[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]








U.S. DEPARTMENT OF VETERANS AFFAIRS BUDGET REQUEST FOR FISCAL YEAR 2017

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

                                HEARING

                               before the

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      WEDNESDAY, FEBRUARY 10, 2016

                               __________

                           Serial No. 114-53

                               __________

       Printed for the use of the Committee on Veterans' Affairs





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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

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hearing records of the Committee on Veterans' Affairs are also 
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                            C O N T E N T S

                              ----------                              

                      Wednesday, February 10, 2016

                                                                   Page

U.S. Department of Veterans Affairs Budget Request For Fiscal 
  Year 2017......................................................     1

                           OPENING STATEMENTS

Honorable Jeff Miller, Chairman..................................     1
Honorable Corrine Brown, Ranking Member..........................     3
    Prepared Statement...........................................    40

                               WITNESSES

Honorable Robert A. McDonald, Secretary, U.S. Department of 
  Veterans Affairs...............................................     4
    Prepared Statement...........................................    40

        Accompanied by:

    Honorable David J. Shulkin, Under Secretary for Health, U.S. 
        Department of Veterans Affairs

    Danny Pummill, Acting Under Secretary for Benefits, Veterans 
        Benefits Administration, U.S. Department of Veterans 
        Affairs

    Ronald Walters, Interim Under Secretary for Memorial Affairs, 
        U.S. Department of Veterans Affairs

    Honorable LaVerne Council, Assistant Secretary for 
        Information and Technology and Chief Information Officer, 
        Office of Information and Technology, U.S. Department of 
        Veterans Affairs

    Ed Murray, Interim Secretary for Management and Interim Chief 
        Financial Officer, U.S. Department of Veterans Affairs

                       STATEMENTS FOR THE RECORD

Government Accountability Office.................................    73
Co-Authors of the Indepedent Budget..............................    83
The American Legion..............................................    98

 
U.S. DEPARTMENT OF VETERANS AFFAIRS BUDGET REQUEST FOR FISCAL YEAR 2017

                              ----------                              


                      Wednesday, February 10, 2016

            Committee on Veterans' Affairs,
                    U. S. House of Representatives,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[Chairman of the Committee] presiding.
    Present: Representatives Miller, Lamborn, Bilirakis, Roe, 
Benishek, Huelskamp, Coffman, Wenstrup, Walorski, Abraham, 
Zeldin, Costello, Radewagen, Brown, Takano, Titus, Ruiz, 
Kuster, O'Rourke, Rice, McNerney, and Walz.

           OPENING STATEMENT OF JEFF MILLER, CHAIRMAN

    The Chairman. Good morning. This hearing will come to 
order.
    Mr. Secretary--
    Secretary McDonald. Good morning.
    The Chairman [continued].--thank you for being here with us 
today. We are gathered to receive the President's VAs budget 
recommendation for fiscal year 2017, as well as the advanced 
appropriation recommendation for fiscal year 2018. As everybody 
knows, the budget request came out only yesterday, so 
admittedly, there is a lot for everybody in this room to 
digest.
    Mr. Secretary, I am told you have come with charts today to 
help us in that effort. And we thank you in advance, for the 
visuals that you provided for us to be able to understand you a 
little more clearly.
    Let me briefly outline some areas that I would like for you 
to cover for us in more detail this morning. First, I think 
there is general agreement among Members of Congress that you 
Mr. Secretary, and veteran organizations, that greater reliance 
on outside care providers is absolutely essential to providing 
high-quality care for our veterans.
    The Choice Program got off to an uneven start, if you will, 
for a plethora of reasons, but the basic concept behind its 
inception still holds true today, namely veterans shouldn't be 
forced to travel or wait for a VA appointment if a community 
option is available to them. And if that option exists, it 
should be the veteran's choice, not the VA's choice as to 
whether or not they can exercise that option.
    The $10 billion Choice Program fund will more than likely 
be depleted within the next fiscal year. We have asked for and 
received a plan from VA to consolidate all of VA's outside care 
authorities into a new Veterans Choice Program going forward.
    We are aggressively working the legislation to make the 
program a reality, and I know that is something that is very 
important to you, Mr. Secretary.
    I am also interested to know what the cost assumptions are 
in the budget for the new Choice Program for the next two 
fiscal years, and how it can be paid for, given the current 
fiscal constraints that exist here in Washington.
    I am also interested to see what impact greater reliance on 
outside providers is actually having on wait times. Simply 
adding more capacity within VA and opening up additional 
outside care options doesn't seem to have moved needle yet 
much, because as the Secretary has told us, demand from 
existing and new users of the system has overwhelmed whatever 
new capacity is being created.
    This is an issue that the Commission on Care is evaluating, 
and we will get the Commission's recommendations later this 
summer, but we need to make sure that what changes we are 
putting forward not only work, but are fiscally sustainable, 
and that they also lay out the groundwork for what the VA 
health delivery system will look like 20 years from now.
    Second, I think it goes without saying, I have been pretty 
critical of VA touting its claims of backlog reduction success 
because it really, I think, has ignored the experience of 
veterans whose waits have grown longer in other areas of the 
claims process.
    The growing appeals backlog is a glaring example, and I am 
glad the Secretary has put forward an idea for a large-scale 
structural reform, instead of simply throwing more money 
staffing over the next decade. I put forward a similar reform 
proposal in concept, so I am interested in hearing more from 
the Secretary this morning about his ideas.
    Thirdly, the conversation we are having on the budget 
wouldn't be complete if we didn't discuss VA's stewardship of 
taxpayer dollars over the last year. As my Ranking Member 
knows, we cannot have a hearing in this room without discussing 
Denver.
    It was a botched construction project. We know that it is 
going to be close to a billion dollars over budget. The 
department has spent millions of dollars on art projects, 
relocation benefits, bonuses for failing employees.
    And last July, the agency threatened to shut down hospitals 
within weeks, due to a budget shortfall that actually was kept 
internal in the preceding months, forcing Congress to give the 
department access to an additional $3 billion, all of which 
came out of Choice.
    In classic fashion, I am not aware of a single employee 
that has been held accountable for any of these unprecedented 
failures. And I will continue to fight to ensure that VA has 
the resources that it needs. But given some of the problems, 
this budget request is going to continue to receive every bit 
of scrutiny that I think the American taxpayers would expect us 
to give it. It is the very least we can do for our veterans and 
the taxpayers and our country.
    And, finally, I would be remiss if I didn't mention my 
frustration, and I am sure many of the frustrations shared by 
my colleagues on this panel, of the recent string of Merit 
Service Protection Board decisions overturning disciplinary 
actions proposed by VA Deputy Secretary Sloan Gibson. We have 
got to have an honest conversation about what is happening 
within the Civil Service system.
    As the deputy noted in his statement last Friday after the 
most recent MSPB decision, and I quote, ``It appears that the 
MSPB does not agree with the Congress or the VA's 
interpretation of the extent of my authority, and has once 
again substituted its judgment for mine and demonstrated a 
willingness to second guess the VA's application of legitimate 
high standards for accountability,'' end quote.
    I will let the deputy's strong statement speak for itself, 
but needless to say, there is a massive problem here that 
permeates the entire conversation about the resources that VA 
has. Absent accountability, we are doomed to see repeated 
problems persist no matter the budget that we provide to the 
VA, no matter how much the Secretary tries to make the changes 
at the VA.
    VA's mission of serving veterans is second to none in our 
government. Creating a higher standard for performance because 
of that mission, is what the public expects of each of us. And 
I remained committed to working with you, Mr. Secretary, on how 
we can strengthen the system of accountability within the 
department, and across the Federal Government system. It is 
imperative to everything, you and we, will attempt to 
accomplish for veterans.
    Mr. Secretary, before I turn it over to the Ranking Member, 
I would like to take a moment to compliment you and your staff 
for the work that you all did in producing the final master 
plan for the West Los Angeles Campus. I visited the campus a 
few weeks ago and saw the enormous potential for the 
restoration of the property, and the mission of any future 
tenant of the property, to its original purpose of serving the 
veterans.
    You brought a lot of competing interests together who, not 
long ago, were extremely far apart. Considering the potential, 
the West LA Campus has, in helping homeless veterans in the Los 
Angeles area, to reintegrate into society. I salute you and the 
leadership that you have shown.
    And with that, I recognize the Ranking Member, Ms. Brown, 
for her opening remarks.

       OPENING STATEMENT OF CORRINE BROWN, RANKING MEMBER

    Ms. Brown. Thank you, Mr. Chairman.
    Mr. Secretary, I want to thank you and thank the President. 
During this President's tenure, discretionary spending has 
increased 86%. I think that deserves repeating. During 
President Barack Obama's tenure, discretionary spending has 
increased 86%. What this says is this President just doesn't 
talk the talk. He walks the walk and as one veteran group says, 
he rolls the roll.
    The President is doing his part to take care of veterans. I 
believe that this budget provides us with a starting point to 
begin the process of making sure that veterans are getting the 
benefits and service we have promised them.
    I look forward to discussing your proposal to establish an 
additional appropriation account focused on community care, 
especially in light of your repeated requests for budget 
flexibility.
    I want to be assured that this account will not take our 
focus away from providing the VA with the resources it needs to 
provide health care to our veterans.
    In light of the shortfalls, VA faced last year, and the 
uncertainty of reform efforts, I want to ask you, Mr. 
Secretary, the question I ask every year, does this budget give 
you what you need to accomplish your mission?
    Do you believe that there are areas that need a special 
focus and may need additional dollars?
    I stand ready to do whatever I can to make sure you have 
what you need. But while I will be in the front line of 
fighting for the dollars you need, I want to make it very 
clear, I expect you to spend every dollar we give you wisely 
for our veterans.
    I believe we must focus on our veterans. By focusing on our 
veterans, we will begin the process of rethinking how we ensure 
that we keep our promises to them in the years ahead.
    So let us know what you need, and we will, working 
together, on both sides of the aisle, make sure you have the 
tools and the dollars to accomplish your mission.
    And as I close,failure is not an option. It is not. We are 
going to take care of our veterans. And with that, I yield back 
the balance of my time.

    [The prepared statement of Corrine Brown appears in the 
Appendix]

    The Chairman. Thank you very much, Ms. Brown.
    I would like to welcome our first panel to the table this 
morning. Accompanying the Honorable Robert McDonald, Secretary 
of Veterans Affairs, this morning is the Honorable Dr. David 
Shulkin, Under Secretary for Health; Mr. Danny Pummill, Acting 
Under Secretary for Benefits; Mr. Ronald Walters, Interim Under 
Secretary for Memorial Affairs; the Honorable LaVerne Council, 
Assistant Secretary for Information Technology and Chief 
Information Officer; and Mr. Ed Murray, Interim Secretary for 
Management and Interim Chief Financial Officer.
    I appreciate all of you being here today. I appreciate also 
your willingness to engage the Committee Members when we have 
questions and issues that come up outside of this room. Your 
openness with us is greatly appreciated.
    Mr. Secretary, you can proceed with your opening statement. 
Members, the Secretary has requested and we have granted 15 
minutes this morning for the Secretary's opening statement.

         STATEMENT OF THE HONORABLE ROBERT A. MCDONALD

    Secretary McDonald. Thank you, Mr. Chairman.
    Chairman Miller, Ranking Member Brown, distinguished 
Members of the Committee, thank you for this opportunity to 
present the President's 2017 budget and 2018 advanced 
appropriation request for the Department of Veterans Affairs.
    Mr. Chairman, ten of our top 16 executives are new since I 
became secretary, all with substantial business experience. 
Their fresh perspectives combined with our more experienced 
government and health care executives are catalyzing 
innovation, meaningful change, and opportunity.
    Our leadership team today is comfortable with and actually 
invites honest, sometimes tough discussions about transforming 
VA. With me here on the panel, everyone is new to position 
since I was sworn in as secretary with the exception of Mr. 
Walters.
    I have a written statement that I ask to be submitted for 
the record.
    The Chairman. Without objection.
    Secretary McDonald. Thank you, sir.
    The President has proposed $182.3 billion for the 
department in fiscal year 2017. We think it is a strong budget, 
another tangible sign of the President's devotion to veterans 
and their families.
    The President's proposal provides the funding needed to 
enhance services to veterans in the short term, to transform 
VA's systems to better serve veterans over the long term, and 
to support and sustain progress that we have made toward any 
disability claims backlog and veterans homelessness.
    It supports VA's four agency priority goals, to improve the 
veterans' experience with VA, to improve VA's employee 
experience, to improve access to health care as experienced by 
the veteran, and to improve the dependency claims process.
    It also sustains our commitment to end veterans' 
homelessness, improves programs for veterans' care in the 
community, streamlines and reforms the appeals process, 
advances medical and prosthetic research, strengthens veterans' 
benefits programs, and proposes increased budget flexibility.
    It supports our five MyVA transformational objectives to 
modernize VA's culture, processes and capabilities, and to put 
the needs and the interests of veterans and their families at 
the center of everything we do.
    Improving the veteran experience is our first and primary 
strategic objective of the MyVA transformation. It is important 
that every contact between veterans and the VA will be 
predictable, consistent, easy, and outstanding.
    Second, making things better for veterans by improving the 
employee experience. We have no hope of improving the veteran 
experience without also training and improving the employee 
experience.
    Third, we want to improve internal support services and 
bring our IT infrastructure into the 21st century to enable 
employees and leaders to better serve veterans.
    Fourth, we want to establish a department-wide culture of 
continuous improvement that would be undergirded by Lean Six 
Sigma.
    And, fifth, we want to expand strategic partnerships, 
extending the reach of services available to veterans and their 
families. And then we will also continue to support our 12 MyVA 
breakthrough priorities that improve the delivery of timely 
care and benefits to veterans.
    My written submission addresses these breakthroughs in 
detail, but I would like to quickly show you how the proposed 
budget supports these priorities for veterans. And I think we 
all agree on this.
    First, the 2017 budget proposal will provide $2.6 million 
for the MyVA program office to help integrate all the MyVA 
initiatives across the enterprise. It increases by 47 percent 
funding for our veterans' experience office so we can continue 
training field employees on advanced business skills, sharing 
best practices, and establishing high customer service 
standards, and requests $171.3 million for IT systems that are 
instrumental to improving the veterans' experience.
    In support of our priority effort to increase access to the 
point that veterans' clinical needs are addressed the same day, 
they call or visit primary care facilities at a VA medical 
center. The budget requests $65 billion for veterans' medical 
care. That is a 6.3 percent increase over 2016. And it proposes 
$66.4 billion in advanced appropriations for the VA medical 
care programs in 2018. That is a 2.2 percent increase above the 
2017 level.
    The proposed budget provides an expected 35,000 veterans 
access to hepatitis C treatment. It funds tele-health access 
and it enhances health programs for women veterans. And $7.8 
million is provided for mental health which continues to 
support successful mental health care related prevention 
programs.
    We are committed to making sure that when veterans call for 
new mental health appointments they receive suicide risk 
assessments and immediate care if needed. Veterans already 
engaged in mental health care who need urgent attention will 
speak to a provider the very same day.
    The 2017 budget includes $12.2 billion for care in the 
community. It includes a new medical community care budget 
account consistent with the VA budget in the Choice Improvement 
Act.
    Proposed IT investments will fund veterans' enterprise-wide 
integrated services platform with best in class service and 
satisfaction measures and expand veterans' access to self-
service tools and benefits information. Veterans should have 
access to VA systems and know where to get accurate answers 24 
hours a day seven days a week.
    The 2017 request supports this priority by funding veteran 
contact centers in the field and veterans' crisis line 
modernization. To expand veterans' access to benefits they have 
earned and deserve, the proposed budget supports increased 
contracted disability exams at all regional offices.
    And it proposes a simplified, streamlined, and fair appeals 
process so most veterans could have a final appeals decision 
within one year of filing. With your support, five years from 
now, veterans could have a process that resolves 90 percent of 
their appeals within one year.
    To that end, the proposed budget requests a 42 percent 
increased in Board of Veterans Appeals funding to $156 million 
and a 35 percent increase in board staffing to more rapidly 
address the growing inventory of more than 440,000 pending 
appeals.
    Under this plan by 2022, we could reduce appeals FTEs to a 
sustainment level sufficient to process all simplified appeals 
within one year. The simplified process makes sense for 
veterans and it is an excellent return on investment for 
taxpayers too. The proposed sustainment level is 1,135 FTEs 
fewer than the fiscal year 2016 budget requires and 4,070 fewer 
department-wide than necessary to address the appeals workload 
with FTE resources alone.
    The fiscal year 2017 proposal continues our progress toward 
an effective end to veterans' homelessness by focusing on 
proven prevention and treatment services and veteran 
homelessness programs like SSVF, HUD-VASH, grant per diem, home 
loans, and foreclosure prevention.
    It provides services to about 65,000 homeless veterans or 
those at risk. It prevents an estimated 36,000 veterans and 
their family members from becoming homeless and provides case 
management support for over 63,000 who receive HUD-VASH 
vouchers.
    It is no coincidence that the very best customer service 
organizations are almost always among the best places to work. 
So the proposal provides for the training that supports our 
MyVA transformation.
    In the same vein, the proposed budget will help us 
significantly improve critical staffing levels that balance 
access and clinical productivity and reduce time to fill 
standards so we can move quickly to hire the people that 
veterans need to serve them.
    With the funding requested, we can continue transforming 
our IT infrastructure to create a world-class IT organization 
supporting veterans and our business partners and to do the 
work necessary to build an enterprise-wide, integrated medical 
surgical supply chain that leverages VA's scale to increase 
responsiveness and reduce operating costs, were redirected to 
priority veteran programs over $150 million in cost avoidance 
savings from transforming our supply chain.
    The proposal includes $78.7 billion in discretionary 
funding. That is $3.6 billion above the 2016 enacted level 
largely for health care. It includes $103.6 billion in 
mandatory funding for veterans' benefits programs. For the 
second time, the budget request VBA advanced appropriations. A 
hundred and three point nine billion is requested to fund 
compensation and pensions, readjustment benefits, and veterans' 
insurance and indemnities for 2018.
    And the 2017 proposal fully funds construction. These are 
investments in the future and they are critical to providing 
both quality care and timely benefits and first-rate facilities 
that are safe for veterans and VA employees.
    We will continue to work closely with the U.S. Army Corps 
of Engineers, our construction agent, to execute two projects 
over $100 million.
    So with this budget, there is a lot we can change on our 
own and we are doing that now. But many important priorities 
that will make meaningful differences for veterans require 
Congress to act on behalf of veterans.
    You will find more than 100 legislative proposals in the 
budget. Over 40 of them are new for this year, some absolutely 
critical to even maintain our current ability to purchase non-
VA care. Here are just a few of the most important ones.
    First, in this session of Congress, we can make significant 
improvements to set the foundation for top-to-bottom 
transformation and streamlining the VA's care in the community 
programs based on proposals in VA's landmark road map plan set 
out in our October 30th report to make these programs more 
rational and to better serve veterans.
    Second, the budget proposes a general transfer authority 
that allows me some measured flexibility to transfer up to two 
percent of discretionary funding across accounts excluding 
medical care to address emerging needs and overcome artificial 
funding restrictions on providing veterans' cares and benefits.
    Third, it is critical that VA is competitive with the 
private sector for top health care talent, so we are proposing 
flexibility on the maximum 80-hour pay period requirement for 
certain medical professionals. The private sector has this 
flexibility and it makes sense in running a hospital. This 
flexibility can both improve hospital operations and help 
attract the best hospital staff who use and prefer more 
flexible schedules.
    Along the same lines, we are proposing critical 
compensation reforms for network and hospital directors. Other 
adjustments to VHA personnel authorities we are putting forward 
also reflect common sense and good practice and best practices 
from the private sector.
    Fourth, we need your help to change VA's purchase care 
authorities, provider agreements, and individual 
authorizations, so veterans have access to clinically indicated 
and timely care. Failing to address this requirement in the 
weeks and months ahead impacts potentially thousands of 
veterans receiving care from local non-VA doctors, hospitals, 
nursing homes, and state veterans' homes.
    Fifth, we are looking for congressional authorization of 18 
leases submitted in VA's 2015 and 2016 budget requests as well 
as authorization of eight major construction projects included 
in VA's 2016 request. And we need your support for the six 
additional replacement major medical facility leases, two major 
construction projects, and four cemetery projects in the 2017 
budget.
    Six, passing special legislation for VA's West Los Angeles 
Campus will get positive results for veterans in that 
community, especially veterans most in need after years of 
debate and court action as the Chairman said.
    Seven, finally as I implied, we have to change the current 
appeals process. Last year, the board was still adjudicating an 
appeal that originated 25 years ago. The appeal had previously 
been decided by VA more than 27 times. Conceived over 80 years 
ago, it is unlike any other standard appeals process across the 
federal and judicial systems. It is complex, it is confusing, 
and it is ineffective.
    Under current law without significant change in resourcing, 
pending appeals are projected to soar by nearly 400 percent to 
almost 2.2 million by 2027. Together we can do this and we are 
open to ideas from the Committee and veteran service 
organizations to make it work for veterans.
    If we are serious about changing VA and better serving 
veterans and their families, we can't keep kicking the can down 
the road. This Congress, with today's VA leadership team, can 
make these changes and more for veterans. Then we can look back 
on this year as the year that we turned the corner, but we have 
to be courageous and we have to work together to make that so.
    This is my second budget cycle and I appreciate the support 
that you have all shown to veterans, the department, and our 
MyVA transformations. On behalf of veterans and the VA 
employees serving them every single day, thank you for this 
opportunity. Mr. Chairman, I look forward to your questions.

    [The prepared statement of Robert A. McDonald appears in 
the Appendix]

