; if the veteran qualifies for 
the Program, the Home must accept the new VA paid per diem--period. The 
Program has an enhanced per diem rate ($331.35 v $74.42/day for Hawaii) 
which is enticing, but these higher rates generally result in lower 
total amounts received for care provided.
    The provision originated in legislation introduced by Senator 
Daniel Akaka CD-HI), who described the measure as an effort to 
``protect and expand'' the State Homes program. ``We need to fortify 
the program,'' said Senator Akaka, who described the language that 
became section 211(a) as intended to ``authorize VA to place severely 
disabled service-connected veterans directly in State homes and . . . 
require VA to reimburse State homes for the cost of such care.''
    Under Public Law 109-461, Title II, Sec 211 Sec. 1745a(3) the VA 
higher Per Diem rate is considered full payment for care. Further, if 
the VA pays the higher per diem rate, and accepts retroactively money 
for services delivered; the SVH must return moneys to all payers for 
the period the VA retroactively paid. Additionally, the VA appears to 
prohibit billing by State Homes to Medicare Parts B and D for veterans 
covered by the Program. Payments to SVH under the Program are the 
lesser of a rate published by VA by the VA for that Veterans Home, or 
the daily cost of care for that Veterans Home determined under OMB 
Circular A-87. This circular disallows certain costs that otherwise 
would be payable to a SVH, i.e., employee meals and lodging, donated 
services, bad debts, advertising, certain depreciation, etc. To our 
knowledge, every State Home in the Nation has an OMB Circular A-87 rate 
which is less than the VA ``published'' rate. It is as likely as not 
that SVH costs will rise sharply because state homes must provide and 
pay for equipment and services currently paid by Medicare Parts B and 
D.
    Yukio Okutsu State Veterans Home has experience with four veterans 
eligible for the Program, three enhanced Per Diem eligible veterans in 
residence--two are relatively low maintenance, the third was in 
residence for 13 days; Per Diem reimbursement for his stay was 
$4,307.55 his ancillary medical bills totaled $8,383.44. Beginning net 
loss of $7 per day room and board then adding costs for Ancillary 
Services; Physician Services, Laboratory Work, X-Ray, Rehab Therapy, 
Respiratory Therapy, Durable Equipment, Nursing Supplies, Prosthetics, 
Orthotics, Dialysis, IV Therapy, and Oxygen; the dollars lost add up.
    The following table is a summary of charges for Program eligible 
veterans in residence for July 2009; August admissions added to show 
accelerating demand.


----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Resident ID Number                                        44          131          130        149 *    Pending *
----------------------------------------------------------------------------------------------------------------
Admission Date                                       7/14/08    6/19/2009    7/17/2009    8/13/2009    8/21/2009
----------------------------------------------------------------------------------------------------------------
Age                                                       85           65           93           69           96
----------------------------------------------------------------------------------------------------------------
Number Days in Residency July 2009                        31            9           16
----------------------------------------------------------------------------------------------------------------
Room & Board                                      $10,272.00    $2,982.00    $5,302.00
----------------------------------------------------------------------------------------------------------------
Pharmacy                                           $1,640.00       $90.00      $597.00
----------------------------------------------------------------------------------------------------------------
Labs/x ray                                                --       $49.00           --
----------------------------------------------------------------------------------------------------------------
Rehab                                              $2,425.00           --    $1,703.00
----------------------------------------------------------------------------------------------------------------
Central Supply                                            --       $54.00           --
----------------------------------------------------------------------------------------------------------------
IV Therapy                                                --    $2,495.00           --
----------------------------------------------------------------------------------------------------------------
Totals                                            $14,337.00    $5,670.00    $7,602.00
----------------------------------------------------------------------------------------------------------------
Per Day Cost                                         $462.48      $630.00      $475.13
----------------------------------------------------------------------------------------------------------------
VA Reimbursement                                   $(331.35)    $(331.35)    $(331.35)
----------------------------------------------------------------------------------------------------------------
Daily Excess Costs                                   $131.13      $298.56      $143.78
----------------------------------------------------------------------------------------------------------------
* Cost Per Resident is Rising
* Included To Demonstrate the Rapid Growth of Program Qualified Residents.

    Is the 70 Percent Disabled Veterans Program a good deal for the 
veteran? For the short term, it may seem to be; but for the long term, 
it is a financial disaster. In fact, State Homes on the mainland have 
projected losses of as much as $300K per month. The Program is causing 
State Homes to profile admission of eligible veterans; the Veterans who 
were to be the prime beneficiaries of the Program will be least served 
by legislation created to improve the quality of their lives.
    Yuba Okutsu State Veterans Home supports the National Association 
of State Veterans Homes (NASVH) initiative 4-step solution:

        1.  Have Congress pass a clarifying amendment to Section 211 of 
        the Veterans Benefits, Health Care, and Information Technology 
        Act of 2006 (Pub. L. No. 109-461) (the ``Act'') postponing for 
        2 years, for Medicare-certified and Medicaid-certified State 
        Veterans Homes only, the mandatory implementation of the 
        Program while any adverse economic effects on States operating 
        Medicare-certified and Medicaid-certified State Veterans Homes 
        can be studied, using cost data for actual veterans residing in 
        State Veterans Homes during this period.
        2.  Allow State Veterans Homes, in interim, to serve service-
        connected disabled veterans under the existing VA Provider 
        Agreement (``Pro VA'') for contract nursing homes.
        3.  At the end of 18 months, the National Association of State 
        Veterans Homes shall report to the Committees on Veterans 
        Affairs of the United States Senate and House of 
        Representatives with any recommendations that it has to modify 
        the provisions of the Act.
        4.  During this time, cost and payment data for residents of 
        Medicare-certified and Medicaid-certified State Veterans Homes 
        shall be compared among the Program, existing Medicare and 
        Medicaid programs, and contracted programs between the VA and 
        private nursing homes for the care of veterans with service-
        connected disabilities.

                                 
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