    The Chairman. Thank you very much, Mr. Secretary.
    According to the slide deck that VA provided yesterday, you 
anticipate spending $1.7 billion in the fiscal year on the 
Choice Program and we discussed this a little bit yesterday.
    How much money is left in the Choice Program today or 
close?
    Secretary McDonald. As we talked yesterday, Mr. Chairman, 
we expect the Choice Program funding to run out before the 
budget year 2018. We will get you the exact number here.
    Mr. Murray. I have that here.
    The Chairman. If you would turn the mike on. Thanks.
    Mr. Murray. Thank you.
    So our estimate for the Choice Program for Section 801 for 
2016 is $2.7 billion and under 802 where we provide care in the 
community, it's $1.7 billion. In 2017, we estimate spending of 
$969 million for Section 801 and $4.8 billion in Section 802. 
And that rounds out the 10 and the 15 together and we can 
provide you the details.
    The Chairman. And you anticipate exhausting the funds when?
    Mr. Murray. At the end of 2017.
    The Chairman. So could you explain, and, again, we 
discussed this a little yesterday, but can you explain the 
discrepancy that VA states that the Choice utilization has 
markedly increased in fiscal year 2016 and the low dollar 
figure presented in the budget materials? In other words, why 
are Choice expenditures estimated to be more than three times 
higher for 2017?
    Mr. Murray. Go ahead, Dr. Shulkin.
    Dr. Shulkin. Mr. Chairman, as you know, and I think that 
you characterized this correctly, the Choice Program got off to 
a rocky start. We have been working very hard to get veterans 
access to care through Choice and we have seen the results of 
that. We are seeing increased authorizations in significant 
numbers and that is leading us to the projections that we will 
be spending much more money using Choice funds to serve 
veterans.
    The Chairman. The advanced appropriation requested for 
fiscal year 2018 is nearly $2.5 billion short of the 2017 
request and almost a billion dollars short of what was actually 
paid in fiscal year 2015.
    So how does the VA envision addressing the inevitable 
budgetary shortfall that is out there?
    Secretary McDonald. As we talked yesterday, Mr. Chairman, I 
think what we are going to need to do is to come back with the 
work that we do in the consolidation of care in the community 
and come back with what we think the number will be for 2018.
    Really the top priority for us is getting to that 
consolidated program. As you know, in the consolidation plan 
that we put forward, there were a couple options that we laid 
out for the Committee. One was dealing with the emergency room. 
One was also dealing with what we think could be incremental 
demand from more veterans using the system.
    What we have seen already and you reflected this in your 
remarks is veterans already have a choice. Eighty-one percent 
of veterans have some form of Medicare, Medicaid, private 
health insurance. And as we continue to improve the care from 
the VA and the care in the community, more veterans are going 
to choose to use our system because our co-pays are zero.
    And right now our estimate is the average veteran uses the 
VA for only 34 percent of their care. If that increases one 
percentage point, it is about a one and a half billion dollar 
increase. So we need to get a better handle on this as we work 
together on the consolidation of care in the community.
    The Chairman. I think that the Committee was pretty clear 
and the Congress was with the Choice Fund Program was intended 
to supplement VA's community care budget. However, I saw in the 
budget where it is assuming $7.2 billion for community care 
funds which are distinct, should be distinct from Choice funds. 
And that is less than what you had budgeted and spent in each 
of the fiscal years 2013, 2014, and 2015.
    So my question is, do you think that VA is compliant with 
the intent of the Congress when the law was passed?
    Secretary McDonald. I certainly think so.
    Ed, do you seen any--
    Mr. Murray. I don't. I did want to mention that we will get 
a chance in the next year this time to revisit the 
appropriation for 2018. So I just wanted to put that in there 
once the consolidation and the care in the community 
recommendations are made, we will get an opportunity to review 
our numbers for fiscal year 2018.
    Secretary McDonald. And, again, Mr. Chairman, I think the 
most important thing is--we got to get the consolidation of 
care in the community law passed and decide what is going to be 
part of that, if the change in the emergency room structure is 
going to be part of that, and then, we got to decide what the 
demand is going to be. And we will work with you on future 
budget numbers that will go with that.
    The Chairman. And we would like to have a little extra time 
to talk to you about what our assumptions are, and why we think 
there may be an issue, whether it is a deviation, and maybe we 
can all get back on the right track.
    I have one more real quick question. The major and minor 
construction requests are substantially lower than what you 
requested last year. And I understand that is because we are 
waiting for the study for the Joint Commission to come out 
later this summer. And I think that is the appropriate thing to 
do.
    The 800 pound gorilla, if you will, is going to be if they 
recommend closing underutilized facilities. Are you prepared, 
Mr. Secretary, to full throatedly support that? Obviously you 
will have to ask for our help as well.
    Secretary McDonald. Mr. Chairman, as you know, for the two 
last years, I have had in my written budget proposal 
productivity improvements for the department. And I have 
specifically culled out ten million square feet of unused space 
that results in a charge to the taxpayer of $25 million a year. 
And we have a number of these facilities where we need the 
courage of the Members of Congress to help us close them, so 
that we can turn those savings into productive use of funds for 
veterans.
    The Chairman. Thank you very much.
    And Ms. Brown just said she has some facilities she would 
like to put up on the chopping block, so I will yield to her.
    Secretary McDonald. Whose district is it in?
    Ms. Brown. Mr. Chairman, all I said was just as long as it 
is not in my district, but I know every single Member feels 
that way. We support that. And please don't charge that against 
me.
    I have a couple of quick concerns. That was a wonderful 
conference you had last week on suicide prevention. And I want 
to thank you for that.
    But one of the things we learned, 22 a day servicemembers 
commits suicide, which is totally unacceptable, but only three 
of them are in the VA's system. What is VA doing to get those 
veterans into the system and have you included that in your 
budget?
    Secretary McDonald. Yes, ma'am. Actually, what we said was 
22 a day and 17 not connected to the VA system, so five. As you 
pointed out, if we can get people connected to the VA system, 
we know how to treat them and we know how to prevent suicide. 
So outreach, as you described, becomes a very big issue.
    And I will let David talk about what we are doing.
    Dr. Shulkin. Well, first of all, thank you for personally 
being there and to the Chairman and so many members that came 
because we know this is very important to you and very 
important to us.
    This conference, as you know, was focused on this exact 
issue, how do we get people that are isolated and not seeking 
help back in. And what we essentially believe is, we need the 
help of the community. VA can't do this alone. So we had at 
this conference community groups, the Department of Defense, 
many other organizations that we believe we need to work closer 
with.
    And the essence of this is, is that what we learned is, we 
need to do a better job in the transition time. When a military 
member leaves service and then gets in the VA, we need to make 
that a much more thorough process to get people help.
    We also have learned that we can do better in predictive 
tools using big data analysis and using the research that is 
actually done at VA to predict who is at greater risk. So we 
are working on that and we are coming up with a plan 30 days 
from the conference with very specific actionable steps that we 
are going to put into place.
    Ms. Brown. Let me add that women, one of the fastest 
growing groups of the military, are committing suicide, and I 
hope VA is targeting our female veterans, making sure that they 
get the help that they need.
    Secretary McDonald. We are. In fact, since the year 2000, 
the number of women veterans seeking VA health care has 
skyrocketed from 160,000 to 447,000. So we are putting in place 
all kinds of programs which we can talk about, whether it is 
having designated women's health providers at all of our 
facilities or whether it is having a hundred percent of our 
medical centers with women's advocates, having women's clinics, 
having obstetricians, gynecologists. We really have to 
transform the entire VA system to serve our female veterans and 
that is a big effort for us.
    Ms. Brown. And one more thing, the elderly veteran, the 
Vietnam veterans are committing suicide as well. Most people 
think it is the younger veterans, but it is really the older 
veterans. So I am hoping VA is looking into that.
    I have one other quick question. We had a hearing last week 
about Hepatitis C and what we are doing as far as the 
pharmaceuticals. And I know at one time that we wanted the VA 
to work with the Department of Defense on the formularies so we 
could keep that cost down for all of the people we service.
    Can you give me an update on that issue because the cost of 
the drug pharmaceuticals is unacceptable particularly since we 
put the money up front?
    Secretary McDonald. Our plan, the plan that you have got 
here is to eliminate hepatitis C amongst veterans over about a 
five-year period. We are in negotiations. There are alternative 
drug treatments now and we are in negotiations to get those 
costs down as low as we possibly can. And any savings we turn 
up, we will obviously plow back into the budget to better care 
for veterans.
    Dr. Shulkin. I would just add with the Department of 
Defense, we are coordinating purchasing our drugs together. And 
we are using the Federal Government size and scale to be able 
to get the best prices for taxpayers.
    Ms. Brown. In closing, the VA and HUD need to work closely 
together. In talking to lots of the homeless facilities, part 
of the problem is the definition of the voucher. We don't want 
veterans to be under a bridge before we can intervene and 
provide proper housing and health care. So we need to work 
together with those inter-agencies to make sure that VA is 
doing the best thing to prevent homelessness.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    The Chairman. Yes, ma'am.
    Mr. Lamborn, you are recognized.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Mr. Secretary, I am very upset about the IG report, this 
report that came out on the clinic in Colorado Springs last 
Thursday. And I know you are here to talk about the $182 
billion budget, but I have got to ask you about my district as 
referred to in this report.
    According to your testimony, looking at all appointments 
nationwide in fiscal year 2015, quote, ``More than 97 percent 
of 56.7 million appointments were completed within 30 days of 
the clinically indicated or veterans' preferred date.''
    But according to this report which looked at appointments 
at the clinic in my district also in fiscal year 2015, only 36 
percent of veterans were able to get an appointment within 30 
days. There is 100,000 veterans in my district. Thirty-six 
percent is a lot worse than 97 percent.
    So either the 97 percent number you give us is unreliable, 
or veterans in my district are getting extra poor treatment. 
Which is it?
    Secretary McDonald. As you know, Congressman, and I know 
Deputy Sloan Gibson talked to you about this last Friday, this 
report from the IG is about a year old, almost a year old. And 
as a result, we have taken many steps since this report was 
issued.
    The clinic manager has been replaced. Sixteen additional 
schedulers have been hired and we have consolidated training 
and supervision and accountability. The bottom line is that 
since March of 2015, Colorado Springs has been aggressively 
implementing the Choice Program. Wait times are coming down. We 
obviously have more work to do, but this report is about a year 
old.
    Mr. Lamborn. Well, as for accountability, will anyone in 
the future be fired or can we say that anyone was fired? Heads 
need to roll when something like this happens.
    Secretary McDonald. Well, first of all, when I read the 
report, what came out of the report to me was we did not do a 
good job training people, not that there was malfeasance. I 
know in your letter, you said deliberately falsified 
appointment records to prevent these veterans from receiving 
care, intentionally delay the medical care of our Nation's 
veterans.
    I read the report. I didn't see that. I mean, it is in your 
letter, but I didn't see it in the report. I think if you read 
the report closely, the IG did not make any kind of accusations 
about people falsifying records or doing anything like that.
    Mr. Lamborn. Well, I did review the report closely. And we 
had that conversation, Secretary Gibson and me, but here is 
what the IG report says. It says scheduling staff used 
incorrect dates that made it appear the appointment wait time 
was less than 30 days. Now, maybe it wasn't done maliciously, 
but--
    Secretary McDonald. Well, see, your letter again says 
intentionally delayed the medical care, deliberately falsified 
appointment records. That is not what is in the IG report.
    Mr. Lamborn. Okay. When it says scheduling, the IG says 
scheduling staff----
    Secretary McDonald [continued]. The people were poorly 
trained. They were poorly trained and we admit that. And as I 
said, the clinic manager has been replaced. We have hired 16 
additional schedulers. We have also consolidated training and 
supervision. This is a training issue and--
    Mr. Lamborn. Well--
    Secretary McDonald [continued].--we are after it. And that 
is why the care has improved, but we need to go further.
    Mr. Lamborn. Whether it was done maliciously or not, I 
think the records were falsified and I think that that is a 
correct term to use. And I think someone needs to be fired for 
this.
    The person that was let go, was that person actually fired 
or were they just allowed to be transferred or allowed to 
retire?
    Secretary McDonald. Mr. Chairman, maybe we should make the 
IG report a matter of the record so that the American people 
can read this because the investigation makes no such 
accusations.
    The Chairman. It is already publically available now on the 
IG's Web site, Mr. Secretary.
    Secretary McDonald. Yes, sir.
    Mr. Lamborn. Let me ask you about the Veterans Choice Act. 
We talked with someone out of this same part of Colorado who 
said she did not agree with the Choice Program and quote, ``The 
VA will always take better care of veterans than the community 
and that the community is not capable of taking care of our 
veterans.''
    Mr. Secretary, I perceive widespread defiance and 
resistance to the Choice Act. Is that something that we are 
going to still have to face in the future, or is there going to 
be a better attitude on the part of VA bureaucracy?
    Secretary McDonald. I don't perceive that, but we are going 
through a process right now called leaders developing leaders. 
It is a program that we put together to train all the leaders 
in the VA. We have trained over 12,000 leaders so far. Part of 
that training is basically sharing with everyone the vision 
that the optimal network of the future includes inside VA care 
and care in the community.
    So if you find someone who you think doesn't understand 
that, please provide us the name and we will certainly share 
our vision with them. But I think everybody gets it.
    The Chairman. Mr. Takano, you are recognized.
    Mr. Takano. Mr. Secretary, you HAVE shared with Members of 
this Committee in a variety of formats your vision for moving 
the VA toward your vision of care in the community. I want to 
let you know I support what you are doing, and hopefully, we 
can all work together to make sure that we enable you to 
consolidate all of the various care in the community programs.
    But I have some questions about some other parts of your 
budget and maybe you or your cohorts can help explain. The 
fiscal year 2017 budget requests $567 million for substance 
abuse, an increase of only $9 million from fiscal year 2016 and 
a decrease of $57 million for your estimate of last year.
    Can you explain this change in estimate with the ever-
increasing opioid addiction crisis facing our states?
    Dr. Shulkin. VA has prioritized the issue of substance 
abuse. There is no question about it that this is a growing 
problem. We have put together some new efforts to be able to 
address this. We think that the budget request that we have 
submitted will allow us to be able to focus on this and 
increase our efforts to be able to make an impact on this.
    We have just joined a White House effort to be able to 
address heroin abuse in the rural areas that is being led by 
the Secretary of Agriculture that VA is participating in. We 
are working with other federal colleagues and other agencies to 
be able to help address this.
    But we are very interested in doing more, and if there are 
other ways that you think that we should be stepping up or 
other ways to do it, we will use whatever resources we have to 
be able to address this.
    Secretary McDonald. I think I would say, too, that opioid 
use across VA, and, again, just the general average is down, 
and the use of alternative treatments, we are finding more and 
more successful, whether it is equine therapy, acupuncture, 
yoga. We will try anything in an evidence-based way that works 
and we are seeing great success with these alternative 
programs.
    Mr. Takano. So you are noting a decrease in opioid abuse, 
but what about overall substance abuse?
    Dr. Shulkin. You know, as the secretary said, we have shown 
that we actually have 16,000 fewer veterans on prescribed 
opioids, so we are making progress there. We still have more 
work to do. The illicit drugs being used and heroin are a 
national epidemic and unfortunately we are seeing that also 
increase in the veteran population.
    So we need to be doing more and we are engaged in looking 
for ways to make our programs more effective and to do better 
outreach. VA has huge programs in substance abuse as you 
identified.
    Mr. Takano. Well, how are you sharing your best practices 
throughout the VA?
    Dr. Shulkin. We are doing research that we publish on this 
and so that is available throughout. You know, once we publish 
it, it is available to the scientific community. We are holding 
conferences on this. We work with SAMHSA, the other federal 
agencies that are involved in substance abuse on a regular 
basis. We are working with the CDC on efforts in substance 
abuse as well.
    But, you know, this is such a national epidemic and such a 
crisis for veterans that we are very open to new ways, new 
ideas to be able to effectively treat veterans.
    Secretary McDonald. And some of the work that we have done, 
I have actually spoken at groups, associations of doctors 
worried about reducing pain medication. I did one in West 
Virginia. I know David has done some. I have spoken to the 
American Medical Association. I have spoken to the Institute of 
Medicine.
    We have got to play a leading role in using our evidence-
based alternative therapies as ways to get people off of 
opioids and also to deal with the substance abuse issue that is 
national.
    Mr. Takano. Well, I note that you are increasing your 
mental health budget significantly and perhaps there is some 
spillover there. But I want to--quickly before my time runs 
out--get a question in about, you know, the shortage of health 
care providers around the country and whether you believe your 
budget includes the resources that are necessary to maintain 
and expand the VA graduate medical education in order to 
recruit and retain health care professionals.
    Secretary McDonald. We do, but there is a critical piece of 
legislation that we are asking for help for, and that would be 
the 80-hour work week which will allow us to hire people into 
emergency rooms and work flexible schedules.
    Also we are asking for Title 38 categorization for our 
medical center directors. Our medical center directors who are 
not Title 38 are paid roughly half of what is made in the 
private sector. As a result, we have a number of vacancies that 
we are trying to fill. So to be competitive, we need those 
pieces of legislation passed.
    Mr. Takano. But as far as medical school education, though?
    Secretary McDonald. Medical school education, I have been 
to--
    Mr. Takano. I mean, graduate medical school.
    Secretary McDonald [continued].--over two dozen medical 
schools recruiting. I find that our problem recruiting is not 
that difficult and that we are outreaching. Most of the medical 
schools will tell you they can increase their throughput, but 
that they need the residencies.
    And I know we are in conversation with Dr. Roe right now 
and the Doctors Caucus at getting more resident positions that 
we can put against primary care, mental health, and in the 
rural areas because that is where the need is great in the 
country.
    Mr. Takano. Okay. Thank you.
    Dr. Shulkin. Thank you.
    The Chairman. Mr. Bilirakis, you are recognized.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
    Welcome, Mr. Secretary. Thank you for your testimony Also 
thank you for taking my call the other day with regard to the 
Wounded Warrior that needed assistance and thanks for following 
up. I really appreciate it so very much.
    Mr. Secretary, again, the President's budget includes a 
request of $7.8 billion for mental health programs and efforts. 
It is encouraging to hear that more and more veterans are 
utilizing the VA or DoD to treat their invisible wounds which 
has increased yearly again. However, the heartbreaking 
statistic is the 18 to 22 veterans taking their lives daily 
delves deeper into the discussion regarding the effectiveness 
of our current programs.
    Does the VA track data regarding how many veterans that 
started VA programs to treat their mental health issues, 
finished the treatment programs and are the mechanisms in place 
to survey the veterans opinion on the successes and areas for 
improvement because one size does not fit all? And I understand 
that veterans start these programs and sometimes do not finish 
them and have nowhere to turn.
    That is why it is very important that we get these 
alternative treatments at the VA on a regular basis. I want to 
ask you that question too. How many treatments, I know you 
brought it up, but how many complementary alternative treatment 
programs such as equine therapy, service dog therapy, yoga, 
what have you are there? Do our veterans have access to these 
programs on a regular basis?
    And in my opinion, we need to expand these programs, and I 
filed legislation to do so. Of course, they must be evidence 
based, but I want to ask that question if you have again these 
programs within the VA, are we tracking them to see how many 
veterans finish those programs and how effective they are?
    Secretary McDonald. Yes and yes. We need to track these 
veterans very closely because the number one cause of missed 
appointments are people with mental health care appointments 
and so we need to track them very closely.
    I am pleased to tell you that we had a situation in 
Vermont, White River Junction where we had a veteran not show 
up for an appointment and one of our nurses seeing that veteran 
didn't show up. Rather than following the rules, and we are 
talking about changing our organization from a rule-based 
organization, a principle-based organization, she contacted the 
VA police.
    The VA police contacted the local police. They went around 
the house. They discovered there weren't footsteps in the snow. 
Neighbors hadn't seen this individual. They actually broke into 
the house and found this veteran lying on the floor wedged 
between two pieces of furniture. The person would have died if 
this nurse hadn't been tracking that appointment for that 
veteran.
    We have celebrated that nurse's behavior. We have 
celebrated her principle-based way of operating. And it was my 
honor to celebrate both of them recently for what they did. And 
we are using that as an example to all of our employees as to 
how we should think about the veterans we serve.
    David.
    Dr. Shulkin. I would just, Congressman, you have identified 
a very, very tough issue in the treatment of mental health 
disorders. Our no-show rate for mental health appointments is 
21 percent. So you are absolutely correct.
    Mr. Bilirakis. That is unacceptable.
    Dr. Shulkin. Yeah, very, very difficult. This, of course, 
is the same thing that you find outside the VA system.
    The VA is absolutely trying to target this issue of 
noncompliance. We are doing more than I have seen anywhere 
else. We use peer counselors to be able to help with this. We 
have our vet centers, 300 of them across the country as another 
source of a place to get information and bring back into the 
system.
    But every one of our suicides we do what is called a root-
cause analysis to look specifically at this issue. What could 
we have done better to bring people in? I was reviewing a root-
cause analysis today where we actually walk the people over to 
the schedulers to make sure that they scheduled. We can't force 
them unfortunately to show up and that is where our 
noncompliance rate is, so--
    Mr. Bilirakis. Are there mechanisms in place to survey, you 
know, to get the option of--
    Dr. Shulkin. Yeah.
    Mr. Bilirakis [continued].--the veteran with regard to 
these programs if they are effective?
    Dr. Shulkin. This is what I would call research where we 
are looking at different ways to improve compliance. We have 
two facilities right now that are surveying veterans using 
functional scores every time they visit to look at this issue. 
We are trying to learn what works so we can spread that.
    Mr. Bilirakis. Okay. We have a $7.8 billion budget.
    Dr. Shulkin. Yes.
    Mr. Bilirakis. Okay. How much is going toward these 
alternative and complementary treatments?
    Dr. Shulkin. Yeah, that would be outside. The alternative 
complementary treatments are in our patient center, a different 
medical services budget. And, again, VA has one of the largest 
programs of these integrated medicine or alternative medicine 
type facilities that we are continuing to learn what works and 
spread it throughout the system.
    We have more to do because not every facility has access to 
this. The type of workers that are experienced and trained in 
this are somewhat limited, but we are continuing each year to 
bring more of these services to our facilities.
    Mr. Bilirakis. Thank you very much.
    And I guess my time has expired. Thank you, Mr. Chairman. 
Appreciate it.
    The Chairman. Ms. Titus, you are recognized.
    Ms. Titus. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary. I have a couple of issues. I will 
just throw them all out there and then ask you if you would 
please address them.
    First and foremost, the appeals process, you heard it said 
so many times that I see this as a new tsunami that we need to 
try to address before it continues to get worse. And your 
figures are pretty compelling and that argument 440,000 
currently taking 25 years. And I appreciate very much that you 
have given us a chart to simplify this process and that you 
have asked for additional resources.
    I would ask you, though, of those 300 additional FTE, I 
think it is called non-related workload, how many of them will 
actually be our workforce? How many of them will actually be 
working on appeals and also when can we expect to get some 
specifics about the legislative changes that need--we need to 
make?
    We talked and I appreciated that. And I have also reached 
out to the VSOs to say give us your recommendations because we 
need to get busy on the legislative side. And so we need some 
specifics on that.
    The second thing I would ask you about is the medical 
research. You have in the budget $663 million which is an 
increase of about $33 million for medical research. And we have 
talked about this before, the need to do research on medical 
marijuana as an option. And I would ask you if any of that is 
scheduled to go for medical marijuana research and, if not, if 
we could work together to try to make that happen.
    And then third, and this is something that is happening in 
my district, and I have brought it up before, about veterans' 
nursing homes. I realize that the VA provides grant money to 
the states, and then the states, through Medicare or Medicaid, 
are then responsible for them. But I wish we could look for 
some way for the VA to have a little more oversight of those 
nursing homes because some of them just really aren't operating 
up to standard and the VA doesn't seem to go back and check on 
them very often. And I wondered if there was somewhere that 
could go in the budget.
    So those would just be my three areas of interest right 
now.
    Secretary McDonald. We will take them one at a time. We 
will start with appeals. Let me get some facts out on the 
table. So about 11 to 12 percent of veterans appeal their 
decision. Of that 11 to 12 percent, if you took the percentage 
of total, about two percent of veterans, two to three percent 
are responsible for about 45 percent of the appeals. So what is 
happening is you have people appealing and appealing and 
appealing. Some have appealed for 80 times. Some have appealed 
for multiple years.
    We have had conversations with the veteran service 
organizations about what the change in law would look like, and 
we shared some thoughts yesterday with the Ranking Member and 
the Chairman. And this is going to take a team effort, and so 
we are going to have to all get together and decide what the 
change in law is.
    We put a strawman in our budget proposal, but, again, it is 
just a strawman for people to react to. And we will be working 
that collaboratively over the time.
    You asked how many people. Danny, how many people?
    Mr. Pummill. The Congresswoman--for fiscal year 2016, you 
gave us 730 people to add to our non-rating work load, and we 
part a large number of those into the appeal process on the VBA 
side. We have an additional 300--we actually hired them in 
2015, so we get them hired and trained up to be ready to go in 
2016.
    The next batch, the 300, we are going to put 100 into 
appeals. On the other side, and the Board of Veterans Appeals, 
their budget was increased by $46 million, and they are going 
to increase the number of judges and appellate people they have 
on their side to do that.
    So the combination with the increased budget at the VBA, 
the increased people they are going to put on the job, the 
extra people that we are going to put on--on the VBA side, and 
if we can get some kind of reform, all that combined together, 
we think we can attack this problem and solve it.
    Medical marijuana I will let David handle.
    Dr. Shulkin. Yeah, Congresswoman, I am not aware that VA is 
doing any research right now on the medical impact of medical 
marijuana. I would be glad to work with you on that issue. It 
is an important issue right now. We are not doing that.
    On the state nursing homes, VA, as you know, funds this 
through a matching program, but does not have the 
responsibility for quality oversight. All that we have right 
now is a annual inspection. Again, if there are specific 
concerns on that, and you think that we should have a more 
active role in that, be glad to work with you on that.
    Ms. Titus. Well, thank you. I appreciate that. I would like 
to look at that. And I also think that as more and more states 
legalize medical marijuana and veterans do not have that as an 
option, we need to look at that, and if you think we need more 
testing--which I agree with--then we should be doing that 
testing.
    And as for the appeals, we have got to get a legislative 
solution. Now, you can't just keep putting more people and and 
more money. That is not going to solve it. So Dr. Abraham and I 
are on that Subcommittee for disability. I appreciate working 
with him, and please keep us in the loop as you come with some 
of these suggestions, I would say.
    Secretary McDonald. Yes, ma'am, and as you know in my 
testimony, I actually talked about reducing the number of 
employees once we get this resolved with the law. Thank you.
    Ms. Titus. Thank you. Thank you, Mr. Chairman.
    The Chairman. Dr. Roe, if you would yield just for a 
moment, Ms. Brown has a question.
    Ms. Brown. Yeah, I have a question to the Secretary. My 
understanding under the medical marijuana, we, in Congress, 
prohibit you all from doing anything. Is that correct?
    Secretary McDonald. We are not allowed to prescribe medical 
marijuana. We can have--our doctors are permitted to have 
discussions with their patients in states where medical 
marijuana is legal about the use of medical marijuana, but we 
cannot prescribe it as an agency of the federal government.
    Ms. Brown. Thank you. I yield back.
    Secretary McDonald. Dr. Roe.
    Mr. Roe. Yes and just for the record, on the medical 
marijuana issue, it is a sore spot with me. It ought to be 
studied like any other chemical, and it has not been. And you 
know, ``I feel good,'' is not science. That's how you feel.
    And so I think we need to study it like any other chemical. 
I totally agree that it is not science based. And so there is 
no science right now. I just reviewed this whole business of 
medical marijuana. There is no science about the medical 
marijuana benefit. So anyway, that is a different issue.
    I wanted to bring up just a couple things very quickly to--
a study was published just about three or four days ago that 
showed that death rates and re-admissions at VA hospitals for 
heart attacks, heart failure, and pneumonia were similar--it 
was in the JAMA--were similar, almost identical, to the private 
sector.
    So I think it speaks that the quality of care the veterans 
get once they are in is comparable to the outside, and I think 
that is a shout out, and I think that is science right there. I 
think that what we need to do is make it easier. Obviously--and 
you are trying to, I think, Mrs. Secretary, for veterans to 
access the care there. So I think once they are in the system, 
the care is comparable. At least this study in JAMA definitely 
showed that.
    Just two or three things I would like to talk about. One is 
homelessness. That is something to me, I think it has been an 
emphasis of mine since I have been here. I want to have you 
comment a little bit on that.
    I think you mentioned about principal care, and I would 
just think that is putting the patient first. And that is what 
this nurse did, that is what nurses do. It is what doctors have 
done forever. And I think the system has prevented that 
sometimes from happening. And I think it is a shout out to this 
nurse, who just did not care what the system was. She cared 
about her patient. And I think that is what we need to have. 
That attitude needs to come from the top down, and I think it 
is beginning to.
    So, first start with homelessness. We have discussed the 
disability backlog. Obviously, it is better than when I came 
seven years ago. There were a million claims when I came here 
and first sat on this Committee, so.
    And the last thing I want to talk about is, I think it is 
critical for the long-term future of the VA, is the 
implementation of the VA residency programs and make sure we do 
that right. So I will stop.
    Secretary McDonald. I will start with homelessness and 
David can deal with the medical issues. On homelessness, we are 
making progress. I mean, homelessness, veteran homelessness, is 
down 36 percent since 2010. Unsheltered veteran homelessness is 
down 50 percent. That is all good. But we are getting to the 
point now where we literally know the veterans who are homeless 
by name. We literally know them by name. And as the Chairman 
said, and I appreciated his comment, the work that we have done 
in Los Angeles is largely about homelessness, because Los 
Angeles compared to other cities around the country is the 
place where there is virtually twice as many as you would find 
elsewhere. I mean, some of the cities who have claimed an end 
to homelessness have housed the number of people over a year 
that Los Angeles has to house in a month. I mean, it is that 
big of a problem.
    And we were prohibited on our campus from doing extended-
use leasing, which we do. We work with partners, private sector 
partners, who build residences for us. We have one in Palo--or 
Menlo Park, which is just, you know, not far from Los Angeles. 
So as soon as we get that legislation, we are going to be 
working very, very quickly. Our master plan has a commitment 
for 1,200 beds in Los Angeles.
    After Los Angeles it is San Diego. And what we are finding 
is the areas we need to work--and I will be quick about this--
number one, is we need landlords to rent for the HUD VASH 
voucher amount, or we need to change the HUD VASH voucher 
amount. In Los Angeles, we have changed the amount twice.
    Number two, we need developers willing to build these 
buildings for us, willing to get a rate of return on housing 
these homeless veterans. Number three, having the caseworkers 
to do the wrap-around cure. We hired about 300 for Los Angeles.
    So we are making progress, but there is still a lot of work 
that needs to be done.
    Mr. Roe. What you pointed out is, is what we found, is the 
housing stock.
    Secretary McDonald. Yes.
    Mr. Roe. And if you have a chance to visit, we will take 
you by some developers who have accepted what the HUD VASH 
Voucher pays and provide that housing stock.
    Secretary McDonald. Love to do that.
    Dr. Shulkin. Dr. Roe, I would just say I am very impressed 
that you are able to keep up with the medical literature. The 
study that you referred to in the Journal of the Medical 
Association was just released yesterday. It actually showed 
that VA has statistically better mortality for acute myocardial 
infarction and for congestive heart failure than the private 
sector, which I think has surprised a lot of people, but it 
does not surprise us, because consistently, VA has had either 
equal or better performance when it comes to mortality compared 
to the private sector. So thank you.
    Mr. Roe. I yield back.
    The Chairman. Another interesting statistic in L.A. is they 
are at one percent, I think the number was, vacancy rate. I 
mean, it is astronomical. There just isn't anything there to be 
rented out, and that is why this master plan, I think, is so 
critical. Mr. O'Rourke, you are recognized.
    Mr. O'Rourke. Thank you, Mr. Chairman. And Mr. Secretary, I 
would like to thank you and your team for the presentation 
today and all of the work that you have contributed to 
improving access to care for our veterans, and all the other 
responsibilities within your purview.
    I want to, in addition, commend you for the focus on mental 
health access and treating veteran suicide like the crisis that 
it is, and meeting that crisis with a sense of urgency. So the 
$7.8 billion to improve mental health access is certainly 
welcomed.
    I would ask that in addition to your comments, that it be a 
standalone priority within the VA, much the way reducing 
veterans homelessness is a standalone priority, I think veteran 
suicide is just that serious, and we still are in a crisis. And 
I think articulating that from the very top that this is, in 
addition to overall access to better health care, physical and 
mental, reducing veteran suicide is a priority. I think the 
more we say that, the more we act on that, the more we follow 
through, the better outcomes, the fewer deaths. This is wholly 
preventable, and I just, again want to thank you.
    Secretary McDonald. Congressman O'Rourke made a suggestion 
to us when we met and went through our 12 priorities for the 
year to call out vet suicide prevention. We had it there, but 
we did not have it called out as explicitly, and we have 
changed that. So we thought it was a good suggestion. We do 
listen, and we do look for your comments. So we do try to 
improve.
    Mr. O'Rourke. Thank you. I really appreciate that. On that 
same note, we know that access--I think we know, I certainly 
feel this way--that access to mental health is connected to 
successful suicide prevention and treatment for those who have 
suicidal ideation.
    As you know, in El Paso, but throughout the country, we 
have critically underserved areas when it comes to mental 
health. To use El Paso as an example, we have the same mental 
health staffing today that we did in September of 2014, when we 
really became aware of how critical the crisis was in El Paso. 
And I know that Dr. Shulkin and Gail Graham, the interim 
director, Brian Olden, had a mental health in El Paso, are all 
doing amazing work, and yet it is not working.
    And I want to know what we are going to do to elevate it 
beyond where you are today to recruit those providers to 
underserved communities like El Paso. Because I know that those 
providers will prevent suicides. They will save lives if we can 
get them in our communities. So what additional flexibility do 
you need to pay them more, to forgive more of their medical 
school debt, bonuses to retain them in place if they are 
performing according to the standards that we have set for 
them?
    And what can we do to implement the very exciting proposal 
that Dr. Shulkin presented in October, which would have us 
leverage partnerships for what I would call non-VA core 
competencies, and elevate those conditions like PTSD and 
traumatic brain injury that are uniquely connected to combat 
and service?
    So don't hire the podiatrist to know, you know--no offense 
to podiatrists and people with issues like that--but that can 
be seen in the community. I am sorry, Brad. But that 
psychiatrist, we are going to focus almost mono-maniacally on 
getting that psychiatrist into our medical centers to the 
exclusion of some other types of providers whose capacity is 
already represented in the community.
    Secretary McDonald. You know, I think, as we have worked 
together on our relationship with the local medical school in 
El Paso, to me, the top priority has got to be getting more 
residencies in there for mental health. There is just no 
question about that.
    David and I have talked that as we put these residencies 
out, mental health, primary care have got to be some of our top 
priorities, and then making sure those people locate in the 
rural areas where we need them.
    We are fortunate in a way that we don't have the issues 
that the private sector has with mental health where the CEO of 
Massachusetts General told me every mental health patient that 
walks in the door, he loses $100. We don't have that. So we can 
get mental health professionals working for us. We need to have 
the residencies and then need to work with the medical schools 
to create the throughput.
    And then I think what we are going to need to do--we do 
have some flexibility on reimbursement of medical school debt, 
and we do have flexibility on incenting people locating in 
rural areas. But I think if we could make that even more, that 
would be helpful, and we will come back to you with specifics 
on that.
    Mr. O'Rourke. I would appreciate a specific request, a 
level to which you need flexibility to bring these much-needed 
providers in underserved communities.
    Dr. Shulkin. I also just want to thank you for your 
efforts. Through your efforts, we have worked with Texas Tech 
to be able to recruit additional psychiatrists into working in 
the VA.
    Very important to work with the community. We can't--as you 
know, we have 116 openings in El Paso. We have only been able 
to fill 91; 21 percent vacancy rate. So we need to work with 
private partners.
    I also want to thank you for your offer to go out and help 
us recruit. And I am going to take you up on that offer. We are 
going to go out and we are going to recruit together. But we 
need everybody's help to let people know that if you are a 
mental health professional, the VA needs you. We want you. 
There are jobs available. Please come and work with us.
    Mr. Roe. Thank you, appreciate that. Thank you, Mr. 
Chairman.
    The Chairman. Dr. Benishek, you are recognized.
    Mr. Benishek. Thank you, Mr. Chairman. Well, good to see 
you all again. I got a couple things I want to touch on. One is 
a sort of a specific item that came up to me yesterday, 
frankly. I had the--oh, no, the third-party administrator--
Health Net, their representative come in to talk to me 
yesterday. And I asked them, you know, what are some of the 
problems with implementing the access in the community?
    And one of the surprising things that she, the 
representative, told me that a lot of the cases, they have a 
hard time discerning what the VA wants for a provider. And that 
is because, apparently, the person who is actually making the 
consultation writes a brief note like, I need a thoracic 
surgeon for a thoracic aortic aneurysm. But by the time the 
third-party administrator gets it, it is a 30-page thing that 
they have to get a professional in there to kind of read 
through the 30 pages.
    Apparently, once the physician makes the request, some 
other bureaucrat gets hold of that request, adds a lot of the 
record to it, and they tell me that is a major delay in getting 
people to the right person.
    So I do not know how much you are familiar with that, maybe 
Dr. Shulkin is. But can you just please address that to me and 
see what you can do to fix that problem?
    Dr. Shulkin. Yes. I think the process is very complex, and 
so we were meeting with the same person you probably were from 
Health Net the other night in the Secretary's office, and what 
we agree is, is that we need to be together doing this. And, in 
fact, we have started pilots throughout the country where we 
embed the staff from the DBA with the VA people, so it is not 
phone calls and faxes, but doing this together. So--
    Mr. Benishek. Right. Well--
    Dr. Shulkin [continued]. You are correct.
    Mr. Benishek. I just want to--that's one of the concerns I 
had with a third-party administrator is all of a sudden we got 
two bureaucracies now. We have the VA bureaucracy, and we have 
the third-party administrator bureaucracy. And this is a 
communication issue between the two of them. I don't know what 
the solution is, if it is better to have an outside 
bureaucracy, a private sector bureaucracy, or the VA 
bureaucracy. But having the two of them--
    Secretary McDonald. No. I think the solution is treat them 
as one, and then use Lean Six Sigma to go through and lean the 
process, so it becomes very linear. And that is what we are 
going to do.
    Mr. Benishek. Well, that sounds pretty technical, and I 
don't understand what it--
    Secretary McDonald. It is what business people do every 
day.
    Mr. Benishek [continued].--what it means. Let me just go 
into one more thing, and then I want to change the pitch a 
little bit. The Chairman mentioned in his opening comments 
about Mr. Gibson's frustration with a process that occurred, 
apparently, in Albany for a medical director that was attempted 
to be disciplined in some manner and then got thwarted by the 
courts. Can you kind of tell us more about that, because I want 
to be sure that you have the tools necessary to do the 
appropriate discipline. That is what we are talking about all 
the time.
    So what went wrong there? What is the story? Is there 
something we need to do? Can you kind of go into that a little 
bit more? I am just not familiar enough with it.
    Secretary McDonald. The Chairman was talking about three 
particular instances, where Deputy Secretary Gibson, as the 
deciding authority, decided certain punishment as it pertains 
to three senior executive service employees. Those three 
appealed to the Merit System Protection Board. And in each of 
the three cases, the Merit System Protection Board--well, it is 
hard to generalize for the three, but basically in two of the 
cases, they said it looks like what he said was right, that 
they lacked judgment in what they did, but they vacated the 
punishment because we didn't punish more people than just them.
    And what Deputy Secretary Gibson said, and we agree, is 
that it seemed less like the Merit System Protection Board 
judges didn't understand the intent of Congress or our intent, 
in punishing those employees. As a result of that, we had a 
discussion last night with the Chairman and the Ranking Member 
about an idea we had. It was actually Deputy Secretary Gibson's 
idea that we make all VA employees Title 38, so that--because 
we are like a business, we happen to be a--if we were a 
company, we would be a Fortune 6 company--treat everybody in VA 
as a Title 38 employee, which would give us more flexibility in 
terms of paying them competitively in the medical community, as 
well as giving us greater flexibility in disciplining them 
without all of the things that happen with the senior executive 
service.
    So we have put that proposal forward. We have to do a lot 
more work on it. It is just preliminary. But we are going to 
work with the Chairman and the Ranking Member to do that.
    The Chairman. Thank you, Mr. Secretary. And if I could, Mr. 
Secretary, a point of clarification, it is not all VA employees 
under Title 38, but the SES level. Because I--
    Secretary McDonald. I am sorry, yes, sir. You are right.
    The Chairman [continued]. You just lit a fire that--
    Secretary McDonald. No, I did--Mr. Chairman, thank you for 
covering my back.
    The Chairman [continued]. Anything I can do for you, Mr. 
Secretary. Ms. Kuster, you are recognized, and I apologize for 
missing you before.
    Ms. Kuster. That is all right. Thank you very much, Mr. 
Chair. And thank you to the team here today for presenting the 
budget in such a coherent way. We appreciate it. I just wanted 
to follow up on Mr. Takano's line of questions and just to give 
a shout out to Mr. Coffman and the Oversight and Investigation 
Subcommittee. We are going to be doing a regional hearing in 
New Hampshire on the 4th of March with the folks from White 
River Junction VA about the alternative remedies that they are 
using for to avoid--to bring down--the opiate prescriptions, 
and I think we will be introducing legislation on best 
practices and moving that across the VA.
    And my hope would be that the VA, frankly, can be a leader 
nationally in bringing a bend in the curve on this opiate 
crisis. One of the things that we have learned in New Hampshire 
is that four out of five of our heroin addicts, where we have 
been particularly hard hit--400 deaths last year--started on 
prescription medications. So we are really focused on that 
generally.
    But also four out of five have co-occurring mental health 
disorders. And so my questions, along with Congressman 
O'Rourke, are how we can bring more treatment, mental health 
treatment, in the VA to the rural areas. And maybe we could 
consider legislation not just for physicians, but for 
therapists to encourage them to come to rural areas by 
alleviating their school debt. So that is one issue.
    The other issue, and just focusing in on these evidence-
based alternative therapies, I know that one of the problems we 
have--and this goes to, actually, from the Affordable Care 
Act--using pain as a fifth vital sign and adds an indicator of 
quality.
    Again, our bipartisan task force is working across the 
aisle. I am working with Representative Mooney from West 
Virginia on this. Is there anything in the VA where you are 
still using pain management as an indicator of quality that 
might be encouraging prescribers to use too much opiates, and 
can we help to turn that around? And would spreading these best 
practices help? And I will end there.
    Secretary McDonald. Let me deal with the rural area medical 
infrastructure first. We had an interagency task force meeting 
on rural poverty, and the President was there, Sylvia Burwell, 
who is the Secretary of HHS, Tom Vilsack, Secretary of 
Agriculture. And we had a long discussion about this medical 
infrastructure. I really do think there is a big opportunity to 
improve the medical infrastructure in rural areas.
    I know as a former CEO, when I would decide to put a plant 
somewhere, you look for infrastructure. You look for roads. You 
look for electricity. You look for water. You also look for 
medical care.
    And so we had a discussion about this, and many of the 
ideas that we have talked about, I think are actionable for us, 
because VA trains 70 percent of the doctors in the country.
    Ms. Kuster. Right.
    Secretary McDonald. So we need the residency slots. Then we 
need to work with the schools to create the residency training, 
because obviously, it is difficult to create that kind of 
training program and frequency in a rural area, given its 
location. So this is a ripe area for us to work together, I 
think, to really help our country. Ask David on the opioids.
    Dr. Shulkin. Yeah, Congresswoman, I appreciate you bringing 
this attention again on this issue of opioid misuse and what we 
can do. VA has already begun to address this, but it has a lot 
more to do. As I said, we have 16,000 fewer veterans today 
taking opioids. We are using routine urine tox screens to 
identify people who are taking multiple drugs. Because you are 
correct about the comorbidities of mental illness.
    We have started what is called academic detailing, which 
means that rather than going and talking to doctors about how 
to use drugs like the pharmaceutical industry, we actually try 
and teach about the appropriate use of drugs and how they can 
avoid and use alternatives to opioids.
    So we do see VA as a national leader in this. We do think 
we need to do more. We are focused on this. We are looking 
forward to that hearing and seeing what else we can do.
    Ms. Kuster. Well, and just quickly, I am the co-chair of a 
bipartisan task force on ending the heroin epidemic, and we 
would love to work with you, maybe some kind of a national 
panel/symposium, on how we can use the lessons from the VA to 
help civilian-side prescribing habits, so. Thank you very much. 
I yield back.
    The Chairman. Mr. Huelskamp, you are recognized.
    Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate the 
topic of consideration today. And Mr. Secretary, I appreciate 
the visit to my office yesterday, and I particularly was 
pleased by your continued commitment to work to make Veterans 
Choice permanent. And I think that is a critical item that we 
do need to pass.
    And we discussed a number of things, and I would like first 
to ask Dr. Shulkin to follow up on one thing we talked about 
that--you know, I have 70 community hospitals and about 1,000 
other providers now in the network for Choice. You have 
announcement, I guess, of a way we can reduce the paperwork and 
simplify some of that process for our providers?
    Dr. Shulkin. In terms of getting them paid?
    Mr. Huelskamp. Yes, and some--
    Dr. Shulkin. Yes, yes.
    Mr. Huelskamp [continued].--of the paperwork mandates that 
you had when you first implemented Choice.
    Dr. Shulkin. Right. Yes. Having spent my life trying to get 
paid for managed care companies, I am very sensitive to this. I 
believe that if you treat our veterans, you deserve to get paid 
and paid timely.
    So we are--the major thing that we can do--and we will do 
this in the next two to three weeks--is--we will de-couple the 
requirement to submit all the medical records in order to get 
paid.
    So, in other words, if you have a authorized claim, or an 
authorized claim that has been submitted to us, we will pay you 
and not require that you have to give us all of the medical 
records first. That will bring our payment rates up by almost 
20 percent above where they are now.
    Mr. Huelskamp. And that will be implemented when?
    Dr. Shulkin. We are waiting for final contracting approval 
within VA, we hope within two weeks.
    Mr. Huelskamp. All right.
    Secretary McDonald. That is the best practice in the 
private sector.
    Mr. Huelskamp. Absolutely. And I appreciate that. Again, I 
have a lot of providers, 70 community hospitals, and they want 
to help. And they also would like to get paid, and they also 
would like to cut through the paperwork. So I appreciate that.
    The other question is--I would like to mention that I know 
Mr. Pummill had mentioned, I think it was at a hearing late 
last year, he said it was almost impossible to discipline most 
VA employees. And Mr. Secretary, do you agree with that 
statement, and if not, why?
    Secretary McDonald. I wasn't at the hearing, so I think the 
solution that we have talked about for SES employees is, for 
me, the, you know, the answer to the question. We have 
terminated about 2,600 employees. That does include the 
expiring of probationary periods. We have 20 employees from ten 
locations that have been disciplined for scheduling errors.
    So, I guess, I would not agree with your statement, Danny. 
I don't know the context of it. But I would like to move 
forward on exploring what we need to do to get our discipline 
for SES employees effected.
    Mr. Huelskamp. So, Mr. Pummill, could you explain--expand 
on that? And do you think the proposed legislative change would 
fix the issue? We do have--I believe we do have a problem.
    Mr. Pummill. I still stand by my statement that I made last 
time. I made it in the context that it is too hard. It takes a 
lot of time, a lot of effort, a lot of money. Time, effort, and 
money that should be used taking care of veterans to follow 
rigid rules and procedures and policies.
    I do think what the Secretary has proposed with the Title 
38 with the SES would go a long way, not just to helping us 
hire better people, but with the long-term disciplining of 
people out there. That is a good start. But I also agree with 
the Secretary that we have got to concentrate on this budget 
and move forward and get going on stuff.
    Mr. Huelskamp. Absolutely. And the Secretary and I talked 
about the VA Accountability Act, and there are some provisions 
in there definitely would help that, if the Senate would move 
forward, and the Administration could be supportive of that.
    And one of the things we talked about in the last month in 
the Committee is, when I discovered--maybe the rest of the 
Committee--about the individuals in Phoenix were on 600 days of 
paid leave. I thought we were going to fix that situation. 
Their paid leave is over, but they are now working for the VA 
again. And if we can't fix that situation, can you explain, Mr. 
Secretary, of how folks that I think we all agreed would not be 
working for the VA. You know, 600 paid days and at the end of 
the day, are still working at the VA and other--
    Secretary McDonald. Yes, sir. Well, you recall in the 
testimony Sloane Gibson gave, Deputy Secretary, he said that we 
were going to change our policy. That the policy of waiting for 
the IG investigation to be over was taking us much too long. So 
we are now doing our own investigations and bringing charges 
much more quickly.
    In the case of those individuals in Phoenix, we expect 
within the next couple of weeks, you will be hearing something 
about that. We are wrapping that up.
    Mr. Huelskamp. And that--those were the folks that were on 
paid leave. Are the other two folks that--are these the ones 
that targeted the whistleblowers?
    Secretary McDonald. There were two people in question who 
were on administrative leave. We have brought them back to 
work. In fact, immediately after that hearing, we brought them 
back to work, and they are now working in the VISN 
headquarters. And there is a third individual that was part of 
the investigation who is currently working within the facility.
    Mr. Huelskamp. Thank you, Mr. Chairman, I yield back.
    The Chairman. Mr. Walz, you are recognized.
    Mr. Walz. Thank you, Chairman. Mr. Secretary, thank you to 
you and your team, for the work you do and we are just--I know 
it is early here and we are still parsing through the budget, 
but we all know budgets are more than just finances; it is a 
moral document that reflects our values. And so when you bring 
these issues to us, we are trying to find, and each of us is 
pulling out, things that are important, are important to our 
veterans. And I know that I do not want to over-simplify, but 
that is exactly what I will do. But this issue keeps coming 
back on, on opiate addiction and some of those, and it ties in 
closely to the issue Mr. O'Rourke and Ms. Kuster talked about 
that they are all interconnected on mental health piece on 
suicides and things.
    I think you heard, and I point this out, one of the root 
causes of opiate and opiate addiction is pain as the systemic 
cause. And I bring this up because you are hearing this--and I 
am going to reflect a little frustration, that we are always 
seeing someone as being reactive. Here, we were proactive. 
Eight years ago, the best minds out in the private sector 
dealing with pain management put together and passed, we did it 
here, the VA Pain Management Care Act. And it was meant to be 
the best practices step tiered, and it was all aimed at 
treating the pain and reducing--because I think just showing 
opiate numbers, sometimes people need that. And I think just 
showing a reduction, I have got people calling my office who 
there is nothing in between. They are off and on. So it is more 
complex than that. And we put this thing into place, and a year 
ago, I guess it was not quite a year, in June last year, Dr. 
Clancy testified, it was never fully implemented. And it 
expired and was not reauthorized. And I asked at that time to 
get a full accounting of that because it was already three 
months before that I had asked. I have never received an 
answer. This was a bill that Congress passed proactively, 
addressing what smart people outside of there and in here 
crafted together to prevent this very thing we are seeing now. 
And so I come--I know you are doing it. I know that was a 
different world, that was not you, that was not your admin--I 
point it out though, because I think at the risk of the 
frustration of the American people, we want to fully fund what 
you need to do this.
    And this Congress passed and funded the Vet Pain Management 
Act that people out there still believe is the best way to 
reduce opium addiction. Never implemented, no answer why, 
expired, business as usual.
    Secretary McDonald. We'll get you that accounting back, 
that reconciliation back. It is my sense, Congressman Walz, 
that many of the things that were in that bill we are 
implementing.
    Mr. Walz. I think you are too. I believe that.
    Secretary McDonald. But we owe you an accounting back as to 
what we are doing and what we are not doing and why, but my 
sense is--we are doing a lot of that.
    Mr. Walz. I think that--
    Secretary McDonald. These were all good best practices.
    Mr. Walz [continued]. Yeah, I think so. And my guess is you 
are exactly right. I think it is probably happening. But there 
is a disconnect between that, the private sector pain 
management experts, and this goes into device manufacturers 
that are coming up with things to block this. I mean, you know 
more about this, Dr. Shulkin, than I do. These folks come to me 
and the disconnect back here to Congress and then I think some 
of us who have been here, we are going to see well-meaning 
members who come here, and they are going to tackle an issue 
that we have already tackled once, or we have done it again, 
and then that is that reinventing the wheel that, in a budget, 
I do not want to see any of those resources not go to exactly 
what you need them for. So I certainly do not want to say that 
they were not being enacted.
    Secretary McDonald. The only thing I would add to that is 
in the different conferences I have spoke at, and the different 
medical schools where I have spoken, there's a clear need of 
the faculty to do a better job teaching pain management. There 
just has not been enough training in medical school--
    Mr. Walz. That is right.
    Secretary McDonald [continued].--in pain management.
    Mr. Walz. And private sector.
    Secretary McDonald. We are trying to go upstream and get 
some of these things dealt with strategically rather than just 
the what happens now--
    Mr. Walz. We treat addiction after it is there, good luck.
    Secretary McDonald. Right.
    Mr. Walz. We all know what that goes. We know recidivism 
rates. We know everything else and all of the heartache and the 
destruction of lives that go with it. That is why this was 
implemented to track these people through from the very 
beginning with a case manager on pain and that. And so if you 
would take a look at that, I would appreciate it. I think we 
would come back--and I know you're doing this, I know there is 
experts in this, but I am hearing it from the outside that we 
have really missed an opportunity to get on the front end. And 
maybe I will segue into that implementation the Clay Hunt Act. 
I know you talked about it at the conference, I know it is 
real, I think Mr. O'Rourke is pointing out what is right. I 
know in this case that the commitment from the VA is there to 
get this on the forefront. I do think it is important to keep 
mentioning that, that it is a priority. It is out there. We are 
implementing. And we are going to see what happens with that. I 
will leave with my last comment on this and this is just, I 
guess, the Agent Orange Act expired. I am not convinced all the 
research is in yet, but it is what it is. You still have the 
ability on presumptions. Where does that fall into this because 
we know what happens. When something is added on this, it all 
ties together with case backlogs, Nemer (?) and everything 
else, so--
    Secretary McDonald. One of the things I have tried to do as 
secretary in my twenty-some months so far is to look at a lot 
of these things that have lingered for some period of time. The 
Chairman was kind to mention the five-year-old lawsuit we had 
in Los Angeles that was paralyzing our ability to do things on 
our campus there--our 388-acre campus there. So I have taken a 
look at a number of these things. C-123 Agent Orange, 
reservists literally scraping out the residue of Agent Orange 
from these airplanes. And I have put in place a more liberal 
interpretation which gets those veterans the presumptive cares 
that they need.
    I have done the same thing with the presumptions around 
Camp Lejeune, where we have included eight presumptions for 
Marines at Camp Lejeune. I just took a look at Bluewater Navy, 
I went back through the Institute of Medicine study. I also 
went through the Australian study, and it was my point of view 
that the science does not exist yet to do a presumptive for 
Bluewater Navy.
    Mr. Walz. My time is going to be up, Mr. Secretary, and I 
want to thank you for all those that might--I guess, maybe do 
you need the Act to further the science? See that is my fear, 
that the Act--
    Secretary McDonald. No, I do not think so. In fact, what we 
did with the Bluewater Navy is, we didn't want to just say no, 
so what we have done is we have formed groups there to go out 
and do the research to discover whether or not we should create 
presumptions for Bluewater Navy.
    Mr. Walz. And I am grateful for that. I yield back. Thank 
you, Mr. Chairman.
    The Chairman. Thank you very much. Mr. Walz ate up one 
minute of your time, Mr. Coffman. So you are recognized five 
minutes.
    Mr. Coffman. Thank you, Mr. Chairman. And Mr. Secretary, 
thank you so much for stopping by my office yesterday to brief 
me personally on the budget. Congressman Lamborn asked about 
the IG report on Colorado Springs and asked the status of the 
manager that was removed. And there was not an answer given to 
that, so let me follow up with that. What is the status of the 
manager that was removed?
    Dr. Shulkin. Congressman, my understanding is, as the 
Secretary had said earlier, that we have replaced the 
supervisor who was responsible for the scheduling. That person 
went to work in another part of the facility.
    Mr. Coffman. What disciplinary action did they receive?
    Dr. Shulkin. I am not aware that there was a specific 
disciplinary action for that individual.
    Mr. Coffman. Mr. Secretary, don't you think that is a 
problem?
    Secretary McDonald. Not the way I read the IG report, 
Congressman. I think if you look at the IG report, the IG 
report does not call out anyone for malfeasance. What it does 
indicate is, number one, we didn't train the people properly.
    Mr. Coffman. Who was responsible for that?
    Secretary McDonald. Well, the leader is always responsible.
    Mr. Coffman. Well, then why weren't they held accountable?
    Secretary McDonald. Well, they are held accountable. They 
are held accountable on their performance review, that doesn't 
necessarily mean they get fired.
    Mr. Coffman. Or disci--
    Secretary McDonald. Firing doesn't lead to--
    Mr. Coffman [continued]. Or disciplined.
    Secretary McDonald [continued].--excellence in an
    Mr. Coffman [continued]. Or disciplined.
    Secretary McDonald [continued].--organization.
    Well, discipline occurs on many different levels. I mean--
    Mr. Coffman. Well, I would like to know specifically what 
discipline is.
    Secretary McDonald. Well, we will get back to you. We will 
get back to you on how it was handled.
    Mr. Coffman. Thank you. When you mentioned Title 38 on the 
SES, what percent of the workforce would that apply to?
    Secretary McDonald. Well, SES is about 540 or so 
individuals of a total of about 360,000.
    Mr. Coffman. So what about--
    Secretary McDonald. They are the senior leaders of the 
organization.
    Mr. Coffman. And what reforms are you putting forward, best 
professional judgment, given the fact that you came from the 
private sector, what personnel reforms are you putting in for 
the others, for the rank and file?
    Secretary McDonald. Yeah. Right now, as I told you, we are 
training the organization in mission and values and leadership. 
We have taken over 12,000 people and trained them. These 
training sessions are cascading throughout the organization.
    Mr. Coffman. So there are no reforms in terms of--
    Secretary McDonald. I have not had--
    Mr. Coffman [continued].--making it easier to let poor 
performers go? You are not putting any reforms in that 
direction?
    Secretary McDonald. We have let 2,600 people go.
    Mr. Coffman. Okay. We had, I think it was, House Resolution 
280, that came before the Congress. And we had testimony from 
your staff that you were neutral on that. Let me explain what 
that does. One of the biggest scandals the VA has had is on the 
appointment wait times. And I think that that corruption was 
fed through bonus money, was fueled through bonus money to 
bring those down. And yet, we have had legislation before us 
that your office is neutral on, that says that you ought to 
have the ability to claw back bonuses when they are 
fraudulently given. The only way that you can currently claw 
back bonuses under existing law is if it is administratively 
given to the wrong person, and for no other reason. Why would 
you be neutral on such a simple reform like that?
    Secretary McDonald. Well, bonus spending across the VA is 
down, and down dramatically. In 2015--
    Mr. Coffman. That's not the--
    Secretary McDonald [continued].--total VA spending for all 
the work categories--
    Mr. Coffman. Sure. But why would you--somebody who 
fraudulently received a bonus, why would you not demand that 
the taxpayers and the veterans get that back?
    Secretary McDonald. A reduction of $19 million, it was 7 
percent below the previous year. And here's a graph that shows 
you the reduction in bonus spending. And as I have laid out for 
the Chairman a couple of times, we are--
    Mr. Coffman. So you are okay. Let me get this straight. You 
are okay with somebody who has got a bonus, even though it has 
been proven that they should have never got that bonus because 
their conduct, that was fraudulent in receiving that bonus, 
like under the appointment wait times. So what you are saying 
by not supporting that legislation is you are okay with that.
    Secretary McDonald. I'm working on the future, not the 
past.
    Mr. Coffman. Well, you are, how?
    Secretary McDonald. The future is about making sure people 
are given performance awards that measure what they do, and 
that is why we are bringing the bonus totals down for the 
department. And that is why we are putting the--we are 
relatively rating people consistent with the best practices in 
the private sector.
    Mr. Coffman. We had Glenn Haggstrom who--a billion dollars 
over budget in the Aurora VA Hospital, retired just right 
before he was supposed to be interviewed by the IAB. We just 
had Dr. Schinazi retire just before--just after the story broke 
about the hep C problem where he was a researcher with VA, 
helped develop the drug there. And then took that intellectual 
property, created a private entity, where VA did business with 
that private entity. And he retired. I mean, what is going on? 
Here is the problem, that you are saying great things here, but 
you are not attacking the heart of the problem, and the heart 
of the problem is--we have a horrible personnel system that 
allows this bureaucrat incompetence, that allows this 
corruption to continue. Where are you on this?
    Secretary McDonald. Congressman Coffman, as I said earlier, 
I think if we can work on the reclassifying the SES, this Title 
38, that would be a big step forward. And, you know, as we have 
said previously, you can't fire your way to excellence. And it 
is my experience that we are taking--
    Mr. Coffman. Well, that would be a good start.
    Secretary McDonald [continued].--the right steps, we are 
taking the right steps--
    Mr. Coffman. It might be a good start.
    Mr. McDonald [continued]--to create a high performance 
organization.
    Mr. Coffman. I think firing incompetent people would be a 
good start.
    Secretary McDonald. And by the way, I don't think I have 
the authority to claw back somebody's bonus after they retire. 
If you want that, you will have to change the law. I don't 
write the laws.
    Mr. Coffman. Could port (?) the law and we have 
legislation--
    Secretary McDonald. I don't write the laws.
    The Chairman. Thank you very much. And also to bring all 
the members up to speed, we are working with the four corners 
on trying to pre-conference and negotiate a lot of these 
issues. Both sides are working collectively. The language that 
you referred to has passed the House. We are trying to get our 
Senate colleagues to follow us so that we can in fact change 
the law, so that for those who have broken the law in 
particular and have been convicted, to give you the ability, or 
your successor, to go in and claw that bonus back. I think that 
is an important tool that we should focus on. You don't have 
that ability now. We found that out after Pittsburgh. I think--
was the Legionnaire's issue there. Mr. McNerney?
    Mr. McNerney. I thank the Chairman, and I thank you, Mr. 
Secretary and your staff for your hard work on developing this 
budget. I have some probe go (?) questions, if you don't mind. 
The Palo Alto VA is in my--it is not in my district, but a lot 
of my veterans use that. And they provide excellent service, no 
doubt about it. But it is in a very high-priced area. It is 
very expensive to live in Palo Alto. And the commute there is 
murder. Do you have any way to compensate for high cost areas 
for your employees? Because they are going to be, you know, 
priced out of that office.
    Secretary McDonald. We do have some flexibility, sir, for 
location premiums. I would argue it is not enough. And if we 
can do what we talked about with Title 38 that would give us 
more flexibility. The Palo Alto facility is one of our very 
best. Many of the doctors there also teach at Stanford Medical 
School, and we do a lot of research there. It is really an 
outstanding facility. It is probably one of our best Lean Six 
Sigma facilities in the country.
    Mr. McNerney. I agree. Moving on. The VA has a construction 
backlog that can last years. Of course, we have experienced 
that in my district on the French Camp facility. Are you in 
support of public-private partnerships or partnerships with 
local governments where the state, for example, can pay part of 
the construction fees and partner with the VA or the Corps of 
Engineers?
    Secretary McDonald. We have done that in the past and that 
is one of the reasons we are looking for the extended use 
leasing on the Los Angeles campus.
    Mr. McNerney. Have you found that to be a successful model?
    Secretary McDonald. Yes, in fact at Menlo Park, which is 
very close to the Palo Alto campus, we have an extended use 
lease going with a company called CoreRVA who built a building 
for aged veterans, aging veterans, and we are leasing that 
building back from them, or renting that building back from 
them.
    Mr. McNerney. The last question has to do with the way 
veterans use VA benefits. Do you track demographic data like 
gender or ethnic group or economic class, in terms of how the 
benefits are distributed?
    Mr. Pummill. We have pretty extensive data, location, 
whether or not they are married, the age of the veteran. I'm 
not sure if we track economic, but everything else we pretty 
much have.
    Mr. McNerney. Could that be made available to my office, 
that information?
    Mr. Pummill. Sure. We actually put out a book every year by 
state with all that data. We can make sure you get a copy.
    Mr. McNerney. Okay. I mean, the plan that you put forth is 
ambitious. It is good. The VA needs to modernize, and I think 
everyone on the Committee here is behind this effort. There is 
going to be some disagreements, but my hat is off to your 
efforts and we are going to try and support you the best we 
can. Mr. Chairman.
    The Chairman. Ms. Walorski, you are recognized.
    Ms. Walorski. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being here today and bringing your team. And I 
just wanted to say how thrilled I am to hear that you have made 
the transition to the concept of running on principle and not 
just necessarily on the bureaucratic rules in the VA because 
there are so many. I look forward to that as it kind of winds 
out in my district.
    Ms. Council, not to leave you out, I have been interested 
in this issue with IT since I have been here in Congress. And I 
am just curious, you are asking for--the VA is requesting $4.2 
billion for cutting-edge information technology. I have heard 
that probably three times since I've been here, the additional 
billions of dollars that have to go into this new cutting-edge 
technology. My first question is just quickly how much of that 
money is going to be kept for just maintaining the legacy 
systems we have, and then, how much of that is actually being 
carved out for new cutting-edge technology?
    Ms. Council. I don't have the breakdown, but I will get 
that to you. What I will tell you is we have a large legacy 
issue that we need to address. We are increasing our spend on 
security to $370 million, fully funding and fully resourcing 
our security capability. In addition, we are putting in well 
over $50 million in creating a data management backbone that we 
didn't have and we have added five new functions within the 
organization that will modernize the IT organization.
    Ms. Walorski. Let me ask you this just quickly. So is this 
money you're requesting, this $4.28 billion, is this going to 
take care then of the maintenance of the legacy system and 
achieve the goals that you are talking about right now, or are 
we going to be looking next year at another 5 billion, another 
6 billion? Is this take care of and suffice to get the VA where 
you need to per the goals that you just talked about?
    Ms. Council. Yes, it does.
    Ms. Walorski. Okay. I appreciate that.
    And, Secretary McDonald, I just wanted to again bring you 
up to speed with what is happening in the state of Indiana, and 
I am again asking that you come and visit our northern Indiana 
VISN.
    You know, two of the things that continued to be an issue, 
and for as fast as you are working to reform these things, and 
for the footsteps that we are taking forward on reform, and we 
are, and I appreciate that. You know, we still deal with an 
issue in our district, it is probably not unlike anybody else 
in this country, but it really makes a difference in our 
district, is that all of our top-level VISN executives have 
been promoted around the country and now we are just not 
dealing with doctor shortages and nursing shortages, now we are 
dealing with administrative shortages. So when a veteran 
exhausts all, you know, appeals and those processes, they come 
to the Congressional office and they say will you help? And 
they are at the end of their end. And now, as we have to get 
involved, and now with Congressional inquiries and battling for 
the sake of our veterans and trying to bring those mountains 
down, we are going through temporary people that really aren't 
really accountable to anybody, and it really provides zero 
transparency then as we tried to come and in good faith with 
the VA, try to figure out where some of these mishaps are.
    And I just want to give you the one example, because I am 
going to need your help on this situation, is, I have got a 
veteran that was in the appeals process for years, and it has 
been back and forth, where the VA will say no, they will deny 
him, and then they will come back and they will prove some 
point, and they will say yes, they will say no, and they will 
say yes. This guy, in bad, bad health, with serious heart 
complications and surgeries, is left holding a bag that now the 
VA says yes, we're going to pay the bill. And the hospitals are 
coming back to him with interest. Over the last four years, I 
have got a veteran right now responsible for $10,000 of 
interest and this was never his fault. But I look at part of 
that of saying can you help us mitigate that with the VA, 
number one. Number two, how long can we possibly and can the VA 
possibly run with temporary administrators?
    Secretary McDonald. If you could, Congresswoman, please get 
me his name.
    Ms. Walorski. I will.
    Secretary McDonald. And I will work on that. We have the 
ability to give relief on that--if we made a mistake--to give 
relief, financial relief on that interest that he would be 
charged. So on all these things, if a veteran comes to you, 
give him my phone number, give him my email address, you don't 
need to deal with it, we will. And we will get it effectively 
resolved.
    The issue you mention on vacancies is one of the biggest 
issues we face, if not the biggest issue we face. It is ironic 
that when I talk to our organization, I do that a lot, because 
whenever I go anywhere I do town hall meeting, they tell me 
that people don't want to join VA because it is a maligned 
organization and everybody is being fired. And then I come and 
sit in front of you and you tell me nobody is being fired. And 
the truth, of course, is somewhere in the middle.
    And our applications are down over 75 percent for available 
positions, and that's just unacceptable. It is a great place to 
work, and I have encouraged each and every one of you, and the 
Chairman has done it, and the Ranking Member, to go recruiting 
with me. And let's stand together and recruit the future 
leaders of this organization.
    Ms. Walorski. Just curious, does this budget reflect any 
kind of new recruitment efforts or the tools that you need to 
do that?
    Secretary McDonald. Absolutely.
    Ms. Walorski. Okay. I appreciate that. And I yield back, 
Mr. Chairman, thank you.
    The Chairman. Dr. Abraham, you're recognized.
    Mr. Abraham. Thank you, Mr. Chairman and thank the Members 
for being here. Mr. Walz brought up something I think that is 
so important and that is the moral duty and the ethical duty 
that we as a Committee and you as the VA have for our veterans 
to ensure that the money that we give you is spent in the best 
fashion so that as many veterans as possible can get the best 
care. And I know you agree with that statement.
    Certainly, it goes also to the trust issue. As a physician, 
I will write a prescription, I give a diagnosis, that patient 
trusts me. If I make the wrong decision, that patient could 
very easily die. And in your arena too, the decisions that you 
all make certainly deal with life and death on almost a daily 
basis such as any physician. And it brings me to the question I 
am going to ask you, Mr. Secretary, let's go back to this IG 
report that we keep going back and forth here.
    Last month the IG testified that due to data manipulation, 
that the VA's backlog statistics were not reliable. And my 
question is how can we trust the Department's current figures 
when it comes to the request to fund 300 additional non-rating 
claims processors, 900 additional board of appeal staff, so 
where is that trust that we as a Committee and the veterans--
how can you ensure that?
    Secretary McDonald. Our data and our data integrity is 
absolutely critical to our success as it is to any business. So 
obviously, it is something we are working very hard on. I did 
not read that IG report as conclusively as you did, that--
because it sounded from what you said as if all of our data was 
not good.
    Mr. Abraham. I am just ponying on what the IG said.
    Mr. Pummill. Can I just chime in a little bit on this 
because, Congressman, I have read the report. I absolutely 
disagree with the IG's statement that the--
    Mr. Abraham. Well, let me interrupt. I mean, he is an 
expert in his field.
    Mr. Pummill. I don't believe he is or he wouldn't have said 
that.
    Mr. Abraham. Well, then there--
    Mr. Pummill. If you look at the statistics.
    Mr. Abraham [continued].--is a big divide there then I 
would argue that if we have got an inspector general of the 
VA's department saying one thing, you guys saying something 
else, where is the trust that that veteran--where is he going 
to find who to trust?
    Mr. Pummill. The bottom line, Congressman, is last year we 
paid out more money to more veterans faster than we ever have 
in the history of the VA. All those stats are there, all that 
data is there. 1.4 million veterans, over $90 billion in 
benefits and services. I mean huge numbers out there, and we 
are doing more and more and more and we are doing it faster and 
faster to veterans, so I disagree with your assessment.
    Mr. Abraham. You are reading the same report I am sure I 
am, the transcript of the IG report.
    Mr. Pummill. Yes, I am. Absolutely.
    Secretary McDonald. Believe me, sir, we read the reports. 
We read the reports.
    Mr. Abraham. I just have.
    Secretary McDonald. As you know, we don't have an IG right 
now.
    Mr. Abraham. I understand that.
    Secretary McDonald. And we have nominated, the President 
has nominated, a very talented individual that we are trying to 
get confirmed by the Senate. And I think what you will see is 
the quality of our work will go up.
    Mr. Abraham. You know, as a guy that deals in the 
objective, I just have a hard time understanding how there can 
just be spaces of worlds apart between your opinion and the 
IG's when you have data that is just in black and white. And we 
will continue to debate.
    I want to get another question. Let me get another question 
in, Mr. Secretary. The Department's budget proposals put forth 
is about the simplified appeals process that would consist of 
closing records on appeals and eliminating what are termed 
optional hearings. And I guess what I'm asking, please provide 
details about the proposal including how it will strike--and it 
is a delicate balance, I realize, of achieving timely, 
accurate, and fair appeal decisions for veterans and their 
families.
    Secretary McDonald. As we said, Congressman, the proposal 
we put forward is a strawman. If you have better ideas, we 
would love to hear them.
    Mr. Abraham. We will get--
    Secretary McDonald. And as veterans service organizations 
have better ideas, we would love to hear them.
    Mr. Abraham. Okay.
    Secretary McDonald. What we all know is today is untenable, 
it is unacceptable.
    Mr. Abraham. I agree and I will certainly.
    Secretary McDonald. And what we are committing to with this 
proposal is, as we said, in the future 90 percent of appeals 
done in one year. So let's work together, let's get this done. 
And we are open to any idea, just like Congressman O'Rourke 
gave us an idea last week and we changed.
    Mr. Abraham. Just real quick, that 440,000 that are in the 
cycle now, is there just a guesstimate or an educated 
guesstimate, how many of those are within the two or three year 
processed appeal?
    Secretary McDonald. I will have to get back to you, sir.
    Mr. Abraham. That is all right. Fair enough.
    Secretary McDonald. I don't know the answer to that.
    Mr. Abraham. Fair enough. Thank you, Mr. Chairman.
    Secretary McDonald. Given that two percent of the people 
create roughly half the appeals, I would assume that there's 
quite a few that this is their, you know, multiple, multiple 
appeal.
    Mr. Abraham. So maybe past the three year.
    Secretary McDonald. Yeah.
    Mr. Abraham. Okay. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. Mr. Takano, do you have 
a closing question please?
    Mr. Takano. Mr. Secretary, I really want to get an answer 
on your planning for more graduate school education, more GMEs. 
And is your resourcing that you are asking for, is it adequate 
for what we need in the future? I mean, we did insert 1500 more 
GMEs in the Choice Act, but the medical associations were all 
telling us they need more. And I am of the mind that this is 
perhaps the best area, the best Committee, to be able to try to 
make some headway into the overall doctor supply. And what you 
are doing to consolidate care in the community, I think, might 
enable us to have this be a platform.
    Dr. Shulkin. Congressman, first of all, thank you to the 
Congress for giving us the 1500 slots. The country needs them. 
We need more graduate medical education slots. And VA can 
really help in this. But of the 1500 slots, we have only used 
372 today. And what we have learned is, is that we actually 
can't do everything that VA needs to do because we need the 
hospitals--we work with affiliate hospitals--they don't have 
the infrastructure and they don't have the ability to pay for 
these. So we would like to work with you and members of the 
doctors caucus, or anybody else who would like to, to give us 
the flexibility to help actually expand these medical education 
programs further. We would like to focus in primary care and 
mental health and in rural areas, absolutely. But we do need 
some additional flexibility to actually carry out the intent of 
Congress here.
    Mr. Takano. Well, I hope that--I mean, I appreciate your 
working with Dr. Roe in the doctors caucus, but there are other 
of us who, Ms. Titus, myself, and Mr. O'Rourke actually were 
coauthors of that language that got into the Choice Act. We 
would be happy to work with you on that. I mean, the primary 
care doctors in mental health are exactly what a lot of regions 
need, rural regions, and suburban urbanized regions such as 
mine, we are under-doctored. And so we definitely want to work 
with you on these issues.
    Dr. Shulkin. Okay. Thank you.
    Mr. Takano. Thank you.
    The Chairman. Real quickly, Mr. Secretary, we talked about 
where the budget expands and spends more money, invests more in 
veteran programs, could you give us two or three examples of 
where this budget goes in and actually cuts some wasteful 
spending and programs? Not efficiencies, I'm talking about 
eliminates from the program.
    Secretary McDonald. Go ahead.
    Dr. Shulkin. Two areas where we have significant decreases 
as you know are in construction. We have actually taken our 
budget down significantly until we get the commission on care 
findings.
    The Chairman. That doesn't count. Try again.
    Dr. Shulkin. No? Okay. How about this one then? We have 
actually reduced our funding for our EMR this year until we, 
Ms. Council and I, and the Secretary and others, get a clear 
plan on where we want to go with our electronic medical 
records.
    The Chairman. No, my question was wasteful spending. And I 
don't think you would say the electronic medical record is 
wasteful spending. We are talking about a, now, $180 billion 
budget. Is there anything that was eliminated this year?
    Secretary McDonald. Well we'd like to close those, you 
know, 10 million square feet of unused space. We have more 
space being created because we are saving about 5,000 tons of 
paper a year in VBA.
    The other thing I will tell you is--we are only at the 
beginning of this. As part of our training program, this 
Leaders Developing Leaders, we have put in place a process 
called RAMP, which stands for Reports, Meetings, Priorities, 
and so forth, where groups of people get together and actually 
stop work that they are doing. We haven't put dollar amounts 
against all of that yet. We are cataloguing all the things we 
are stopping doing. And then, we will put dollar amounts 
against it, and we will come back to you and tell you what 
those dollar amounts are.
    Remember in this budget too, one of the things we are 
proposing, if you will help us, is the creation of a unified 
holistic supply chain for VHA. There is a lot of money sitting 
on the table. We are committing here to saving at least $150 
million, if you can help us do that. Right now, each one of our 
facilities has its own supply chain. We know by consolidating 
those supply chains, we can save a lot of money.
    The Chairman. And I appreciate that, and I do think you 
need to be looking for efficiencies, and I know that is 
something that you are focused on.
    Secretary McDonald. It is in our written testimony, if 
you--
    The Chairman. But surely somewhere in a $170 billion 
budget, there is waste that could be eliminated. If you would 
have some folks go out searching. We need to go ahead and 
adjourn now, but if you would, for the record, we will take 
that in.
    Obviously, we are all trying to absorb as much of the 
budget as we can. So as we look through it, there will be more 
questions that this Committee will have. And I would, as our 
custom, say that all Members who have five legislative days 
with which to revise and extend or add extraneous materials to 
their remarks
    Without objection, so ordered. And with that, this hearing 
is adjourned.

    [Whereupon, at 12:00 p.m., the Committee was adjourned.]




                            A P P E N D I X

                              ----------                              

                  Prepared Statement of Corrine Brown
      Thank you, Mr. Chairman.
      Mr. Secretary, I want to thank you, and thank the 
President. During the President's tenure, discretionary spending has 
increased 86%. The President is doing his part to take care of 
veterans. I believe that this budget provides us with a starting point 
to begin the process of making sure veterans are getting the benefits 
and services we have promised them.
      I look forward to discussing your proposal to establish 
an additional appropriations account focused on community care, 
especially in light of your repeated requests for ``budget 
flexibility.''
      I want to be assured that this account will not take our 
focus away from providing the VA with the resources it needs to provide 
health care to our veterans.
      In light of the shortfalls VA faced last year, and the 
uncertainty of reform efforts, I want to ask you, Mr. Secretary, the 
question I ask every year - does this budget give you what you need to 
accomplish your mission?
      Do you believe that there are areas that need a special 
focus and may need additional dollars?
      I stand ready to do whatever I can to make sure you have 
what you need. But while I will be in the front line of fighting for 
the dollars you need, I want to be very clear - I expect you to spend 
every dollar we give you wisely for our veterans.
      I believe we must focus on our veterans. By focusing on 
our veterans we will begin the process of rethinking how we ensure that 
we keep our promises to them in the years ahead.
      So let us know what you need, and we will, working 
together, on both sides of the aisle, make sure you have the tools and 
the dollars to accomplish your mission.
      I yield back the balance of my time.

                                 
                Prepared Statement of Robert A McDonald
    Good morning, Chairman Miller, Ranking Member Brown, and 
Distinguished Members of the House Veterans' Affairs Committee. Thank 
you for the opportunity to present the President's 2017 Budget and 2018 
Advance Appropriations (AA) requests for the Department of Veterans 
Affairs (VA). This budget continues the President's faithful support of 
Veterans and their families and survivors, and it sustains VA's 
historic transformation. It will provide the funding needed to enhance 
services to Veterans in the short term, while strengthening the 
transformation of VA that will better serve Veterans in the future.

                        A Vision for the Future

    VA's vision for the future is to be the No. 1 customer-service 
agency in the Federal government. The American Customer Satisfaction 
Index already rates our National Cemetery Administration No. 1 with 
respect to customer service. In addition, for the sixth year in a row, 
VA's Consolidated Mail Outpatient Pharmacy received J.D. Power's 
highest customer satisfaction score among the Nation's public and 
private mail-order pharmacies. These are compelling examples of 
excellence. We aim to make that so for all of VA.
    We are transforming the entire Department, not just making 
incremental changes to parts of it. We began in July 2014 by 
immediately reinforcing the importance of our inspiring mission-caring 
for those ``who shall have borne the battle,'' their families, and 
their survivors. Then, we re-emphasized our commitment to our 
exceptional I-CARE Values-Integrity, Commitment, Advocacy, Respect, and 
Excellence. To provide timely quality care and benefits for Veterans, 
everything we are doing is built, and must be built, on the rock-solid 
foundation of mission and values.
    MyVA is the catalyst making VA a world-class service provider. It 
is a framework for modernizing VA's culture, processes, and 
capabilities so we put the needs, expectations, and interests of 
Veterans and their families first, and put Veterans in control of how, 
when, and where they wish to be served.
    Listening to others' perspectives and insights has been, and 
remains, instrumental in shaping our transformation. We have taken 
advantage of an unprecedented level of outreach to the field and our 
stakeholders. In my first months as Secretary, I assessed VA and 
recognized that we would need to change fundamental aspects of every 
part of VA in order to rise to excellence. I shared my assessment's 
results with President Obama and received his guidance. I discussed my 
findings with you and other Members of Congress-privately and during 
hearings. And I consulted with literally thousands of Veterans, VA 
clinicians, VA employees, and Veteran Service Organizations (VSOs) and 
other stakeholders in dozens of meetings.
    Since my July 29, 2014, confirmation, I have made 277 visits to VA 
field sites in more than 100 cities, including 47 visits to VA Medical 
Centers, 30 visits to homeless Veterans program sites, 16 visits to 
Community Based Outpatient Clinics, 15 Regional Offices, and 9 
Cemeteries. I have attended 61 Veteran engagements through public and 
private partnerships and 60 stakeholder events to hear firsthand the 
problems and concerns impacting our Veterans. To recruit individuals to 
work for VA as medical professionals and in other critical fields, I 
have visited 50 medical schools, universities, and other educational 
institutions. This kind of outreach, partnership, and collaboration 
underpins our department-wide transformation to change VA's culture and 
make the Veteran the center of everything we do.

Progress

    Transforming an organization of this size is an enormous 
undertaking. It will not happen overnight. But we are now running the 
government's second largest Department like a $166 billion Fortune 6 
organization should be run. That is, balancing near term performance 
improvements while rebuilding VA's long-term organizational health.
    Effective change often requires new leadership, and we have made 
broad changes. Of our top 16 executives, 10 are new to their positions 
since I became Secretary. Our team today includes extensive executive 
expertise from the private sector: a former banking industry Chief 
Financial Officer and President of the USO; the former Chief Executive 
Officer of Beth Israel Medical Center in New York City and Morristown 
Medical Center in New Jersey; a former Chief Executive of Jollibee 
Foods and President of McDonald's Europe; a former Chief Information 
Officer of Johnson & Johnson and Dell Inc.; a former partner in 
McKinsey & Company's Transformational Change and Operations 
Transformation Practices; a retired partner in Accenture's Federal 
Services Practice; a former Chief Customer Officer for the City of 
Philadelphia who previously spent 10 years at United Services 
Association of America (USAA), one of the best and foremost customer-
service organizations in the country; a former entrepreneur and CEO of 
multiple technology companies; and a retired Disney executive who spent 
2010-2011 at Walter Reed National Military Medical Center enhancing the 
patient experience.
    Most members of the executive leadership team are Veterans 
themselves. They have served from Vietnam to Iraq and Afghanistan, and 
each is here because he or she demonstrates a personal commitment to 
our mission. These fresh, diverse perspectives, combined with our more 
experienced government and health care executives, will continue to 
catalyze innovation and change.
    Thanks to the continuing support of Congress, VSOs, union leaders, 
our dedicated employees, states, and private industry partners, we have 
made tremendous headway over the past 18 months. In 2015, we made 
notable progress building the momentum that will begin delivering 
transformational changes that VA needs.
    Congress has passed key legislation-such as the Veterans Access, 
Choice, and Accountability Act and the Clay Hunt Suicide Prevention for 
American Veterans Act-that gives VA more flexibility to improve our 
culture and ability to execute effectively.
    Consistent with the culture of a High Performance Organization that 
serves Veterans and their families, we have turned VA's structural 
pyramid upside down. Veterans and their families are at the top. The 
Office of the Secretary is at the bottom, supporting subordinate 
leaders and the workforce who are serving Veterans. This method of 
thinking and operating is a reminder to all employees and stakeholders 
that we are here to support our Veterans, not our bosses.


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    While reinforcing our I-CARE Values, we are transitioning from a 
rules-based culture that may neglect the human dimension of service to 
a principles-based culture grounded in values, sound judgment, and the 
courage and opportunity ``to choose the harder right instead of the 
easier wrong . . . .''
    We formed a MyVA Advisory Committee (MVAC) to advise us on our 
transformation. The MVAC is comprised of a diverse group of business 
leaders, medical professionals, experienced government executives, and 
Veteran advocates. The Chairman is retired Major General Joe Robles, 
former Chairman and CEO of USAA. The Vice Chairman is Dr. J. Michael 
Haynie, Air Force Veteran, Vice Chancellor of Syracuse University and 
founder of the Institute for Veteran and Military Families (IVMF). The 
MVAC includes executives with deep customer service and transformation 
expertise from organizations such as Amazon, The Cleveland Clinic, 
McKinsey & Company, Johns Hopkins, Mayo Clinic, as well as a former 
Surgeon General, a former White House doctor for three 3 US Presidents, 
a university president who was a Rhodes Scholar from the Air Force 
Academy who currently serves as a reserve Air Force Lieutenant Colonel, 
and advocates for both the traditional VSOs and post-9/11 Veterans' 
organizations.
    Private sector leadership experts are bringing cutting-edge 
business skills and developing VA teams in new ways. We are training 
critical pockets of our workforce on advanced techniques like Lean and 
Human Centered Design. For example, working with the University of 
Michigan, we have already trained more than 5,000 senior leaders across 
the Nation in our ``Leaders Developing Leaders.'' The Veterans Benefits 
Administration (VBA), Veterans Health Administration (VHA), and our 
Veterans Experience team collaborated using Human Centered Design and 
Lean techniques to redesign the Compensation and Pension Examination 
(C&P Exam) process because we received consistent feedback that the 
process-often, a Veteran's first impression of the VA when separating 
from service-can be a confusing and uncomfortable experience.
    Across VA, we are encouraging different perspectives and listening 
to all of our key stakeholders, even those who are critical of VA. To 
benchmark and capture ideas and best practices along our transformation 
journey, we have been working collaboratively with world-class 
institutions like Procter & Gamble, USAA, Cleveland Clinic, Wegmans, 
Starbucks, Disney, Marriott and Ritz-Carlton, NASA, Kaiser Permanente, 
Hospital Corporation of America, Virginia Mason, DoD, and GSA, among 
others.



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    VA named the Department's first Chief Veteran Experience Officer 
and began staffing the office that will work with the field to 
establish customer service standards, spread best practices, and train 
our employees on advanced business skills.
    Rather than asking Veterans to navigate our complicated internal 
structure, we are redesigning functions and processes to fit Veteran 
needs in the spirit of General Omar Bradley's 1947 proposition that 
``We are dealing with Veterans, not procedures; with their problems, 
not ours.''
    We are realigning VA to facilitate internal coordination and 
collaboration among business lines-from nine disjointed, disparate 
organizational boundaries and organizational structures to a single 
framework. That means down-sizing from 21 service networks to 18 that 
are aligned in five districts and defined by state boundaries, except 
in California. This realignment means opportunities for local level 
integration, and it promotes consistently effective customer service. 
Veterans from Florida to California, Puerto Rico to Maine, Alaska and 
Guam, and all parts in between, will see one VA.
    We have developed a multi-year plan for creating a world-class 
Information Technology organization, and on November 11, Veterans Day, 
we launched the Vets.gov initial capability. Developed with support 
from the U.S. Digital Services Team and informed by extensive feedback 
from Veterans, Vets.gov is a modern, mobile-first, cloud-based Web site 
that will replace numerous other Web sites and Web site logins with a 
single, easy to navigate location. The Web site puts Veteran needs and 
wishes first, and we will continue to add the capability that's 
required to improve its accessibility and usefulness. As Vets.gov 
evolves, it will simplify the Veteran experience by re-using and making 
consistent Veteran information, including mailing address and phone 
number, across the agency.
    At VA, we know that serving Veterans is a collaborative exercise, 
so we will not function in a vacuum. We are operating as part of a 
community of care, forming strategic partnerships with external 
organizations to leverage the goodwill, resources, and expertise of 
valuable partners to better serve our Nation's Veterans and help 
address a wide variety of Veteran needs, including employment, 
homelessness, wellness, and mental health. Partners include respected 
organizations like the YMCA, the Elks, the PenFed Foundation, LinkedIn, 
Coursera, Google, Walgreens, academic institutions, other Federal 
agencies, and many more. These partnerships reflect our commitment to 
re-thinking how VA does business so we can leverage the strengths of 
others who also care for Veterans.
    We have enabled 36 Community Veterans Engagement Boards, a national 
network designed to leverage all community assets, not just VA assets, 
to meet local Veteran needs. Fifteen more communities are in 
development right now.


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    We have renewed and redefined working relationships with our union 
partners, and union leaders are part of the team, and have had 
significant input into MyVA. We continue to work with them to address 
issues and make sure our employees are involved often and early in 
every major decision.
    We are continuing to develop a robust provider network while we 
streamline business processes and re-imagine how we obtain services 
such as billing, reimbursement credentialing, and information sharing.
    We continue to listen, learn, and grow.

                       VA's Agency Priority Goals

    In 2015, we were guided by and made notable progress toward 
reaching our three Agency Priority Goals (APGs)-(1) Improve Veteran 
Access to VA Benefits and Services, (2) End Veteran Homelessness, and 
(3) Eliminate the Disability Backlog. These accomplishments toward 
achieving our APGs demonstrate VA's commitment to using our resources 
effectively to improve care and benefits for Veterans.

Access

    We expanded capacity by focusing on staffing, space, productivity, 
and VA Community Care.
    Access. Since discovering the access challenges in Phoenix, 
Arizona, we have aggressively improved access to care, not just in 
Phoenix but across VA as a whole. For instance, in the first 12 months 
after discovering the Phoenix appointment backup, from June 2014 to 
June 2015, we completed 7 million more appointments than during the 
same period the year prior: 2.5 million of those appointments were at 
VA; 4.5 million appointments were in the community. Altogether in FY 
2015, we completed 56.7 million appointments, nearly 2 million more 
than FY 2014. More than 97 percent (55 million) of those 56.7 million 
appointments were completed within 30 days of the clinically indicated 
or Veteran's preferred date, an increase of 1.4 million over FY 2014 
numbers.
    Veteran access is one of the five critical priorities supporting VA 
health care transformation with far-reaching impact across VA that 
Under Secretary for Health, Dr. David J. Shulkin announced in September 
2015. With the Access Stand Downs, VHA is empowering each facility to 
focus on the needs of its specific population and refocusing people, 
tools, and systems on a journey of continuous improvement towards same-
day access for primary care and urgent specialty care. The immediate 
goal is that no patients with urgent appointment requests in VA clinics 
with the most critical clinical needs, such as cardiology, urology, and 
mental health, are waiting more than 30 days.
    From November 9, through November 13, 2015, VHA conducted a 
complete review of all Veterans waiting for appointments-with a focus 
on those Veterans waiting for clinically important and acute services-
to ensure that the wait was clinically appropriate as determined by the 
Veteran's treatment team. This process culminated with the VHA's first 
Access Stand Down on November 14th-a nationwide effort to ensure 
Veterans get the right care at the right time.
    In the first Access Stand Down, VHA reviewed nearly 55,800 of the 
more than 56,000 Level One, stat, consults that were open more than 30 
days (as of November 6, 2015), a herculean effort. Of those 55,800 
urgent open consults reviewed, 82 percent (45,849) were scheduled or 
closed by the end of that first Stand Down.
    Building on the November 14th Access Stand Down momentum and 
success, VHA is continuing to maximize accessibility to outpatient 
services with the coming February 27th, 2016 Access Stand Down. The 
February Stand Down is an opportunity to make another significant leap 
in dramatically enhancing Veterans' access to care. Clinical operations 
will meet customer demand through resource-neutral, continuous 
improvement at the facility-level and scaling-up excellence across the 
enterprise.
    VetLink data is another way we are listening to Veterans. Since 
September 2015, VHA has analyzed preliminary data from VetLink, our 
kiosk-based software that allows us to collect real-time customer 
satisfaction information. In all three separate VetLink surveys to 
date-related to nearly half-a-million [476,672] appointments-Veterans 
told us that about 90 percent of the time, they are either ``completely 
satisfied'' or ``satisfied'' with getting the appointment when they 
wanted it. However, about 3 percent of Veterans who participated in the 
survey were either ``dissatisfied'' or ``completely dissatisfied,'' so 
we have more work to do.
    Staffing. We increased net VHA staffing. VHA hired 41,113 
employees, for a net increase of 13,940 health care staff, a 4.7 
percent increase overall. That increase included 1,337 physicians and 
3,612 nurses, and we filled several critical leadership positions, 
including the Under Secretary of Health.
    Space. We activated 2.2 million square feet in FY 2015, adding to 
more than 1.7 million square feet of clinical space activated in FY 
2014.
    Productivity. We increased physician work Relative Value Units 
(RVUs) by 9 percent. VA completed more than 1.4 million extended hour 
completed encounters in primary care, mental health and specialty care 
in FY 2014 and more than 1.5 million in FY 2015, an increase of 5.7 
percent in extended hour encounters.

Care in the Community

    In 2015, VA obligated $10.5 billion for Care in the Community, 
including resources provided through the Veterans Choice Act-an 
increase of $2.3 billion (28 percent) over the 2014 level-which 
resulted in nearly 2.4 million authorizations for Veterans to receive 
Care in the Community from December 3, 2014 through December 2, 2015. 
Programmatically, this included care in the community for Veterans' 
dialysis, state home programs, community nursing care, Veterans home 
programs, emergency care, private medical facilities care, and care 
delivered at Indian health clinics. It also includes care under VA's 
CHAMPVA program for certain dependents who were entitled for that care.

Homelessness

    Veteran homelessness has continued to decline, thanks in large part 
to unprecedented partnerships and vital networks of collaborative 
relationships across the Federal government, across state and local 
government, and with both non-profit and for-profit organizations. 
Ending and preventing Veteran homelessness is now becoming a reality in 
many communities, including: the Commonwealth of Virginia; New Orleans, 
Louisiana, Houston, Texas; Las Vegas, Nevada; Philadelphia, 
Pennsylvania; Syracuse, New York; Winston-Salem, North Carolina; and 
Las Cruces, New Mexico. In collaboration with our Federal and local 
partners, we have greatly increased access to permanent housing; a full 
range of health care including primary care, specialty care, and mental 
health care; employment; and benefits for homeless and at-risk for 
homeless Veterans and their families.
    In FY 2015 alone, VA provided services to more than 365,000 
homeless or at-risk Veterans in VHA's homeless programs. Nearly 65,000 
Veterans obtained permanent housing through VHA Homeless Programs 
interventions, and more than 36,000 Veterans and their family members, 
including 6,555 children, were prevented from becoming homeless.
    Directly related is Veteran unemployment, which dropped to its 
lowest point since April 2008, according to the Bureau of Labor 
Statistics' October 2015 report.
    Overall Veteran homelessness dropped by 36 percent between 2010 and 
2015, based on data collected during the annual Point-in-Time (PIT) 
Count conducted on a single night in January 2015. We saw a nearly 50 
percent drop in unsheltered Veteran homelessness. Since 2010, more than 
360,000 Veterans and their family members have been permanently housed, 
rapidly rehoused, or prevented from falling into homelessness.

Backlog

    VA transitioned disability compensation claims processing from a 
paper-intensive process to a fully electronic processing system; as a 
result, 5,000 tons of paper per year were eliminated.
    In FY 2015, VA decided a record-breaking 1.4 million disability 
compensation and pension (rating) claims for Veterans and their 
survivors-the highest in VA history for a single year. As of December 
31, 2015, VA had driven down the disability claims backlog to 75,480, 
from a peak of over 611,000 in March 2013.


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2016-2017 VA's Agency Priority Goals

    In a collaborative, analytic process, VA has established our four 
new Agency Priority Goals (APGs). In FYs 2016 and 2017, our four APGs 
build upon and preserve progress we made in 2015. The new APGs will 
help accelerate transformation to MyVA and advance our framework for 
allocating resources to improve Veteran outcomes. Our new APGs are to 
(1) Improve Veterans Experience with VA, (2) Improve VA Employee 
Experience, (3) Improve Access to Health Care as Experienced by the 
Veteran, and (4) Improve Dependency Claims Processing. While no longer 
APGs, VA will continue to build upon the progress it has already made 
related to ending Veterans' Homelessness and eliminating the 
compensation rating claims backlog.

                         FY 2017 Budget Request

    Our 2017 budget requests the necessary resources to allow us to 
serve the growing number of Veterans who selflessly served our Nation.
    The 2017 Budget requests $182.3 billion for VA-$78.7 billion in 
discretionary funding (including medical care collections) and $103.6 
billion in mandatory funding for Veterans benefit programs. The 
discretionary request reflects an increase of $3.6 billion (4.9 
percent) over the 2016 enacted level. The budget also requests 2018 
advance appropriations (AAs) of $66.4 billion for Medical Care and 
$103.9 billion for three mandatory accounts that support Veterans 
benefit payments (i.e., Compensation and Pensions, Readjustment 
Benefits, and Insurance and Indemnities).
    We value the support that Congress has demonstrated in providing 
the resources needed to honor our Nation's Veterans. We are seeking 
your support for legislative proposals contained in the 2017 Budget-
including many already awaiting Congressional action-to enhance our 
ability to provide Veterans the benefits and services they have earned 
through their service. The Budget also proposes a new General Transfer 
Authority that would allow VA to move discretionary funds across line 
items. Flexible budget authority would give VA greater ability to avoid 
artificial restrictions that impede our delivery of care and benefits 
to Veterans.

                 Rising Demand for VA Care and Benefits

    Veterans are demanding more services from VA than ever before. As 
VA becomes more productive, the demand for benefits and services from 
Veterans of all eras continues to increase, and Veterans' demand for 
benefits has exceeded VA's capacity to meet it.
    In 2014, when the Phoenix access difficulties came to light, VA had 
300,000 appointments that could not be completed within 30 days of the 
date the Veteran needed or wanted to be seen. To meet that demand, VA 
rallied to add capacity to complete 300,000 more appointments each 
month, or about 3.5 million additional appointments annually.
    Despite these extraordinary measures to increase capacity, VA was 
unable to absorb Veterans' increasing demand for health care. The 
number of Veterans waiting for appointments more than 30 days rose by 
about 50 percent, to roughly 450,000 between 2014 and 2015, so we are 
aggressively working on innovative ways to address that challenge, and 
VHA's new Access Stand Downs are central to VHA's health care 
transformation efforts and addressing that challenge.
    The trend of a growing demand for VA health care is fueled by more 
than a decade of war, Agent Orange-related disability claims, an 
unlimited claim appeal process, demographic shifts, increased medical 
issues claimed, and other factors. Additionally, survival rates among 
Americans who served in conflicts have increased, and more 
sophisticated methods for identifying and treating Veteran medical 
issues continue to become available. And, VA now serves a population 
that is older, has more chronic conditions, and is less able to afford 
care in the private sector. Workload will continue to increase as the 
military downsizes and Veterans regain trust in VA.



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    In 2017, the number of Veterans receiving medical care at VA will 
be over 6 million. VA expects to provide more than 115 million 
outpatient visits in 2017, an increase of 8.4 million visits over 2016, 
through both VA and Care in the Community.
    Compared to FY 2009, the number of patients is projected to 
increase by 22 percent by FY 2017. And, as Veterans see the results of 
VA's transformation, we are confident that the number of Veterans 
utilizing VA services will continue to rise. Currently, 11 million of 
the 22 million Veterans in this country are registered, enrolled, or 
use at least one VA benefit or service.
    Veterans' health care and benefit requirements continue to increase 
decades after conflicts' end, and this fact is a fundamental, long-term 
challenge for VA. Forty years after the Vietnam War ended, the number 
of Vietnam Era Veterans receiving disability compensation has not yet 
peaked. VA anticipates a similar trend for Gulf War Era Veterans, only 
26 percent of whom have been awarded disability compensation.


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[
    Today, there are an estimated 22 million Veterans. The number of 
Veterans is projected to decline to around 15 million by 2040. However, 
while the absolute number may decline, an aging Veteran population 
requires greater care, services, and benefits. In 2017, 46 percent (or 
9.8 million) of the 22 million Veteran population will be 65 years old 
or older, a dramatic increase since 1975 when only 7.5 percent (or 2.2 
million) of the Veteran population was 65 years old or older.
    While the percent of the Veteran population receiving compensation 
was nearly constant at 8.5 percent for more than 40 years, over the 
past 15 years there has been a striking increase to 20 percent. The 
total number of service-connected disabilities for Veterans receiving 
compensation grew from 11.8 million in 2009 to 19.7 million in 2015, an 
increase of more than 67 percent in just six years. This dramatic 
growth, combined with estimates based on historic trends, predicts an 
even greater increase in claims for more benefits as Veterans age and 
disabilities become more acute.


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    The increase in Veterans receiving compensation is accompanied by a 
significant increase in the average degree of disability granted to 
Veterans for disability compensation. For 45 years, from 1950 to 1995, 
the average degree of disability held steady at 30 percent. But, since 
2000, the average degree of disability has risen to 49 percent. VBA's 
mandatory request for 2017 is $103.6 billion, twice the amount spent in 
FY 2009.




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    As VA continues to improve access and quality of care, more 
Veterans will come to VA for more of their care. Veterans today often 
choose VA for care either because of personal preference or because of 
VA's economic edge. Some 78 percent of enrolled Veterans at VA have 
other choices like Medicare, Medicaid, Tricare, or private insurance. 
Out-of-pocket cost for Veterans at VA is often lower, and cost 
considerations are a key factor in Veterans' demand for VA health care. 
In 2014, Veteran enrollees received only 34 percent of their total 
health care through VA, accounting for about $53 billion in 2014 costs. 
Just a one percent increase in Veteran reliance on VA health care will 
increase costs by $1.4 billion.

               Productivity Improvements and Stewardship

    The MyVA transformation will ensure VA is a sound steward of the 
taxpayer dollar. We are instituting operational efficiencies, cost 
savings, productivity improvements, and service innovations to support 
this and future budget requests. We are assessing all aspects of VA 
operations using a business lens and pursuing changes so VA will 
deliver care and services more efficiently and effectively at the 
highest value to Veterans and taxpayers. For instance, few realize that 
when it comes to the general operating expense of distributing over a 
hundred-billion dollars in benefits to over 5.3 million Veterans and 
survivors, VBA spends only about 3 cents on the dollar. By any measure, 
that's an excellent return on investment. Our Reports, Approvals, 
Meetings, Measurements, and Policies (RAMMPs) process identifies 
practices to streamline or, in some cases, eliminate entirely. To free 
capacity and empower employees to identify counter-productive or 
wasteful activities that management can eliminate, VA leaders at all 
levels of the organization are using RAMMP to address opportunities for 
improvement that employees have identified.
    To boost efficiency and employee productivity, VA is quickly moving 
to paperless claims processing from its historically manual, paper-
intensive process. Modernizing to an electronic claims processing 
system has helped VBA increase claim productivity per claims processor 
by 25 percent since 2011 and medical issue productivity by 82 percent 
per claims processor since 2009. This significant productivity increase 
helped mitigate the effects of the 131 percent increase in workload 
between 2009 and 2015, when the number of medical issues rose from 2.7 
million to 6.4 million. VA's shift to electronic claims processing has 
meant converting paper files to eFolders. Between 2012 and 2015, the 
Veterans Claims Intake Program (VCIP) scanned nearly 6 million claims 
files into Veterans' eFolders in the Veterans Benefits Management 
System (VBMS). VBA has removed more than 7,000 tons of claims-related 
papers formerly undermining efficiency, hampering productivity, and 
cluttering workspace.



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    In FY 2015, VBA deployed its innovative Centralized Mail Initiative 
to 56 regional offices (ROs) and one pension management center (PMC). 
Centralized Mail reroutes inbound compensation and pension claims-
related mail directly to Claims and Evidence Intake Centers at document 
conversion services vendor sites, an innovation that improves 
productivity and enabled digital analysis of more than four million 
mail packets. Through Centralized Mail, VBA can more efficiently manage 
the claims workload, and prioritize and distribute claims 
electronically across the entire RO network, maximizing resources and 
improving processing timeliness.
    To strengthen financial management and stewardship, in FY 2015 VA 
launched its multi-year effort to replace VA's antiquated, 30-year-old 
core Financial Management System (FMS) with a 21st century system that 
will vastly improve VA financial management accuracy and transparency. 
The modernization effort requires robust enterprise-wide support across 
the Department. In FY 2015, VA committed to using a shared service 
solution and engaged the Department of Treasury's Office of Financial 
Innovation and Transformation (FIT) to pursue a Federal Shared Service 
Provider that leverages existing, successful investments and 
infrastructure across the government and meets our financial management 
system needs while supporting VA's mission of serving Veterans. VA also 
stood up a Program Management Office, initially staffed with 5 FTE from 
existing resources to lead and manage the effort, and identified an OIT 
Project Manager. VA has worked to compile lessons-learned from other 
agencies engaged in this effort and from VA's previous attempts to 
modernize the FTE, to ensure the effort is successful. Tasks ahead 
include strategies, roadmaps, and project plans, business process re-
engineering, and engaging in significant change management activities.
    Recent challenges managing non-VA care program finances have 
demonstrated the great risks and immense burden of the FMS legacy 
system. FMS failure would severely impede the Department's ability to 
execute its budget, pay vendors and Veterans, and produce accurate 
financial statements.

                    Closing Unsustainable Facilities

    It is well-past time to close VA's old, substandard, and 
underutilized facilities. VA's 2016 Budget testimony last year 
explained that VA cannot be a sound steward of taxpayer resources with 
the asset portfolio it carries, and each year of delay makes the 
situation more costly and untenable. No sound business would carry such 
a portfolio, and Veterans and taxpayers deserve better.


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    VA currently has 370 buildings that are fully vacant or less than 
50 percent occupied, which are excess to our needs. These vacant 
buildings account for over 5.2 million square feet of unneeded space. 
In addition, we have 770 buildings that are underutilized, accounting 
for more than 6.3 million square feet that are candidates to be 
consolidated to improve utilization and lower costs. This means we have 
to maintain over 1,100 buildings and 11.5 million square feet of space 
that is unneeded or underutilized - taking funding from needed Veteran 
services. We estimate that it costs VA $26 million annually to maintain 
and operate these vacant and underutilized buildings. For example, when 
attempting to demolish the vacant storage facility in Bedford, 
Massachusetts, VA encountered environmental issues that prevented the 
demolition, forcing VA to either pay costly remediation costs to 
demolish a building we no longer need or maintain facilities such as 
this across the system.


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    As the Veteran population has migrated, VA's capital infrastructure 
has not kept pace. We continue to operate medical facilities where the 
Veteran population is small or shrinking. Our smallest hospitals often 
do not have sufficient patient volume and complexity of care 
requirements to maintain the clinical skills and competencies of 
physicians and nurses.

                    Ensuring Veterans Access to Care

    The President's 2017 Budget will allow VA to operate the largest 
integrated health care system in the country, including nearly 1,300 VA 
sites of health care and approximately 6 million Veterans receiving 
care; the eleventh largest life insurance provider, covering both 
active duty Servicemembers and enrolled Veterans; compensation and 
pension benefit programs serving more than 5.3 million Veterans and 
survivors; education benefits to more than one million students; 
vocational rehabilitation and employment benefits to more than 140,000 
disabled Veterans; a home mortgage program that will guarantee more 
than 429,000 new home loans; and the largest national cemetery system 
that leads the industry as a high-performing organization, with 
projections to inter more than 132,000 Veterans and family members in 
2017.
    The 2017 Budget requests $65 billion for medical care, an increase 
of $3.9 billion (6.3 percent) over the 2016 enacted level. The increase 
in 2017 is driven by Veterans' demand for VA health care as a result of 
demographic factors, economic assumptions, investments in access, and 
high priority investments for caregivers, new Hepatitis C treatments, 
and support for Veterans Health Information Systems and Technology 
Architecture (VistA) Evolution. The 2017 request supports programs to 
end and prevent Veteran homelessness, invests in strategic initiatives 
to improve the quality and accessibility of VA health care programs, 
continues implementation of the Caregivers and Veterans Omnibus Health 
Services Act, and provides for activation requirements for new or 
replacement medical facilities. The 2017 appropriations request 
includes an additional $1.7 billion above the enacted 2017 AA for 
Veterans medical care. The request assumes approximately $3.6 billion 
annually in medical collections in 2017 and 2018. For the 2018 Advance 
Appropriations for medical care, the current request is $66.4 billion.

Hepatitis C Treatment

    Although the Hepatitis C virus infection (HCV) takes years to 
progress, it is the main cause of advanced liver disease in the United 
States. Treatment of this disease remains a high priority because its 
cure dramatically lowers patients' risk of liver failure, liver cancer, 
and death.
    VA is the largest single provider of care in the Nation for chronic 
HCV, and over the next five years, VA will strive to provide treatment 
to all Veterans with HCV who are treatment candidates. For FY 2017, VA 
is requesting $1.5 billion for the cost of Hepatitis C drugs and 
clinical resources. With a budget of $1.5 billion in FY 2017, VA 
expects to treat 35,000 patients with HCV. At the beginning of FY 2016, 
almost 120,000 Veterans in VA care were awaiting HCV treatment, of whom 
approximately 30,000 have advanced liver disease.
    VA successfully negotiated extremely favorable pricing for both of 
the new treatments available-Harvoni and Viekira-from two different 
drug manufacturers by stressing VA's proven ability to deliver market 
share, VA's large HCV population, and the long-term impact that VA's 
physician residency programs can have on post-residency prescribing 
practices.
    During FY 2015, VA medical facilities treated more than 30,000 
Veterans for HCV with these new drugs with remarkable success, 
achieving cure rates of 90 percent, similar to those seen in clinical 
trials.
    VA clinicians have rapidly adopted new, more effective therapies 
for HCV as they have become available. New therapies are costly and 
require well-trained clinical providers and support staff, presenting 
resource challenges for the Department. VA will focus resources on the 
sickest patients and most complex cases and continue to build capacity 
for treatment through clinician training and use of telehealth 
platforms. Patients with less advanced disease are being offered 
treatment through the Veterans Choice program in partnership with 
community HCV providers.

Care in the Community

    VA is committed to providing Veterans access to timely, high-
quality health care. The 2017 Budget includes $12.2 billion for Care in 
the Community and includes a new Medical Community Care budget account, 
consistent with the VA Budget and Choice Improvement Act (P.L. 114-41). 
Of the total that will be spent on non-VA care in FY 2017, $7.5 billion 
will be provided through a transfer of the 2017 enacted AA from the 
Medical Services account to the new budget account, and $4.7 billion 
will be provided through the resources provided in the Veterans Choice 
Act for implementation of the Veterans Choice Program.
    The Choice Act increased VA's in-house capacity by funding medical 
personnel growth in VA facilities and expanded eligibility for Care in 
the Community to ensure access to care within 30 days and to provide 
care closer to home for enrollees residing more than 40 miles from a VA 
facility (the 40-mile group).
    This additional capacity facilitated an increase in enrollees' 
reliance on VA health care by more than half a percent over the level 
expected in FY 2015. This growth was the result of enrollees increasing 
their use of VA funded health care versus their use of other health 
care options (Medicare, Medicaid, commercial insurance, etc.).
    The FY 2015 growth in enrollee reliance was largely in Care in the 
Community, with the 40-mile group generating a more significant 
increase in care:
      In FY 2015, enrollees' reliance on VA health care 
increased by 0.7 percent overall. Reliance for the 40-mile group 
increased by 2.8 percent from 32.5 percent to 35.3 percent.
      The increase in reliance was mostly driven by growth in 
Care in the Community. Cost sharing levels in VA are lower than what is 
typically available elsewhere, which provides an incentive for 
enrollees to use VA-paid Care in the Community.
    Enrollee reliance on VA health care is expected to continue to 
increase in 2016 and beyond to service the unmet demand that the Choice 
Act was enacted to address.
    On October 30, 2015, VA provided Congress with a plan for the 
consolidation and improvement of all purchased care programs into one 
New Veterans Choice Program (New VCP). Consistent with this report, the 
2017 Budget will include legislative proposals to streamline and 
improve VA's delivery of Community Care.

Caregiver Support Program

    Caregivers give their time and love in countless behind-the-scenes 
ways. Whether they are helping with transportation to and from 
appointments, helping the Veteran apply for benefits, or helping with 
meals, bathing, clothing, medication, the spectrum of care is wide and 
compassion runs deep.
    The 2017 Budget requests $725 million for the National Caregivers 
Support Program to support nearly 36,600 caregivers, up from about 
30,600 in FY 2016. Funding requirements for caregivers are driven by an 
increase in the eligible Veteran population, with caregiver enrollment 
increasing by an average of about 500 each month.

                      Ending Veteran Homelessness

    The ambitious goal of ending Veteran homelessness has galvanized 
the Federal government and local communities to work together to solve 
this important National problem. Our systems are designed to help 
prevent homelessness whenever possible, and our goal is a systematic 
end to homelessness, meaning that there are no Veterans sleeping on our 
streets and every Veteran has access to permanent housing. Should 
Veterans become homeless or be at-risk of becoming homeless, there will 
be capacity to quickly connect them to the help they need to achieve 
housing stability.
    The 2017 Budget supports VA's commitment to ending Veteran 
homelessness by emphasizing rescue for those who are homeless today and 
prevention for those at risk of homelessness. The 2017 Budget requests 
$1.6 billion for VA homeless-related programs, including case 
management support for the Department of Housing and Urban Development 
(HUD)-VA Supportive Housing program (HUD-VASH), the Grant and Per Diem 
Program, VA justice programs, and the Supportive Services for Veteran 
Families program.
    In FY 2015 and FY 2016, VA committed more than $1.5 billion 
annually to strengthen programs that prevent and end homelessness among 
Veterans. Communities that have reached the goal or are close to 
effectively ending homelessness rely heavily on VA targeted homeless 
resources. Communities that have a sustainment plan are depending on 
those resources to be available as they continue to tackle homelessness 
and sustain the support for Veterans who have moved into permanent 
housing, ensuring that they maintain housing stability and do not fall 
back into homelessness.
    VA will continue to advocate for its continuum of homeless services 
to address the needs associated with preventing first-time 
homelessness, as well as the needs of those who return to homelessness, 
and focus on the root causes associated with homelessness, including 
poverty, addiction, mental health, and disability.
    Congress has an important role, as well, in ensuring adequate 
resources to meet the needs of those most vulnerable Veterans by 
enacting authorizations and other legislation to provide VA with a full 
complement of tools to combat homelessness-including legislation that 
is a prerequisite to carry out dramatic improvements to our West Los 
Angeles campus centered on the needs of Veterans.

                           Benefits Programs

    The 2017 Budget requests $2.8 billion and 22,171 FTE for VBA 
General Operating Expenses, an increase of $93.4 million (3.4 percent) 
over the 2016 enacted level. The request includes an additional 300 
full-time equivalent (FTE) employees for non-rating claims.

    With the resources requested in the 2017 Budget, VA will provide:

      Disability compensation and pension benefits for 5.3 
million Veterans and survivors, totaling $86 billion;
      Vocational rehabilitation and employment benefits to 
nearly 141 thousand disabled Veterans, totaling $1.4 billion;
      Education benefits totaling $14 billion to more than one 
million Veterans and family members;
      Guaranty of more than 429,000 new home loans; and
      Life insurance coverage to 1.0 million Veterans, 2.2 
million Servicemembers, and 2.8 million family members.

    Improving the quality and timeliness of disability claim decisions 
has been integral to VBA's transformation of benefits delivery. VBA 
successfully streamlined a complex and paper-bound compensation claims 
process and implemented people, process, and technology initiatives 
necessary to optimize productivity and efficiency. In alignment with 
the MyVA initiative, VBA is working to further improve its operations 
with a focus on the customer experience. We are implementing 
enhancements to enable integration across our programs and 
organizational components, both inside and outside of VBA.
    VBA has processed an unprecedented number of rating claims in 
recent fiscal years (nearly 1.4 million in 2015, and more than 1 
million per year for the last 6 years). However, its success has 
resulted in other unmet workload demands. As VBA continues to receive 
and complete more disability rating claims, the volume of non-rating 
claims, appeals, and fiduciary field examinations increases 
correspondingly.

      Non-rating claims. VA completed nearly 37 percent more 
non-rating work in 2015 than 2013-and 15 percent more than 2014. The 
2017 Budget requests $29.1 million for an additional 300 non-rating 
claims processors to reduce the non-rating claims inventory and provide 
Veterans with more timely decisions on non-rating claims.
      Appeals. Over the last 20 years, appeal rates have 
continued to hold steady at between 11 and 12 percent of completed 
claims. As VBA continues to receive and complete record-breaking 
numbers of disability rating claims, the volume of appeals 
correspondingly increases. As of December 31, 2015, there were more 
than 440,000 benefits-related appeals pending in the Department at 
various stages in the multi-step appeals process, which divides 
responsibility between VBA and the Board of Veterans' Appeals (Board)-
355,803 of those benefits-related appeals are in VBA's jurisdiction and 
85,682 are within the Board's jurisdiction.

    Under current law, VA appeals framework is complex, ineffective, 
and opaque, and veterans wait on average 5 years for final resolution 
of an appeal. The 2017 Budget supports the development of a Simplified 
Appeals Process to provide veterans with a simple, fair, and 
streamlined appeals procedure in which they would receive a final 
appeals decision within 365 days from filing of an appeal by FY 2021. 
The 2017 Budget provides funding to support over 900 FTE for the Board 
and proposes a legislative change that will improve an outdated and 
inefficient process which will benefit all veterans through expediency 
and accuracy. We look forward to working with Congress, Veterans, and 
other stakeholders to implement improvements.

      Fiduciary program. The fiduciary program served 29 
percent more beneficiaries in 2015 than it served in 2014. Program 
growth is primarily due to an increase in the total number of 
individuals receiving VA benefits and an aging population of 
beneficiaries. Additionally, in 2015 the fiduciary program changed the 
way it captures beneficiary population data and now reports all 
beneficiaries served during the course of the fiscal year. In 2015, 
fiduciary personnel conducted more than 84,000 field examinations, and 
VBA anticipates field examination requirements will exceed 97,000 in 
2017.
      Housing program. The 2017 Budget includes $34 million for 
the VA Loan Electronic Reporting Interface (VALERI) to manage the 2.4 
million VA guaranteed loans for Veterans and their families. VALERI 
connects VA with more than 320,000 Veteran borrowers and more than 
225,000 mortgage servicer contacts. VA uses the VALERI tool to manage 
and monitor efforts taken by private-sector loan servicers and VA staff 
in providing timely and appropriate loss mitigation assistance to 
defaulted borrowers. Without these resources, approximately 90,000 
Veterans and their families would be in jeopardy of losing their homes 
each year, potentially costing the government an additional $2.8 
billion per year. VALERI also supports payment of guaranty and 
acquisition claims.

    The Budget requests the following advance appropriations amounts 
for 2018: $90.1 billion for compensation and pensions, $13.7 billion 
for readjustment benefits, and $107.9 million for insurance and 
indemnities. VA will continue to closely monitor workload and monthly 
expenditures in these programs and will revise cost estimates as 
necessary in the Mid-Session Review of the 2017 Budget, to ensure the 
enacted advance appropriation levels are sufficient to address 
anticipated veteran needs throughout the year.

                   The Simplified Appeals Initiative

    The current VA appeals process is broken. The more than 80-year-old 
process was conceived in a time when medical treatment was far less 
frequent than it is today, so it is encumbered by some antiquated laws 
that have evolved since WWI and steadily accumulated in layers.
    Under current law, the VA appeals framework is complex, 
ineffective, confusing, and understandably frustrating for Veterans who 
wait much too long for final resolution of their appeal. The current 
appeals system has no defined endpoint, and multiple steps are set in 
statute. The system requires continuous evidence gathering and multiple 
re-adjudications of the very same or similar matter. A Veteran, 
survivor, or other appellant can submit new evidence or make new 
arguments at any time, while VA's duty to assist requires continuous 
development and re-adjudication. Simply put, the VA appeals process is 
unlike other standard appeals processes across Federal and judicial 
systems.
    Fundamental legislative reform is essential to ensure that Veterans 
receive timely and quality appeals decisions, and we must begin an 
open, honest dialogue about what it will take for us to provide 
Veterans with the timely, fair, and streamlined appeals decisions they 
deserve. To put the needs, expectations, and interests of Veterans and 
beneficiaries first-a goal on which we can all agree-the appeals 
process must be modernized.



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    The 2017 Budget proposes a Simplified Appeals Process-legislation 
and resources (i.e., people, process, and technology) that would 
provide Veterans with a simple, fair, and streamlined appeals process 
in which they would receive a final decision on their appeal within one 
year from filing the appeal by FY 2021.
    The 2017 Budget requests $156.1 million and 922 FTE for the Board, 
an increase of $46.2 million and 242 FTE above the FY 2016 enacted 
level. This is a down-payment on a long-term, sustainable plan to 
provide the best services to Veterans. This policy option also 
represents the best value to taxpayers (as outlined in the chart, 
Analysis of Alternatives).
    Without legislative change or significant increases in staffing, VA 
will face a soaring appeals inventory, and Veterans will wait even 
longer for a decision on their appeal. If Congress fails to enact VA's 
proposed legislation to simplify the appeals process, Congress would 
need to provide resources for VA to sustain more than double its 
appeals FTE, with approximately 5,100 appeals FTE onboard. The prospect 
of such a dramatic increase, while ignoring the need for structural 
reform, is not a good result for Veterans or taxpayers.



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    While the Simplified Appeals proposal would require FTE increases 
for the first several years to resolve the more than 440,000 currently 
pending appeals, by 2022, VA would be able to reduce appeals FTE to a 
sustainment level of roughly 1,030 FTE (including 980 FTE at the Board 
and 50 at VBA), a level sufficient to process all simplified appeals in 
one year. Notably, such a sustainment level is 1,135 FTE less than the 
current 2016 budget requires, and is 4,070 FTE less Department-wide 
than would be required to address this workload with FTE resources 
alone. In addition, this reform would essentially eliminate the need 
for appeals FTE at VBA, allowing these resources to be redirected 
within VBA to other priorities.
    In 2015, the Board was still adjudicating an appeal that originated 
25 years ago, even though the appeal had previously been decided by VA 
more than 27 times. Under the Simplified Appeals Process, most Veterans 
would receive a final appeals decision within one year of filing an 
appeal. Additionally, rather than trying to navigate a multi-step 
process that is too complex and too difficult to understand, Veterans 
would be afforded a transparent, single-step appeal process with only 
one entity responsible for processing the appeal. Essentially, under a 
simplified appeals process, as soon as a Veteran files an appeal, the 
case would go straight to the Board where a Judge would review the same 
record considered by the initial decision-maker and issue a final 
decision within one year; informing the Veteran whether that initial 
decision was substantially correct, contained an error that must be 
corrected, or was simply wrong. If a Veteran disagrees with any or all 
of the final appeals decision, the Veteran always has the option of 
filing a new claim for the same benefit once the appeal is resolved, or 
may pursue an appeal to the Court of Appeals for Veterans Claims.



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    Rapid growth in the appeals workload exacerbates this challenge. As 
VBA has produced record-setting claims-decision output over the past 
five years, appeals volume has grown commensurately. Between December 
2012 and November 2015, the number of pending appeals rose by 34 
percent. Under current law with no radical change in resources, the 
number of pending appeals is projected to soar by 397 percent-from 
437,000 to 2.17 million (chart, Status of Appeals)-between November 
2015 and FY 2027.


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    VA firmly believes that justice delayed is justice denied. In the 
streamlined appeals process proposed in the FY 2017 President's Budget 
(chart, Proposed Simplified Appeals), there would be a limited 
exception allowing the Board to remand appeals to correct duty to 
notify and assist errors made on the part of the Agency of Original 
Jurisdiction (AOJ) prior to issuance of the initial AOJ decision.


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                    Medical and Prosthetic Research

    The 2017 Budget continues VA's program of groundbreaking, high 
standard research focused on advancing the health care needs of all 
Veterans. The 2017 Budget requests $663 million for Medical Research 
and supports the President's Precision Medicine Initiative (PMI) to 
drive personalized medical treatment and the evolving science of 
Genomic Medicine-how genes affect health. In addition to the direct 
appropriation, Medical Research will be supported through $1.3 billion 
from VA's Medical Care program and other Federal and non-Federal 
research grants. Total funding for Medical and Prosthetic Research will 
be more than $2.0 billion in 2017.
    VA research is focused on the U.S. Veteran population and allows VA 
to uniquely address scientific questions to improve Veteran health 
care. Most VA researchers are also clinicians and health care providers 
who treat patients. Thus, VA research arises from the desire to heal 
rather than pure scientific curiosity and yields remarkable returns.

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    For more than 90 years, VA research has produced cutting-edge 
medical and prosthetic breakthroughs that improve the lives of Veterans 
and others. The list of accomplishments includes therapies for 
tuberculosis following World War II, the implantable cardiac pacemaker, 
computerized axial tomography (CAT) scans, functional electrical 
stimulation systems that allow patients to move paralyzed limbs, the 
nicotine patch, the first successful liver transplants, the first 
powered ankle-foot prosthesis, and a vaccine for shingles. VA 
researchers also found that one aspirin a day reduces by half the rate 
of death and nonfatal heart attacks in patients with unstable angina. 
More recently, VA investigators tested an insulin nasal spray that 
shows great promise in warding off Alzheimer's disease and found that 
prazosin (a well-tested generic drug used to treat high blood pressure 
and prostate problems) can help improve sleep and lessen nightmares for 
those with post-traumatic stress disorder.
    Beyond VA's support of more than 2,200 continuing research 
projects, VA will leverage our Million Veteran Program (MVP)-already 
one of the world's largest databases of genetic information-to support 
several Precision Medicine Initiatives. The first initiative will 
evaluate whether using a patient's genetic makeup to inform medication 
selection is effective in reducing complications and getting patients 
the most effective medication for them. This initiative will focus on 
up to 21,500 Veterans with PTSD, depression, pain, and/or substance 
abuse.

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    The second initiative will focus on additional analysis of DNA 
specimens already collected in the MVP. More than 438,000 Veteran 
volunteers have contributed DNA samples so far. Genomic analysis on 
these DNA specimens allows researchers to extract critical genetic 
information from these specimens. There are several possible ``levels'' 
of genomic analyses, with increasing cost.
    Built into the design of MVP and currently funded within the VA 
research program is a process known as ``exome chip'' genotyping-the 
tip of the iceberg in genomic analysis. Exome Chip genotyping provides 
useful information, but newer technologies promise significantly 
greater information for improving treatments. VA proposes conducting 
the next level of analysis, known as ``exome sequencing,'' on up to 
100,000 Veterans who are enrolled in MVP. This exome sequencing 
analyzes the part of the genome that codes for proteins-the large, 
complex molecules that perform most critical functions in the body. 
Sequencing efforts will begin with a focus on Veterans with PTSD and 
frequently co-occurring conditions such as depression, pain, and 
substance abuse, and expand to other chronic illnesses such as diabetes 
and heart disease, among others. This more detailed genetic analysis 
will provide greater information on the biological factors that may 
cause or increase the risk for these illnesses.
    VA's research and development program improves the lives of 
Veterans and all Americans through health care discovery and 
innovation.

                            Other Priorities

Information Technology

    The 2017 Budget demonstrates VA's commitment to using cutting-edge 
information technology (IT) to support transformation and ensure that 
the Veteran is at the center of everything we do. The Budget requests 
$4.28 billion-an increase of $145 million (3.5 percent) from the 2016 
enacted level-to help stabilize and streamline core processes and 
platforms, eliminate the information security material weakness, and 
institutionalize new capabilities to deliver improved outcomes for 
Veterans. The request includes $471 million for new efforts to develop, 
improve, and enhance clinical and benefits systems and processes and 
supports VA's strategy to replace FMS. The 2017 Budget was developed 
through Federal IT Acquisition Reform Act (FITARA) compliant processes 
led by the Chief Information Officer (CIO), in concert with the Chief 
Financial Officer and Chief Acquisition Officer.
    In FY 2015, the Office of Information and Technology (OIT) 
developed an IT Enterprise Strategy and an Enterprise Cybersecurity 
Strategy. These strategies support OIT's vision to become a world-class 
organization that provides a seamless, unified Veteran experience 
through the delivery of state-of-the-art technology. OIT is 
implementing a new IT Security Strategy to improve VA's security 
posture and eliminate the Federal Information Security Management Act/
Federal Information System Controls Audit Manual material weakness.
    The 2017 Budget includes $370.1 million for information security, 
an increase of 105 percent over the FY 2016 funding level. In addition, 
the 2017 Budget includes $50 million to launch a new Data Management 
program to use data as a strategic resource. Under this program, VA 
will inventory its data collection activities-with the objective of 
requesting data from the Veteran only once-and dispose expired 
information in a secure and timely way. These two aspects will reduce 
VA costs for data storage and support safeguards for Veterans' 
information.

National Cemetery Administration

    The National Cemetery Administration (NCA) has the solemn duty to 
honor Veterans and their families with final resting places in national 
shrines and with lasting tributes that commemorate their service and 
sacrifice to our Nation. The 2017 Budget requests $286 million, an 
increase of $15 million (5.5 percent) to allow VA to provide perpetual 
care for more than 3.5 million gravesites and more than 8,800 developed 
acres. The Budget supports NCA's efforts to raise and realign 
gravesites and repair turf in order to maintain cemeteries as national 
shrines. The Budget also continues implementation of a Geographic 
Information System to enable enhanced accounting of remains and 
gravesites and enhanced gravesite location for visitors. The Budget 
positions NCA to meet Veterans' emerging burial and memorial needs in 
the decades to come by ensuring that Veterans and their families 
continue to have convenient access to a burial option in a National, 
state, or tribal Veterans cemetery and that the service they receive is 
dignified, respectful, and courteous.

                           VA Infrastructure

    The 2017 Budget requests $900.2 million for VA's Major and Minor 
construction programs. The Budget invests in infrastructure projects at 
existing campuses that will lead to seismically safe facilities, 
ensuring that Veterans are safe when they seek care. The capital asset 
budget request demonstrates VA's commitment to address critical Major 
construction projects that directly affect patient safety and seismic 
issues, and reflects VA's promise to provide safe and secure facilities 
for Veterans. The 2017 Budget also requests funding to ensure that VA 
has the ability to provide eligible Veterans with access to burial 
services through new and expanded cemeteries, and prevent the closure 
to new interments in existing cemeteries.
    VA acknowledges the transformation underway in the landscape for 
health care delivery. Our future space needs may be impacted by the 
changes we are already implementing in how we deliver care for 
Veterans. In addition, we plan to potentially incorporate any 
recommendations from the Commission on Care and their impact on our 
changing service delivery into our long-term infrastructure strategy.
    Leasing provides flexibility and enables VA to more quickly adapt 
to changes in medical technology, workload, new programs, and 
demographics. VA is also looking to Congress for authorization of 18 
leases submitted in VA's FY 2015 and 2016 Budget requests. The pending 
major medical facility lease projects will replace, expand, or create 
new outpatient clinics and research facilities and are critical for 
providing access for Veterans and enhancing our research capabilities 
nationwide. The 2017 Budget includes a request to authorize six 
additional replacement major medical facility leases under VA's 
authority in 38 U.S.C. Sec. Sec.  8103 and 8104 and with the 
anticipated delegation of leasing authority from the General Services 
Administration. The Department is awaiting authorization of its request 
to expand the definition of ``Medical Facilities'' in VA's authorizing 
statutes to allow VA to more easily partner with other Federal 
agencies. Another proposal that deserves attention is authorization of 
enhanced use lease (EUL) authority to encompass broader possibilities 
for mixed-use projects. This change would give VA more opportunities to 
engage the private sector, local governments, and community partners by 
allowing VA to use underutilized property that would benefit Veterans 
and VA's mission and operations.

Major Construction

    The 2017 Budget requests $528.1 million for Major Construction. The 
request includes funds to address seismic problems in facilities in 
Long Beach, California, and Reno, Nevada. These projects will correct 
critical safety and seismic deficiencies that pose a risk to Veterans, 
VA staff, and the public. Consistent with Public Law 114-58, the 
Department must identify a non-VA entity to execute these two projects, 
as they are more than $100 million. We have identified the U.S. Army 
Corps of Engineers as our construction agent to execute these projects.
    We must prevent the devastation and potential loss of life that may 
occur because our facilities are vulnerable to earthquakes-such as the 
one that occurred in 1971 in San Fernando, California. As shown, a 6.5-
magnitude earthquake caused two buildings in the San Fernando Medical 
Center to collapse and 46 patients and staff to lose their lives.


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    These images show a known seismic deficiency at the San Francisco 
Medical Center-built in 1933-wherein the rebar does not extend into the 
``pile cap.''
    The request also includes funding for new national cemeteries in 
western New York and southern Colorado, and national cemetery 
expansions in Jacksonville, Florida and South Florida. These cemetery 
projects support NCA's goal to ensure that eligible Veterans have 
access to a burial option within a reasonable distance from their 
residences.


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      The new western New York national cemetery will establish 
a dignified burial option for more than 96,000 Veterans plus eligible 
family members in the western New York region.
      The new southern Colorado national cemetery will 
establish a dignified burial option for more than 95,000 Veterans plus 
eligible family members in the southern Colorado region.
      The Jacksonville National Cemetery expansion will develop 
approximately 30 acres of undeveloped land to provide approximately 
20,200 gravesites.
      The South Florida National Cemetery expansion will 
develop approximately 25 acres of undeveloped land to provide 
approximately 21,750 gravesites.

Minor Construction

    In 2017, the Budget requests $372 million for Minor Construction. 
The requested amount would provide funding for ongoing projects that 
renovate, expand and improve VA facilities, while increasing access for 
our Veterans. Examples of projects include enhancing women's health 
programs; providing additional domiciliaries to further address 
Veterans' homelessness; improving safety; mitigating seismic 
deficiencies; transforming facilities to be more Veteran-centric; 
enhancing patient privacy; and enhancing research capabilities.
    The Minor Construction request will also provide funding for 
gravesite expansion and columbaria projects to keep existing national 
cemeteries open, and will support NCA's urban and rural initiatives. It 
will also provide funding for projects at VBA regional offices 
nationwide and will fund infrastructure repairs and enhancements to 
improve operations for the Department's staff offices.

Leasing

    The 2017 Budget includes a request to authorize six replacement 
major medical facility leases located in Corpus Christi, Texas; 
Jacksonville, Florida; Pontiac, Michigan; Rochester, New York; Tampa, 
Florida; and Terre Haute, Indiana. These leases will allow VA to 
provide continued access to Veterans that are served in these 
locations.

                          MyVA Transformation

    MyVA puts Veterans in control of how, when, and where they wish to 
be served. It is a catalyst to make VA a world-class service provider-a 
framework for modernizing VA's culture, processes, and capabilities to 
put the needs, expectations, and interests of Veterans and their 
families first. A Veteran walking into any VA facility should have a 
consistent, high-quality experience.
    MyVA will build upon existing strengths to promote an environment 
where VA employees see themselves as members of one enterprise, 
fortified by our diverse backgrounds, skills, and abilities. Moreover, 
every VA employee-doctor, rater, claims processor, custodian, or 
support staffer, or the Secretary of Veterans Affairs-will understand 
how they fit into the bigger picture of providing Veteran benefits and 
services. VA, of course, must also be a good steward of public 
resources. Citizens and taxpayers should expect to see efficiency in 
how we run our internal operations.

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    The FY 2017 budget will make investments toward the five critical 
MyVA objectives:

    1. Improving the Veteran experience: At a bare minimum, every 
contact between Veterans and VA should be predictable, consistent, and 
easy; however, we are aiming to make each touchpoint exceptional. It 
begins with receptionists who are pleasant to our Veteran clients, but 
there is also a science to this experience. We are focusing on human-
centered design, process mapping, and working with leading design firms 
to learn and use the technology associated with improving every 
interaction with clients.
    2. Improving the employee experience-so we can better serve 
Veterans: VA employees are the face of VA. They provide care, 
information, and access to earned benefits. They serve with distinction 
daily. We cannot make things better for Veterans without improving the 
work experience of our dedicated employees. We must train them. We must 
move from a rules/fear-based culture to a principles/values-based 
culture. I learned in the private sector that it is absolutely not a 
coincidence that the very best customer-service organizations are 
almost always among the best places to work.
    3. Improving internal support services: We will let employees and 
leaders focus on assisting Veterans, rather than worrying about ``back 
office'' issues. We must bring our IT infrastructure into the 21st 
century. Our scheduling system, where many of our issues with access to 
care were manifest, dates to 1985. Our Financial Management System is 
written in COBOL, a language I used in 1973. This is simply 
unacceptable. It impedes all of our efforts to best serve Veterans.
    4. Establishing a culture of continuous improvement: We will apply 
Lean strategies and other performance improvement capabilities to help 
employees examine their processes in new ways and build a culture of 
continuous improvement.
    5. Enhancing strategic partnerships: Expanding our partnerships 
will allow us to extend the reach of services available for Veterans 
and their families. We must work effectively with those who bring 
capabilities and resources to help Veterans.

    Breakthrough Priorities for CY 2016

    While we have made progress, we are still on the first leg of a 
multi-year journey. We have narrowed down our near-term focus to 12 
``breakthrough priorities.''
    Many of these reflect issues which are not new-they have been known 
problems, in some cases, for years. We have already seen some progress 
in solving many of them. However, we still have much work to do.
    The following are our 12 priorities and the 2016 outcomes to which 
we aspire. We understand that it will be a challenge to accomplish all 
of these goals this year, but we have committed ourselves to producing 
results for Veterans and creating irreversible momentum to continue the 
transformation in future years.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



Veteran Facing Goals

1. Improve the Veteran Experience.

  Breakthrough Outcome for 2016:

    I  Strengthen the trust in VA to fulfill our country's commitment 
to Veterans; currently measured at 47 percent, we want it to be 70 
percent by year end.
    I  Establish a Department-wide customer experience measurement 
framework to enable data-driven service improvements.
    I  Make the Veterans Experience office fully operational.
    I  Expand the network of Community Veteran Engagement Boards to 
more than 100.
    I  Additionally, in order to deliver experiences to Veterans that 
are effective, easy, and in which Veterans feel valued, medical centers 
will ensure that they are fully staffed at the frontline with well-
prepared employees who have been selected for their customer service. 
Functionally, this means new frontline staff will be assessed through a 
common set of customer service criteria, hired within 30 days of 
selection, and provided a nationally standardized onboarding and 
training program.

2. Increase Access to Health Care.

  Breakthrough Outcome for 2016:

    I  When Veterans call or visit primary care facilities at a VA 
Medical Center, their clinical needs will be addressed the same day.
    I  When Veterans call for a new mental health appointment, they 
receive a suicide risk assessment and immediate care if needed. 
Veterans already engaged in mental health care identifying a need for 
urgent attention will speak with a provider the same day.
    I  Utilizing existing VistA technology, Veterans will be able to 
conveniently get medically necessary care, referrals, and information 
from any VA Medical Center, in addition to the facility where they 
typically receive their care.

3. Improve Community Care.

  Breakthrough Outcome for 2016: Improve the Veterans' 
    experience with Care in the Community. Following enactment of our 
    requested legislation, by the end of the year:
    I  VA will begin to consolidate and streamline its non-Department 
Provider Network and improve relationships with community providers and 
core partners.
    I  Veterans will be able to see a community provider within 30 days 
of their referral.
    I  Non-Department claims will be processed and paid within 30 days, 
85 percent of the time.
    I  Health care claims backlog will be reduced to less than 10 
percent of total inventory.
    I  Referral and authorization time will be reduced.

4. Deliver a Unified Veteran Experience.

  Breakthrough Outcome for 2016:

    I  Vets.gov will be able to provide Veterans, their families, and 
caregivers with a single, easy-to use, and high-performing digital 
platform to access the VA benefits and services they have earned.
    I  Vets.gov will be data-driven and designed such that the top 100 
search terms will be available within one click from search results. 
The top 100 search terms will all be addressed within one click on the 
site.
    I  All current content, features and forms from the current public-
facing VA Web sites will be redesigned, rewritten in plain language, 
and migrated to Vets.gov, in priority order based on Veteran demand.
    I  Additionally, we will have one authoritative source of customer 
data; eliminating the disparate streams of Administration-specific data 
that require Veterans to replicate inputs.

5. Modernize our Contact Centers (Including Veterans Crisis Line).

  Breakthrough Outcome for 2016:
    I  Veterans will have a single toll free phone number to access the 
VA Contact Centers, know where to call to get their questions answered, 
receive prompt service and accurate answers, and be treated with 
kindness and respect. VA will do this by establishing the initial 
conditions necessary for an integrated system of customer contact 
centers.
    I  By the end of this year, every Veteran in crisis will have his 
or her call promptly answered by an experienced responder at the 
Veterans Crisis Line.

6. Improve the Compensation & Pension (C&P) Exam Process.

  Breakthrough Outcome for 2016:
    I  Improved Veteran satisfaction with the C&P Exam process. We will 
have a baseline satisfaction metric in place by the end of February and 
will set a goal for significant improvement once we know our baseline.
    I  VA will have a national rollout of initiatives to ensure the 
experience is standardized across the Nation.

7. Develop a Simplified Appeal Process.

  Breakthrough Outcome for 2016:

    I  Subject to successful legislative action, put in place a 
simplified appeals process, enabling the Department to resolve 90 
percent of appeals within one year of filing by 2021.
    I  Increase current appeals production to more rapidly reduce the 
existing appeals inventory.

8. Continue Progress in Reducing Veteran Homelessness.

  Breakthrough Outcome for 2016:

    I  Continue progress toward an effective end to Veteran 
homelessness by permanently housing or preventing homelessness for an 
additional 100,000 Veterans and their family members,

VA Internal Facing Goals

9. Improve the Employee Experience (Including Leadership Development).

  Breakthrough Outcome for 2016:

    I  Continue to improve the employee experience by developing 
engaged leaders at all levels who inspire and empower all employees to 
deliver a seamless, integrated, and responsive VA customer service 
experience.
    I  More than 12,000 engaged leaders skilled in applying LDL 
principles, concepts, and tools will work projects and/or initiatives 
to make VA a more effective and efficient organization.
    I  Improve VA's employee experience by incorporating LDL principles 
into VA's leadership and supervisor development programs and courses of 
instruction.
    I  VA Senior Executive performance plans will include an element 
that targets how to improve employee engagement and customer service, 
and all VA employees will have a customer service standard in their 
performance plans.
    I  All VA supervisors will have a customer service standard in 
their performance plans.
    I  VA will begin moving from paper-based individual development 
plans to a new electronic version, making it easier for both 
supervisors and employees.

10. Staff Critical Positions.

  Breakthrough Outcome for 2016:

    I  Achieve significantly improved critical staffing levels that 
balance access and clinical productivity, with targets of 95 percent of 
Medical Center Director positions filled with permanent appointments 
(not acting) and 90 percent of other critical shortages addressed-
management as well as clinical.
    I  Work to reduce ``time to fill'' hiring standards by 30 percent.

11. Transformation the Office of Information & Technology (OIT).

  Breakthrough Outcome for 2016: Achieve the following key 
    milestones on the path to creating a world-class IT organization 
    that improves the support to business partners and Veterans.

    I  Begin measuring IT projects based on end product delivery, 
starting with a near-term goal to complete 50 percent of projects on 
time and on budget.
    I  Stand up an account management office.
    I  Develop portfolios for all Administrations.
    I  Tie all supervisors' and executives' performance goals to 
strategic goals.
    I  Close all current cybersecurity weaknesses.
    I  Develop a holistic Veteran data management strategy.
    I  Implement a quality and compliance office.
    I  Deploy a transformational vendor management strategy.
    I  Ensure implementation of key initiatives to improve access to 
care.
    I  Establish one authoritative source for Veteran contact 
information, military service history, and Veteran status.
    I  Finalize the Congressionally mandated DoD-VA Interoperability 
requirements.

12. Transform Supply Chain.

  Breakthrough Outcome for 2016:

    I  Build an enterprise-wide integrated Medical-Surgical supply 
chain that leverages VA's scale to drive an increase in responsiveness 
and a reduction in operating costs. More than $150 million in cost 
avoidance will be redirected to priority Veteran programs.

    We are rigorously managing each of these ``breakthrough 
priorities'' by instituting a Department level scorecard, metrics, and 
tracking system. Each priority has an accountable and responsible 
official and a cross-functional, cross-Department team in support. Each 
team meets every other week in person with either the Secretary or 
Deputy Secretary to discuss progress, identify roadblocks, and problem 
solve solutions. This is a new VA-more transparent, collaborative, and 
respectful; less formal and bureaucratic; more execution and outcome-
focused; principles based, not rules-based.

                         Legislative Priorities

    The Department is grateful for your continuing support of Veterans 
and appreciates your efforts to pass legislation enabling VA to provide 
Veterans with the high-quality care they have earned and deserve. We 
have identified a number of necessary legislative items that require 
action by Congress in order to best serve Veterans going forward:

    1. Improve Care in the Community: We need your help, as discussed 
on many occasions, to help overhaul our Care in the Community programs. 
VA staff and subject matter experts have communicated regularly with 
congressional staff to discuss concepts and concerns as we shape the 
future plan and recommendations. We believe that together we can 
accomplish legislative changes to streamline Care in the Community 
programs before the end of this session of Congress.
    2. Flexible Budget Authority: We need flexible budget authority to 
avoid artificial restrictions that impede our delivery of care and 
benefits to Veterans. Currently, there are more than 70 line items in 
VA's budget that dedicate funds to a specific purpose without adequate 
flexibility to provide the best service to Veterans. These include 
limitations within the same general areas, such as health care funds 
that cannot be spent on health care needs. These restrictions limit 
VA's ability to deliver Veteran care and benefits based on demand, 
rather than specific funding lines. The 2017 Budget proposes language 
to provide VA with new authority to transfer up to two percent of the 
discretionary appropriations for fiscal year 2017 between any of VA's 
discretionary appropriations accounts. This new authority would give VA 
greater ability to address emerging needs and overcome artificial 
funding restrictions on providing Veterans' care and benefits.
    3. Support for the Purchased Health Care Streamlining and 
Modernization Act: This legislation would clarify VA's ability to 
contract with providers in the community on an individual basis, 
outside of Federal Acquisition Regulations (FAR), without forcing 
providers to meet excessive compliance burdens, while maintaining 
essential worker protections. The proposal allows this option only when 
care directly from VA or from a non-VA provider with a FAR-based 
agreement in place is not feasibly available. Already, we have seen 
certain nursing homes not renew their agreements with VA because of the 
excessive compliance burdens, and as a result, Veterans are forced to 
find new nursing home facilities for residence.
    VA further requests your support for our efforts to recruit and 
retain the very best clinical professionals. These include, for 
example, flexibility for the Federal work period requirement, which is 
inconsistent with private sector medicine, and special pay authority to 
help VA recruit and retain the best talent possible to lead our 
hospitals and health care networks.
    4. Special Legislation for VA's West Los Angeles Campus: VA has 
requested legislation to provide enhanced use leasing authority that is 
necessary to implement the Master Plan for our West Los Angeles Campus. 
That plan represents a significant and positive step for Veterans in 
the Greater West Los Angeles area, especially those who are most in 
need. We appreciate the Committee's hearing in December 2015 on 
legislation to implement that Master Plan, and VA urges your support 
for expedited consideration of this bill to secure enactment of it in 
this session of Congress. Enactment of the legislation will allow us to 
move forward and get positive results for the area's Veterans after 
years of debate in the community and court action. This bill would 
reflect the settlement of that litigation, and truly be a win-win for 
Veterans and the community. I believe this is a game-changing piece of 
legislation as it highlights the opportunities that are possible when 
VA works in partnership with the community.
    5. Overhaul the Claims Appeals Process: As mentioned earlier, VA 
needs legislation that sets out structural reforms that will allow VBA 
and the Board to provide Veterans with the timely, fair, and quality 
appeals decisions they deserve thereby addressing the growing inventory 
of appeals.

    Lastly, let me again remind everyone that the vast majority of VA 
employees are hard workers who do the right thing for Veterans every 
day. However, we need your assistance in supporting the cultural change 
we are trying to drive. We are working to change the culture of VA from 
one of rules, fear, and reprisals to one of principles, hope, and 
gratitude. We need all stakeholders in this transformation to embrace 
this cultural transformation, including Congress. In fact, I think 
Congress, above all, recognizes the policy window we have at hand and 
must have the courage to make the type of changes it is asking VA and 
our employees to make. Congress can only put Veterans first by caring 
for those who serve Veterans.
    Our dedicated VA employees, if given the right tools, training, and 
support, can and go out of their way to provide the best care possible 
to our Veterans and their families.

                                Closing

    VA exists to serve Veterans. We have spent the last year and a half 
working to find new and better ways to provide high quality care and 
administer benefits effectively and efficiently through responsible use 
of taxpayer dollars. We will continue to face enormous challenges, and 
this budget request will provide the resources needed to continue the 
transformation of this Department.
    This budget and associated legislative proposals will allow us to 
streamline care for Veterans and improve access by addressing existing 
gaps, develop a simplified appeals process, further the progress we 
have made to eliminate the VBA claims backlog and end Veteran 
homelessness, and improve our cyber security posture to protect Veteran 
and employee data. It will also allow us to continue implementing MyVA 
to guide overall improvements to VA's culture, processes, and 
capabilities.
    I have pledged that VA will ensure that the funds Congress 
appropriates to VA will be used to improve both the quality of life for 
Veterans and the efficiency of our operations. I am proud to continue 
this work and recognize there is much left to be done. We have made 
great strides and are grateful for the support of Congress through this 
transformation.
    Thank you for the opportunity to appear before you today and for 
your continued steadfast support of Veterans. We look forward to your 
questions.

                                 
                       Statements For The Record

                    GOVERNMENT ACCOUNTABILITY OFFICE
    Statement for the Record by Randall B. Williamson, Director, Health 
Care
    Letter
    Chairman Miller, Ranking Member Brown, and Members of the 
Committee,
    I am pleased to submit this statement on preliminary observations 
from our ongoing work examining the Department of Veterans Affairs' 
(VA) projected funding gap in its fiscal year 2015 medical services 
appropriation account. As you know, VA's Veterans Health Administration 
operates one of the largest health care delivery systems in the nation-
serving about 6.6 million patients-and had total budgetary resources of 
nearly $51 billion for medical services in fiscal year 2015. In June 
2015, VA requested additional amounts from Congress because it 
projected a funding gap of about $3 billion in its medical services 
appropriation account. \1\ On July 31, 2015, the VA Budget and Choice 
Improvement Act provided VA temporary authority to use up to $3.3 
billion from the Veterans Choice Program appropriation for obligations 
incurred for other specified medical services, starting May 1, 2015 and 
ending October 1, 2015, to address its fiscal year 2015 projected 
funding gap. \2\ The Veterans Choice Program, which was established by 
statute in 2014, generally allows veterans to obtain care from a 
network of providers when their local VA medical centers (VAMC) cannot 
provide the services due to long wait times or the distance from 
veterans' homes. \3\
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    \1\ In this statement, the projected funding gap refers to the 
period in fiscal year 2015 when VA's obligations for medical services 
were projected to exceed its available budgetary authority for that 
purpose for that year. The Antideficiency Act prohibits agencies from 
incurring obligations in excess of available budget authority. 31 
U.S.C. Sec.  1341(a). An obligation is defined as a ``definite 
commitment that creates a legal liability of the government for the 
payment of goods and services ordered or received, or a legal duty on 
the part of the United States that could mature into a legal liability 
by virtue of actions on the part of the other party beyond the control 
of the United States.'' GAO, A Glossary of Terms Used in the Federal 
Budget Process, GAO 05 734SP (Washington, D.C.: September 2005), p. 70. 
We did not determine whether an Antideficiency Act violation occurred, 
as such an evaluation was beyond the scope of our ongoing work.
    \2\ Pub. L. No. 114-41, Sec. Sec.  4001, 4004, 129 Stat. 443, 463-
464 (2015).
    \3\ To address concerns about long wait times for care, in 2014, 
the Veterans Access, Choice, and Accountability Act of 2014 was enacted 
to, among other things, establish the Veterans Choice Program. Pub. L. 
No. 113-146, Sec.  101,128 Stat. 1754, 1755-1765 (2014).
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    We and others have reported on past challenges VA has faced 
regarding the reliability, transparency, and consistency of its budget 
estimates for medical services used to support the President's budget 
request, as well as the agency's ability to accurately track 
obligations for medical services. For example, in February 2012, we 
reported that VA's estimated savings from operational improvements for 
providing medical services-used to support both the President's budget 
request for fiscal year 2012 and VA's advance appropriations request 
for fiscal year 2013-lacked analytical support or were flawed, raising 
questions regarding the reliability of the estimated savings. \4\ In 
addition, according to VA's 2014 Performance and Accountability Report, 
VA has financial system deficiencies and lacks an adequate process to 
validate its reported obligations. \5\ In light of these challenges, 
coupled with VA's fiscal year 2015 projected funding gap, members of 
Congress have questioned VA's ability to accurately estimate its 
budgetary needs for future years and track its obligations for medical 
services.
---------------------------------------------------------------------------
    \4\ See GAO, VA Health Care: Methodology for Estimating and Process 
for Tracking Savings Need Improvement, GAO 12 305 (Washington, D.C.: 
Feb. 27, 2012). Proposed savings included savings from operational 
improvements and management initiatives that are included in VA's 
budget justifications. The Veterans Health Care Budget Reform and 
Transparency Act of 2009 provided that VA's annual appropriations for 
health care also include advance appropriations that become available 1 
fiscal year after the fiscal year for which the appropriations act was 
enacted. Pub. L. No. 111-81, Sec.  3, 123 Stat. 2137, 2137-38 (2009), 
codified at 38 U.S.C. Sec.  117. The act provided for advance 
appropriations for VA's Medical Services, Medical Support and 
Compliance, and Medical Facilities appropriations accounts and directed 
VA to include with information it provides Congress in connection with 
the annual appropriations process detailed estimates of funds needed to 
provide its health care services for the fiscal year for which advance 
appropriations are to be provided.
    \5\ See VA, 2014 Performance and Accountability Report (Washington, 
D.C.: Nov. 12, 2014).
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    My statement today will discuss our preliminary observations on
    1. the activities or programs that accounted for VA's fiscal year 
2015 projected funding gap in its medical services appropriation 
account, and
    2.changes VA has made to prevent potential funding gaps in future 
years.
    My statement today is based on our ongoing work examining VA's 
fiscal year 2015 projected funding gap in its medical services 
appropriation account. To examine the activities or programs that 
accounted for this projected funding gap, we reviewed fiscal year 2015 
obligation data and documents provided by VA, including requests for 
VA's fiscal year 2015 and 2016 budgets; VA's requests to Congress for 
the authority to transfer funds between its appropriations; internal 
memos and communications; and documents related to the projection model 
used by VA to estimate the utilization of and associated costs for 
activities funded through its medical services appropriation account. 
We analyzed this information to examine the activities or programs in 
VA's medical services budget that accounted for the projected funding 
gap in fiscal year 2015, as well as the extent to which and reasons 
that each activity or program contributed to the projected funding gap. 
We also interviewed officials from VA and the Office of Management and 
Budget (OMB) to identify the steps taken to address the projected 
funding gap.
    To examine the changes VA has made or is planning to make to help 
prevent potential funding gaps in future years, we obtained and 
reviewed VA documents, including VA policy memoranda and internal 
reports, and interviewed VA officials. We analyzed this information to 
identify new or updated processes for projecting future budgetary needs 
and tracking obligations. We conducted a data reliability assessment of 
VA's fiscal year 2015 obligation data that we used, which included 
checks for missing values and outliers, and interviewed officials from 
the Office of Finance within the Veterans Health Administration, who 
are knowledgeable about the data. As a result of these steps, we 
determined that the data were sufficiently reliable for our objectives. 
We obtained the views of VA officials on the information provided in 
this statement and incorporated their comments, as appropriate.
    The work upon which this statement is based is being conducted in 
accordance with generally accepted government auditing standards.
    Background
    VA provides medical services to various veteran populations-
including an aging veteran population and a growing number of younger 
veterans returning from the military operations in Afghanistan and 
Iraq. VA operates approximately 170 VAMCs, 130 nursing homes, and 1,000 
outpatient sites of care. In general, veterans must enroll in VA health 
care to receive VA's medical benefits package-a set of services that 
includes a full range of hospital and outpatient services, prescription 
drugs, and long-term care services provided in veterans' own homes and 
in other locations in the community.
    The majority of veterans enrolled in the VA health care system 
receive care in VAMCs and community-based outpatient clinics, but VA 
may authorize care through community providers to meet the needs of the 
veterans it serves. For example, VA may provide care through its Care 
in the Community (CIC) program, such as when a VA facility is unable to 
provide certain specialty care services, like cardiology or 
orthopedics. \6\ CIC services must generally be authorized by a VAMC 
provider prior to a veteran receiving care. In addition to the CIC 
program, VA may also provide care to veterans through the Veterans 
Choice Program, which was established through the Veterans Access, 
Choice, and Accountability Act of 2014 (Choice Act), enacted on August 
7, 2014. \7\ Implemented in fiscal year 2015, the program generally 
provides veterans with access to care by non-VA providers when a VA 
facility cannot provide an appointment within 30 days or when veterans 
reside more than 40 miles from the nearest VA facility. The Veterans 
Choice Program is primarily administered using contractors, who, among 
other things, are responsible for establishing nationwide provider 
networks and scheduling appointments for veterans. The Choice Act 
created a separate account known as the Veterans Choice Fund, which 
cannot be used to pay for VA obligations incurred for any other 
program, such as CIC, without legislative action. \8\ The Choice Act 
appropriated $10 billion to be deposited in the Veterans Choice Fund. 
Amounts deposited in the Veterans Choice Fund are available until 
expended and are available for activities authorized under the Veterans 
Choice Program. However, the Veterans Choice Program activities are 
only authorized through fiscal year 2017 or until the funds in the 
Veterans Choice Fund are exhausted, whichever occurs first. \9\
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    \6\ VA has purchased health care services from community providers 
since as early as 1945. Before 2015, VA referred to its CIC program as 
``non-VA medical care'' or ``fee basis care.''
    \7\ Pub. L. No.113-146, 128 Stat. 1754 (2014).
    \8\ Pub. L. No.113-146, Sec.  802, 128 Stat. 1754, 1802-1803 
(2014). It was outside the scope of our ongoing review to evaluate VA's 
determinations to authorize an episode of care by non-VA providers 
under the Veterans Choice Program as opposed to CIC.
    \9\ Pub. L. No.113-146, Sec.  802(d), 128 Stat. 1754, 1802 (2014).
---------------------------------------------------------------------------
    As part of the President's request for funding to provide medical 
services to veterans, VA develops an annual budget estimate detailing 
the amount of services it expects to provide as well as the estimated 
cost of providing those services. VA uses the Enrollee Health Care 
Projection Model (EHCPM) to develop most of the agency's estimates of 
the budgetary needs to meet the expected demand for VA medical 
services. \10\ Like many other agencies, VA begins to develop these 
estimates approximately 18 months before the start of the fiscal year 
for which funds are provided. Different from many agencies, VA's 
Veterans Health Administration receives advance appropriations for 
health care in addition to annual appropriations. VA's EHCPM makes 
these projections 3 or 4 years into the future for budget purposes 
based on data from the most recent fiscal year. In 2012, for example, 
VA used actual fiscal year 2011 data to develop the budget estimate for 
fiscal year 2014 and the advance appropriation estimate for fiscal year 
2015. Similarly, in 2013, VA used actual fiscal year 2012 data to 
update the budget estimate for fiscal year 2015 and develop the advance 
appropriation estimate for fiscal year 2016. Given this process, VA's 
budget estimates are prepared in the context of uncertainties about the 
future-not only about program needs, but also about future economic 
conditions, presidential policies, and congressional actions that may 
affect the funding needs in the year for which the estimate is made-
which is similar to budgeting practices of other federal agencies. 
Further, VA's budget estimates are typically revised during the budget 
formulation process to incorporate legislative and department 
priorities as well as in response to successively higher level of 
reviews in VA and OMB.
---------------------------------------------------------------------------
    \10\ The EHCPM's estimates are based on three basic components: the 
projected number of veterans who will be enrolled in VA health care, 
the projected quantity of health care services enrollees are expected 
to use, and the projected unit cost of providing these services. Unit 
costs are the costs to VA of providing a unit of service, such as a 30-
day supply of a prescription or a day of care at a medical facility.
---------------------------------------------------------------------------
    Each year, Congress provides funding for VA health care primarily 
through the following appropriation accounts:
      Medical Services, which funds, among other things, health 
care services provided to eligible veterans and beneficiaries in VA's 
medical centers, outpatient clinic facilities, contract hospitals, 
state homes, and outpatient programs on a fee basis. \11\ The CIC 
program is funded through this appropriation account.
---------------------------------------------------------------------------
    \11\ In this statement, when we refer to medical services provided 
by VA, we are referring only to the services funded through its Medical 
Services appropriation account, which is where VA projected its fiscal 
year 2015 funding gap.
---------------------------------------------------------------------------
      Medical Support and Compliance, which funds, among other 
things, the administration of the medical, hospital, nursing home, 
domiciliary, construction, supply, and research activities authorized 
under VA's health care system.
      Medical Facilities, which funds, among other things, the 
operation and maintenance of the Veterans Health Administration's 
capital infrastructure, such as costs associated with nonrecurring 
maintenance, utilities, facility repair, laundry services, and 
groundskeeping. \12\
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    \12\ Nonrecurring maintenance is designed to correct, replace, 
upgrade, and modernize existing infrastructure and utility systems.

Higher-than-Expected Obligations for the CIC Program and Hepatitis C 
---------------------------------------------------------------------------
    Drugs Accounted for VA's Fiscal Year 2015 Projected Funding Gap

    Higher-than-Expected Obligations for the CIC Program Accounted for 
85 Percent of VA's Projected Fiscal Year 2015 Funding Gap

    Our preliminary work suggests that the higher-than-expected 
obligations identified by VA in April 2015 for VA's CIC program 
accounted for $2.34 billion (or 85 percent) of VA's projected funding 
gap of $2.75 billion in fiscal year 2015. \13\ These higher-than-
expected obligations for the CIC program were driven by an increase in 
utilization of VA medical services across VA, reflecting, in part, VA's 
efforts to improve access to care after public disclosure of long wait 
times at VAMCs. VA officials expected that the Veterans Choice Program 
would absorb much of the increased demand from veterans for health care 
services delivered by non-VA providers. However, veterans' utilization 
of Veterans Choice Program services was much lower than expected in 
fiscal year 2015. VA had estimated that obligations for the Veterans 
Choice Program in fiscal year 2015 would be $3.2 billion, but actual 
obligations totaled only $413 million. Instead, VA provided a greater 
amount of services through the CIC program, resulting in total 
obligations of $10.1 billion, which VA officials stated were much 
higher than expected for that program in fiscal year 2015. \14\ 
According to VA officials, the lower-than-expected utilization of the 
Veterans Choice Program in fiscal year 2015 was due, in part, to 
administrative weaknesses, such as provider networks that had not been 
fully established, that slowed enrollment in the program and that VAMC 
staff lacked guidance on when to refer veterans to the program.
---------------------------------------------------------------------------
    \13\ At the end of the fiscal year, VA determined that the 
projected funding gap was lower than it had initially projected, 
because VA reduced or halted funding for non-essential projects to 
mitigate an initial $3 billion projection.
    \14\ The total obligations of $10.1 billion in fiscal year 2015 for 
the CIC program do not include the $413 million in obligations for the 
Veterans Choice Program in that year.
---------------------------------------------------------------------------
    The unexpected increase in CIC obligations in fiscal year 2015 
exposed weaknesses in VA's ability to estimate costs for CIC services 
and track associated obligations. While VA officials first became 
concerned that CIC obligations might be significantly higher than 
projected in January 2015, they did not determine that VA faced a 
projected funding gap until April 2015-6 months into the fiscal year. 
They made this determination after they compared authorizations in the 
Fee Basis Claims System (FBCS)-VA's system for recording CIC 
authorizations and estimating costs for this care-with obligations in 
the Financial Management System (FMS)-the centralized financial 
management system VA uses to track all of its obligations, including 
those for medical services. In its 2015 Agency Financial Report (AFR), 
VA's independent public auditor identified the following issues as 
contributing to a material weakness in estimating costs for CIC 
services and tracking CIC obligations: \15\
---------------------------------------------------------------------------
    \15\ See VA, 2015 Agency Financial Report (Washington, D.C.: Nov. 
16, 2015).
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      VAMCs individually estimate costs for each CIC 
authorization and record these estimates in FBCS. This approach leads 
to inconsistencies, because each VAMC may use different methodologies 
to estimate the costs they record. \16\ Having more accurate cost 
estimates for CIC authorizations is important to help ensure that VA is 
aware of the amount of money it must obligate for CIC services.
---------------------------------------------------------------------------
    \16\ A recent VA Office of Inspector General report found that the 
methods used to calculate estimated costs included Medicare rates, 
historical costs, and an optional cost estimation tool provided by the 
Chief Business Office within the Veterans Health Administration. This 
office is responsible for developing administrative processes, policy, 
regulations, and directives associated with the CIC program. The 
accuracy of estimates varied widely among these methodologies. See VA 
Office of Inspector General, Audit of the Veterans Health 
Administration's Non-VA Medical Care Obligations (Washington, D.C.: 
Jan. 12, 2015).
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      VAMCs do not consistently adjust estimated costs 
associated with authorizations for CIC services in a timely manner to 
ensure greater accuracy, and they do not perform a ``look-back'' 
analysis of historical obligations to validate the reasonableness of 
estimated costs. Furthermore, centralized, consolidated, and consistent 
monitoring of CIC authorizations is not performed.
      FBCS is not fully integrated with VA's systems for 
recording and tracking the department's obligations. Notably, the 
estimated costs of CIC authorizations recorded in FBCS are not 
automatically transmitted to VA's Integrated Funds Distribution, 
Control Point Activity, Accounting, and Procurement (IFCAP) system, a 
procurement and accounting system used to send budgetary information, 
such as obligations, to FMS. According to VA officials, because FBCS 
and IFCAP are not integrated, at the beginning of each month, VAMC 
staff must record in IFCAP estimated obligations for outpatient CIC 
services, and they use historical obligations for this purpose. \17\ 
Depending on the VAMC, these estimated obligations may be entered as a 
single lump sum covering all outpatient care or as separate estimated 
obligations for each category of outpatient care, such as radiology. 
Regardless of how they are recorded, the estimated obligations recorded 
in IFCAP are often inconsistent with the estimated costs of CIC 
authorizations recorded in FBCS. In fiscal year 2015, the estimated 
obligations that VAMCs recorded in IFCAP were significantly lower than 
the estimated costs of outpatient CIC authorizations recorded in FBCS. 
VA officials told us that they did not determine a projected funding 
gap until April 2015, because they did not complete their analysis of 
comparing estimated obligations with estimated costs until then.
---------------------------------------------------------------------------
    \17\ In contrast, obligations corresponding to inpatient CIC 
authorizations are automatically recorded into IFCAP when the 
authorization is entered into FBCS. Officials told us that the high 
volume of outpatient CIC authorizations compared to the relatively 
lower volume of inpatient CIC authorizations, among other issues, makes 
it impossible to automate the process for recording outpatient CIC 
obligations using the existing systems.
---------------------------------------------------------------------------
    In addition, the Chief Business Office (CBO) within the Veterans 
Health Administration, which is responsible for developing 
administrative processes, policy, regulations, and directives 
associated with the CIC program, had not developed and implemented 
standardized and comprehensive policies for VAMCs, regional networks, 
and the office itself to follow when estimating costs for CIC 
authorizations and for monitoring authorizations and associated 
obligations. \18\ This contributed to the material weaknesses the 
independent public auditor identified in the AFR. The AFR and VA 
officials we interviewed stated that because CIC was consolidated under 
CBO in fiscal year 2015 pursuant to the Choice Act, CBO did not have 
adequate time to implement efficient and effective procedures for 
monitoring CIC obligations.
---------------------------------------------------------------------------
    \18\ VA's regional networks manage VAMCs within their network.
---------------------------------------------------------------------------
    To address the fiscal year 2015 projected funding gap, on July 31, 
2015, VA obtained temporary authority to use up to $3.3 billion in 
Veterans Choice Program funds for obligations incurred for medical 
services from non-VA providers, whether authorized under the Veterans 
Choice Program or CIC, starting May 1, 2015 and ending October 1, 2015. 
\19\ Based on our preliminary work, Table 1 shows the sequence of 
events that led to VA's request for and approval of additional budget 
authority for fiscal year 2015.
---------------------------------------------------------------------------
    \19\ Of this amount, not more than $500 million could be used to 
pay for drug expenses relating to the treatment of hepatitis C. Pub. L. 
No. 114-41, Sec.  4004, 129 Stat. 443, 463 (2015).

   Table 1: Timeline of Actions Taken to Address the Department of Veterans Affairs' (VA) Higher-than-Expected
                     Obligations for Care in the Community (CIC) Program in Fiscal Year 2015
----------------------------------------------------------------------------------------------------------------
                          Date                                                Action taken
----------------------------------------------------------------------------------------------------------------
January 2015                                           VA officials stated that they first became concerned that
                                                             CIC obligations might be significantly higher than
                                                        projected. Officials discovered that authorizations for
                                                         CIC, which are recorded in the Fee Basis Claims System
                                                       (FBCS), had increased between 30 and 40 percent compared
                                                        to the same period in the prior year, while obligations
                                                         recorded in the Integrated Funds Distribution, Control
                                                            Point Activity, Accounting, and Procurement (IFCAP)
                                                       system and transmitted to the Financial Management System
                                                                   (FMS) had not increased correspondingly. (a)
January - April 2015                                            VA officials told us that, upon discovering the
                                                         discrepancy between authorizations and obligations, VA
                                                                undertook efforts to determine the cause of the
                                                       discrepancy by comparing its authorizations in FBCS with
                                                       obligations in FMS. VA officials stated that this process
                                                            involved analyzing millions of transactions and was
                                                       complicated by the lack of interoperability between FBCS
                                                                                                       and FMS.
April 2015                                                    VA officials determined that CIC obligations were
                                                             underreported in FMS, were projected to exceed the
                                                       program's budgetary resources as currently allotted, and
                                                        estimated this would result in a projected funding gap.
                                                                                                            (b)
May 2015                                                   VA explored whether it had other budgetary resources
                                                             available to address its projected funding gap and
                                                          reduced or halted funding for non-essential projects.
May - June 2015                                         Officials stated that VA asked the Office of Management
                                                       and Budget whether unobligated balances from prior years
                                                       in other appropriation accounts could be used to address
                                                       the projected funding gap. VA was informed that this was
                                                                                                  not possible.
June 2015                                               VA notified the Senate and House Committees on Veterans
                                                       Affairs of its projected funding gap of about $3 billion-
                                                        of which it attributed $2.5 billion to its CIC program-
                                                       and requested temporary authority to use Veterans Choice
                                                        Program funds for other purposes, specifically to cover
                                                             the projected funding gap in VA's medical services
                                                                                     appropriation account. (c)
July 2015                                              VA obtained temporary authority to use up to $3.3 billion
                                                       in Veterans Choice Program funding to cover the projected
                                                                                                   funding gap.
September 30, 2015                                        At the end of the fiscal year, VA determined that its
                                                            projected funding gap was $2.75 billion-of which VA
                                                       attributed $2.34 billion to its CIC program. This amount
                                                          was lower than VA had initially projected, because VA
                                                          reduced or halted funding for non-essential projects.
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis based on VA documentation and interviews. ? GAO-16-374T.
(a) VA medical centers (VAMC) use FBCS to record CIC authorizations and estimate costs for this care. IFCAP is a
  decentralized procurement, funds control, and front-end accounting system. IFCAP transmits obligations to VA's
  FMS. VA uses FMS to track all of its obligations, including those for medical services.
(b) According to VA officials, VAMCs record obligations for outpatient CIC in IFCAP monthly, using historical
  obligations in each category of care, such as radiology. In contrast, obligations associated with inpatient
  CIC are automatically transmitted to IFCAP at the time the care is authorized in FBCS.
(c) In June 2015, VA officials provided the House Committee on Veterans Affairs with a spreadsheet outlining its
  expected obligations for CIC through the end of fiscal year 2015 compared to the amount budgeted for CIC at
  the beginning of the fiscal year. The amount budgeted for CIC, as reported to the committee, did not match the
  amount allocated for CIC in VA's budget justification, which was presented to Congress as part of the
  President's budget request in February 2015. VA officials told us that the amounts did not match because VA
  had made changes in how it defined its CIC program between the time the budget justification was developed and
  the beginning of fiscal year 2015, including reorganizing certain programs as a result of the Veterans Access,
  Choice, and Accountability Act of 2014 under the Chief Business Office, which is responsible for developing
  administrative processes, policy, regulations, and directives associated with the CIC program. VA officials
  were unable to fully reconcile the difference between the two amounts.


Unanticipated Obligations for Hepatitis C Drugs Contributed to the 
    Remaining Portion of VA's Projected Fiscal Year 2015 Funding Gap

    Our preliminary work also suggests that unexpected obligations for 
new hepatitis C drugs accounted for $0.41 billion of VA's projected 
funding gap of $2.75 billion in fiscal year 2015. \20\ Although VA 
estimated that obligations in this category would be $0.7 billion that 
year, actual obligations totaled about $1.2 billion.
---------------------------------------------------------------------------
    \20\ In addition, VA faced unanticipated construction costs 
totaling $875 million for the new Aurora, Colorado VAMC. VA 
reprogrammed funds in its medical services account, and with statutory 
authority, transferred funds from other VA appropriation accounts to 
cover these unanticipated construction costs.
---------------------------------------------------------------------------
    VA officials told us that VA did not anticipate in its budget the 
obligations for new hepatitis C drugs -which help cure the disease-
because the drugs were not approved by the Food and Drug Administration 
until fiscal year 2014, after VA had already developed its budget 
estimate for fiscal year 2015. The new drugs costs between $25,000 and 
$124,000 per treatment regimen, and according to VA officials demand 
for the treatment was high. \21\ Officials told us that about 30,000 
veterans received these drugs in fiscal year 2015.
---------------------------------------------------------------------------
    \21\ VA officials told us that they were not aware of the cost of 
these drugs until after their approval.
---------------------------------------------------------------------------
    In October 2014, VA reprogrammed $0.7 billion within its medical 
services appropriation account to cover projected obligations for the 
new hepatitis C drugs, after VA became aware of the drugs' approval. 
However, in January 2015, VA officials recognized that obligations for 
the new hepatitis C drugs would be significantly higher by year end 
than they expected. VA officials told us that they assessed next steps 
and then limited access to the drugs to those veterans with the most 
severe cases of hepatitis C. In June 2015, VA requested statutory 
authority to transfer funds dedicated to the Veterans Choice Program to 
VA's medical services appropriation account to cover the projected 
funding gap.

VA has Taken Steps to Better Track Obligations and Project Health Care 
    Utilization, but Systems Deficiencies and Budgeting Uncertainties 
    Remain

    VA Has Taken Steps to Better Track Obligations, but Deficiencies 
Remain in the Systems for Tracking Obligations
    Our preliminary work indicates that VA has developed new processes 
to prevent funding gaps for fiscal year 2016 and future years by 
improving its ability to track obligations for CIC services and 
hepatitis C drugs.
      In August 2015, VA issued a standard operating procedure 
to all VAMCs for recording estimated costs for inpatient and outpatient 
CIC in FBCS. The procedure, among other things, stipulates that VAMCs 
are to base estimated costs on historical cost data provided by VA. In 
addition, VA developed a software patch-released in December 2015 to 
all VAMCs-that automatically generates estimated costs for CIC 
authorizations, thereby eliminating the need for VAMC staff to 
individually estimate costs and record them in FBCS. According to VA 
officials, these changes should result in more accurate estimated costs 
for CIC authorizations. However, VA officials told us that accurately 
estimating the cost of CIC authorizations is challenging because of 
several unknown factors, such as the number of times a veteran may seek 
treatment for a recurring condition. \22\
---------------------------------------------------------------------------
    \22\ A single authorization may allow for multiple episodes of 
care, such as up to 10 visits to a physical therapist. Alternatively, a 
veteran may choose not to seek the care that was authorized.
---------------------------------------------------------------------------
      In November 2015, VA allocated funds for CIC and 
hepatitis C drugs to each VAMC. \23\ In addition, VA officials told us 
that to identify VAMCs that may be at risk for exhausting their funds 
before the end of the fiscal year, VA began tracking VAMCs' obligations 
for CIC and hepatitis C drugs through monthly reports. Officials from 
the Office of Finance within the Veterans Health Administration told us 
that once a VAMC had obligated its CIC and hepatitis C drug funds, it 
would have to request additional funds from VA. VA would, in turn, 
evaluate the validity of a VAMC's request and determine whether 
additional funds may be made available. This practice could limit 
veterans' access to CIC services or hepatitis C drugs in some 
locations. Officials told us that these steps are intended to reduce 
the risk of VAMCs obligating more funds than VA's budgetary resources 
allow.
---------------------------------------------------------------------------
    \23\ VA officials told us that, after VA received its fiscal year 
2016 appropriations in December 2015, VA increased the funds allocated 
to VAMCs.
---------------------------------------------------------------------------
      In November 2015, VA also issued a policy requiring VAMCs 
to identify and report on potentially inaccurate estimated costs for 
CIC authorizations recorded in FBCS and any discrepancies between 
estimated costs for CIC authorizations recorded in FBCS and the amount 
of estimated obligations recorded in FMS. According to VA officials, 
these discrepancies may signal a risk of VA under obligating funds for 
CIC, leaving VA potentially unable to pay for authorized care. VA's 
policy also requires VAMCs to address concerns identified by VAMCs in 
these reports-such as adjusting unreasonably low estimated costs for 
CIC authorizations and unreasonably low estimated obligations, to make 
the estimates more accurate. Under VA's new policy, network directors 
are required to certify monthly that the reports have been reviewed and 
concerns addressed.
    VA officials told us that these new processes are necessary to help 
prevent future funding gaps because of the deficiencies in VA's systems 
for tracking obligations, which we have described previously.
    Officials also told us that VA is exploring options for replacing 
IFCAP and FMS, which officials describe as antiquated systems based on 
outdated technology, and the department has developed a rough timeline 
and estimate of budgetary needs to make these changes. Officials told 
us that the timeline and cost estimate would be refined once concrete 
plans for replacing IFCAP and FMS are developed. Officials told us that 
replacing IFCAP and FMS is challenging due to the scope of the project 
and the requirement that the replacement system interface with various 
VA legacy systems, such as the Veterans Health Information Systems and 
Technology Architecture, VA's system containing veterans' electronic 
health records. However, as we have previously reported, VA has made 
previous attempts to update IFCAP and FMS that were unsuccessful. In 
October 2009, we attributed these failures to the lack of a reliable 
implementation schedule and cost estimates, among other factors, and 
made several recommendations aimed at improving program management. 
\24\
---------------------------------------------------------------------------
    \24\ Previous unsuccessful attempts to update FMS include the Core 
Financial and Logistics System in 2004. See GAO, Information 
Technology: Actions Needed to Fully Establish Program Management 
Capability for VA's Financial and Logistics Initiative, GAO 10 40 
(Washington, D.C.: Oct. 26, 2009).

VA is Using More Recent Data to More Accurately Project Future Health 
---------------------------------------------------------------------------
    Care Utilization, but Budgetary Uncertainties Remain

    Our preliminary work indicates that VA updated its EHCPM to include 
data from the first 6 months of fiscal year 2015, reflecting increased 
health care utilization in that year, which VA officials told us will 
inform VA's budget estimate for fiscal year 2017 and advance 
appropriations request for fiscal year 2018. \25\ Without this change, 
VA would have used actual data from fiscal year 2014 to make its budget 
estimate and inform the President's budget request for fiscal years 
2017 and 2018.
---------------------------------------------------------------------------
    \25\ The President's Budget request for fiscal year 2016 and VA's 
fiscal year 2016 congressional budget justification had been submitted 
by the time officials realized that VA faced a projected funding gap 
for its medical services appropriation account in fiscal year 2015.
---------------------------------------------------------------------------
    However, as we have previously reported, while the EHCPM projection 
informs most of VA's budget estimate, the amount of the estimate is 
determined by several factors, including the President's priorities. 
Historically, the final budget estimate for VA has consistently been 
lower than the amount projected for modeled services. VA officials told 
us that they expect any difference between the fiscal year 2017 budget 
estimate and the amount projected by VA's model to be made up by 
greater utilization of the Veterans Choice Program. However, VA's 
authority to use Veterans Choice Program funds is only available 
through fiscal year 2017 or until the funds are exhausted, whichever 
occurs first.
    VA has also taken steps to help increase utilization of the 
Veterans Choice Program. VA issued policy memoranda to VAMCs in May and 
October 2015, requiring them to refer veterans to the program if timely 
care cannot be delivered by a VAMC, rather than authorizing care 
through the CIC program. With statutory authority, VA has also loosened 
restrictions on veterans' use of the Veterans Choice Program, 
eliminating the requirement that veterans must be enrolled in the VA 
health care system by August 2014 in order to receive care through the 
program. \26\ While data from November 2015 indicate that utilization 
of care under the Veterans Choice Program has increased, VA officials 
expressed concerns that utilization would not reach the levels 
projected for fiscal year 2016 because of continuing weaknesses in 
implementing the program. For example, in November 2015, VA's Office of 
Compliance and Business Integrity identified extensive noncompliance 
among VAMCs with VA's policies for implementing the Veterans Choice 
Program and recommended training for VAMC staff responsible for 
implementing the program. \27\ The office also recommended that VA 
establish internal controls to ensure compliance with VA's policies. As 
of January 2016, VA had not completed a plan for establishing these 
internal controls.
---------------------------------------------------------------------------
    \26\ Pub. L. No. 114-41, Sec.  4005(b), 129 Stat. 443, 464 (2015).
    \27\ This office provides internal oversight of the VAMCs' revenue 
and CIC operations.
---------------------------------------------------------------------------
    Like other health care payers, VA faces uncertainties estimating 
the cost of emerging health care treatments-such as costly drugs to 
treat chronic diseases affecting veterans. VA, like other federal 
agencies, prepares its budget estimate 18 months in advance of the 
start of the fiscal year for which funds are provided. At the time VA 
develops its budget estimate, it may not have enough information to 
estimate the likely costs for health care services or these treatments 
with reasonable accuracy. However, by establishing appropriate internal 
controls, VA can help reduce the risks associated with the weaknesses 
in its budgetary projections and monitoring.
    Chairman Miller, Ranking Member Brown, and Members of the 
Committee, this concludes my statement for the record.

GAO Contacts & Staff Acknowledgments

    If you or your staff members have any questions concerning this 
statement, please contact Randall B. Williamson, Director, Health Care, 
at 202-512-7114 or [email protected]. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this statement. GAO staff who made key contributions to this 
statement include Rashmi Agarwal, Assistant Director; Luke Baron; 
Krister Friday; Jacquelyn Hamilton; and Michael Zose.

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                             GAO Highlights
    Highlights of GAO-16-374T, a statement for the record to the 
Committee on Veterans Affairs, House of Representatives

Why GAO Did This Study

    VA projected a funding gap in its fiscal year 2015 medical services 
appropriation account and obtained temporary authority to use up to 
$3.3 billion in Veterans Choice Program funding to close this gap. GAO 
was asked to examine VA's fiscal year 2015 projected funding gap and 
changes VA has made to help prevent potential funding gaps in future 
years.
    This statement is based on GAO's ongoing work and provides 
preliminary observations on (1) the activities or programs that 
accounted for VA's fiscal year 2015 projected funding gap in its 
medical services appropriation account and (2) changes VA has made to 
prevent potential funding gaps in future years. GAO reviewed data VA 
provided on its obligations and related documents to determine what 
activities accounted for the projected funding gap in its fiscal year 
2015 medical services appropriation account, as well as the factors 
that contributed to the projected funding gap. GAO interviewed VA and 
Office of Management and Budget officials to identify the steps taken 
to address the projected funding gap. GAO also examined changes VA made 
to better track obligations and project future budgetary needs.
    GAO shared the information provided in this statement with VA and 
incorporated its comments as appropriate.

                        VA'S HEALTH CARE BUDGET
Preliminary Observations on Efforts to Improve Tracking of Obligations 
                       and Projected Utilization
What GAO Found

    GAO's ongoing work indicates that two areas accounted for the 
Department of Veterans Affairs' (VA) fiscal year 2015 projected funding 
gap of $2.75 billion. Specifically,

      Higher-than-expected obligations for VA's longstanding 
care in the community (CIC) program-which allows veterans to obtain 
care from providers outside of VA facilities-accounted for $2.34 
billion or 85 percent of VA's projected funding gap. VA officials 
expected that the new Veterans Choice Program-which was implemented in 
fiscal year 2015 and also allows veterans to access care from non-VA 
providers under certain conditions-would absorb veterans' increased 
demand for care after public disclosure of long wait times. However, 
administrative weaknesses slowed enrollment into this new program. The 
unexpected increase in CIC obligations also exposed VA's weaknesses in 
estimating costs for CIC services and tracking associated obligations. 
VA officials did not determine that VA faced a projected funding gap 
until April 2015-6 months into the fiscal year, after they compared 
estimated authorizations with estimated obligations for CIC.
      Unanticipated obligations for hepatitis C drugs accounted 
for the remaining portion-$408 million-of VA's projected funding gap. 
VA did not anticipate in its budget the obligations for these costly, 
new drugs, which can help cure the disease, because the drugs did not 
gain approval from the Food and Drug Administration until fiscal year 
2014-after VA had already developed its budget estimate for fiscal year 
2015. VA officials told GAO that in fiscal year 2015 about 30,000 
veterans received these drugs, which cost between $25,000 and $124,000 
per treatment regimen.

    GAO's ongoing work indicates that VA has taken steps to better 
track obligations and project future healthcare utilization, but 
systems deficiencies and budgetary uncertainties remain. Specifically, 
GAO's preliminary results indicate that VA has taken the following 
steps:

      VA issued a standard operating procedure to help VA 
medical centers (VAMC) more accurately estimate the costs associated 
with authorizations for CIC.
      VA directed VAMCs to compare their estimated costs for 
CIC authorizations with estimated obligations for CIC on a monthly 
basis.
      VA allocated funds to each VAMC for CIC and hepatitis C 
drugs and began tracking VAMCs' obligations with monthly reports. 
Officials told GAO that once a VAMC has obligated its funds, it would 
have to request additional funds. VA would determine whether additional 
funds may be made available. These processes are necessary because 
continued deficiencies in VA's financial systems present challenges in 
tracking of obligations.
      VA updated the model it uses to inform most of its budget 
estimates for medical services. It now includes more recent data that 
reflect increased healthcare utilization among veterans in fiscal year 
2015. However, VA officials noted uncertainties remain about the 
forecasted utilization of the Veterans Choice Program and emerging 
health care treatments, which could affect the accuracy of the health 
care budget estimates.

                                 
                         THE INDEPENDENT BUDGET
             Budget Recommendations for FY 2017 and FY 2018

Introduction

    For 30 years, the co-authors of The Independent Budget-DAV 
(Disabled American Veterans), Paralyzed Veterans of America (PVA), and 
Veterans of Foreign Wars (VFW)-have presented our budget and policy 
recommendations to Congress and the Administration. Our recommendations 
are meant to inform Congress and the Administration of the needs of our 
members and all veterans and to offer substantive solutions to address 
the many health care and benefits challenges they face. This budget 
report serves as our benchmark for properly funding the Department of 
Veterans Affairs (VA) to ensure the delivery of timely, quality health 
care and accurate and appropriate benefits.
    The Independent Budget veterans' service organizations (IBVSOs) 
recognize that Congress and the Administration continue to face immense 
pressure to reduce federal spending. However, we believe that the ever-
growing demand for health care and benefits services provided by the VA 
certainly validates the continued need for sufficient funding. We 
understand that VA has fared better than most federal agencies in 
budget proposals and appropriations.
    In the past couple of years, as many federal agencies have faced 
reductions in funding, the Administration has continued to request 
increases to discretionary funding for VA. At the same time, Congress 
has continued to provide increases in appropriations dollars. However, 
the serious access problems in the health care system identified in 
2014 and the continued pressure being placed on the claims processing 
system raise serious questions about the resources being provided and 
how VA chooses to spend these resources. In fact, Deputy Secretary 
Gibson affirmed on multiple occasions that for too long VA has been 
``managing to budget, not to need.'' This is an unacceptable practice 
for an agency charged with meeting the needs of veterans who have 
served and sacrificed.
    The IBVSOs are jointly releasing this stand-alone report that 
focuses solely on the budget of VA and our projections for the VA's 
funding needs across all programs. This report is not meant to suggest 
that these are the absolute correct answers for funding these services. 
However, in submitting our recommendations the IBVSOs are attempting to 
produce an honest assessment of need that is not subject to the 
politics of federal budget development and negotiations that inevitably 
have led to continuous funding deficits.
    Our recommendations include funding for all discretionary programs 
for FY 2017 as well as advance appropriations recommendations for 
medical care accounts for FY 2018. Our recommendations reflect our 
concerns with obtaining adequate funding levels for the VA in light of 
the massive shortfall that the VA faced last summer. It affirms the 
need for added emphasis on properly staffing the health care system and 
building capacity, particularly in the spinal cord injury system of 
care that serves the largest single inpatient population of veterans. 
We hope that the House and Senate Committees on Veterans' Affairs as 
well as the Military Construction and Veterans' Affairs Appropriations 
Subcommittees will be guided by these estimates in making their 
decisions to ensure sufficient, timely, and predictable funding for VA.

                                               VA Accounts for FY 2017 and FY 2018 Advance Appropriations
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              FY 2017                                         FY 2018         FY 2018
                                                              FY 2016         Advance      FY 2017 Admin    FY 2017 IB        Advance         Advance
                                                           Appropriation      Approps         Revised                         Approps         Approps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Veterans Health Administration (VHA)
Medical Services                                              49,972,360      51,673,000      45,505,812      60,868,757      44,886,554      64,032,909
Medical Community Care                                                                         7,246,181                       9,409,118
Choice Program**                                               5,643,953                       5,673,190
Subtotal Medical Services                                     55,616,313      51,673,000      58,425,183      60,868,757      54,295,672      64,032,909
Medical Support and Compliance                                 6,144,000       6,524,000       6,524,000       6,222,894       6,654,480       6,314,266
Medical Facilities                                             5,020,132       5,074,000       5,723,000       5,742,036       5,434,880       6,683,603
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subtotal Medical Care, Discretionary                          66,780,445      63,271,000      70,672,183      72,833,687      66,385,032      77,030,778
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Medical Care Collections                                       3,515,171       3,299,954       3,558,307                       3,627,255
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Total, Medical Care Budget Authority (including               70,295,616      66,570,954      74,230,490      72,833,687      70,012,287      77,030,778
 Collections)
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Medical and Prosthetic Research                                  630,735                         663,366         665,000
Millions Veterans Program                                                                                         75,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Total, Veterans Health Administration                         70,926,351      66,570,954      74,893,856      73,573,687
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
General Operating Expenses (GOE)
Veterans Benefits Administration                               2,707,734                       2,826,160       3,056,353
General Administration                                           336,659                         417,959         345,623
Board of Veterans Appeals                                        109,884                         156,096         134,150
Total, GOE                                                     3,154,277                       3,400,215       3,536,126
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Departmental Admin/ Misc. Programs
Information Technology                                         4,133,363                       4,278,259       4,209,053
National Cemetery Administration                                 271,220                         286,193         274,942
Office of Inspector General                                      136,766                         160,106         138,440
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, Dept. Admin/ Misc. Programs                             4,541,349                       4,724,558       4,622,435
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Construction Programs
Construction, Major                                            1,243,800                         528,110       1,500,000
Construction, Minor                                              406,200                         372,069         749,000
Grants for State Extended Care Facilities                        120,000                          80,000         200,000
Grants for State Vets Cemeteries                                  46,000                          45,000          52,000
Total, Construction Programs                                   1,816,000                       1,025,179       2,501,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Other Discretionary                                              166,090                         201,000         168,000
Rescission to Joint Incentive Fund                               -30,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Total, Discretionary Budget Authority (Including Medical      80,574,067                      84,244,808      84,401,248
 Collections)
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                         Veterans Health Administration
                                               Total Medical Care
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
FY 2017 IB Recommendation                                                                          $72.8 billion
FY 2017 Enacted Advance Appropriations                                                             $63.3 billion
Medical Care Collections                                                                            $3.3 billion
Total Advance Appropriations                                                                       $66.6 billion
FY 2017 Revised Administration Request
**This amount includes approximately $3.6 billion in Medical Care
 Collections and nearly $5.6 billion in funding used under
 authorities of the Choice Act.
Total                                                                                              $74.2 billion
FY 2018 IB Advance Appropriations Recommendation                                                   $77.0 billion
FY 2018 Administration Advance Appropriations Request                                              $70.0 billion
Medical Care Collections                                                                            $3.6 billion
Total                                                                                              $73.6 billion
----------------------------------------------------------------------------------------------------------------

    The IBVSOs appreciate the fact that the Administration continues to 
present budget recommendations for the overall Medical Care accounts 
that address veterans' growing demand for health care services. 
Unfortunately, we believe the FY 2017 advance appropriation approved by 
Congress in the FY 2016 Consolidated and Further Continuing 
Appropriations Act is not sufficient to meet the full demand for 
services being placed on the system. For FY 2017, the IB recommends 
approximately $72.8 billion in total medical care funding. Congress 
recently approved only $66.6 billion for this account (including an 
assumption of approximately $3.3 billion in medical care collections).
    Of particular concern to the IBVSOs that VA continues to over-
project and underperform its medical care collections estimates. 
Overestimating medical care collections allows Congress to appropriate 
fewer discretionary dollars for the health care system. However, when 
VA fails to collect what VA originally estimated, it is left with 
insufficient funding to meet the actual demand by veterans. As long as 
this scenario continues, VA will find itself falling farther behind in 
its ability to care for enrolled veterans, the precise situation now 
occurring.
    Similarly, we are concerned that the baseline for FY 2016 was not 
appropriately adjusted in the previous continuing appropriations bill 
to offset the severe shortfall the VA experienced last year. The 
underfunded baseline will assuredly have a serious negative downstream 
effect on funding for FY 2017 and FY 2018. We believe that it will be 
critical moving forward for VA to adjust its baseline for total Medical 
Care need to account for the much greater demand for services.
    With these thoughts in mind, The Independent Budget also recommends 
approximately $77.0 billion for total Medical Care for FY 2018. This 
recommendation reflects the necessary adjustment to the baseline for 
all Medical Care program funding in the preceding fiscal years.

                                                Medical Services
                                           Appropriations for FY 2017
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
FY 2017 IB Recommendation                                                                          $60.9 billion
FY 2017 Revised Administration Request
Medical Services                                                                                   $45.5 billion
Medical Community Care (New Proposed Account)                                                       $7.2 billion
Section 801 and 802 Choice Act Funds                                                                $5.7 billion
Medical Care Collections                                                                            $3.6 billion
Total                                                                                              $58.4 billion
FY 2017 Enacted Advance Appropriations                                                             $51.7 billion
Medical Care Collections                                                                            $3.6 billion
Total                                                                                              $55.3 billion
----------------------------------------------------------------------------------------------------------------

    For FY 2017, The Independent Budget recommends $60.9 billion for 
Medical Services. This recommendation is a reflection of multiple 
components. These components include the following recommendations:

            Current Services Estimate...........$57,114,044,000
            Increase in Patient Workload...........$1,409,713,000
            Additional Medical Care Program Cost........$2,345,000,000
            Total FY 2016 Medical Services..........$60,868,757,000

    The current services estimate reflects the impact of projected 
uncontrollable inflation on the cost to provide services to veterans 
currently using the system. This estimate also assumes a 1.2 percent 
increase for pay and benefits across the board for all VA employees in 
FY 2017. The Administration recently announced an intention to provide 
a 1.6 percent comparability increase. The significant increase in our 
recommended funding also reflects an adjustment in the baseline for 
funding within the Medical Services account of approximately $2.85 
billion. The Independent Budget believes this adjustment is necessary 
in light of a more than $3 billion shortfall that the VA health care 
system experienced last summer. The fact that VA provided 7 million 
more appointments last year-both within VA facilities and in the 
community-is further evidence of the dramatic rise in demand. If the 
baseline from FY 2016 is not adjusted to better reflect the true demand 
VA is experiencing, we believe the VA will inevitably face a severe 
shortfall again this fiscal year and next.
    Our estimate of growth in patient workload is based on a projected 
increase of approximately 103,000 new unique patients. These patients 
include priority group 1*-8 veterans and covered non-veterans. We 
estimate the cost of these new unique patients to be approximately $1.2 
billion. The increase in patient workload also includes a projected 
increase of 53,150 new Operation Enduring Freedom and Operation Iraqi 
Freedom (OEF/OIF) enrollees, as well as Operation New Dawn (OND) 
veterans at a cost of approximately $215 million. The increase in 
utilization among OEF/OIF/OND veterans is supported by the average 
annual increase in new users through the third quarter of FY 2015.
    The Independent Budget believes that there are additional projected 
medical program funding needs for VA. Specifically, we believe there is 
real funding needed to address the array of long-term-care issues 
facing VA, including the shortfall in institutional capacity; critical 
resources to address the continually increasing demand for life-saving 
Hepatitis C treatments; to provide additional centralized prosthetics 
funding (based on actual expenditures and projections from the VA's 
Prosthetics and Sensory Aids Service); funding to expand and improve 
services for women veterans; as well as funding necessary to improve 
the Comprehensive Family Caregiver program. Similarly, VA must ensure 
that adequate funding is directed towards specialized services, to 
include the beds and staffing infrastructure for the spinal cord injury 
service which delivers lifetime care for a patient population that 
heavily relies on the VA health care system. Lack of commitment to 
these programs threatens the health and well-being of many of the most 
vulnerable populations of veterans.

Long-Term Services and Supports

    The Independent Budget recommends $285 million for FY 2017. This 
recommendation reflects the fact that there was a significant increase 
in the number of veterans receiving Long Term Services and Supports 
(LTSS) in 2015. Unfortunately, due to loss of authorities-specifically 
fee-care no longer being authorized, provider agreement authority not 
yet enacted, and the inability to use Choice funds for all but skilled 
nursing care-to purchase appropriate LTSS care particularly for home- 
and community-based care, we estimate an increase in the number of 
veterans using the more costly long-stay and short-stay nursing home 
care. This funding is particularly important to veterans with spinal 
cord injury/disease (SCI/D), as they tend to rely on inpatient LTSS 
that is far more complex than the average veteran. Unfortunately, SCI/D 
veterans are significantly underserved by VA's LTSS. We believe the 
Administration must demonstrate serious commitment to expanding 
capacity for long-term care for veterans with SCI/D.

Hepatitis C

    We also recommend $1.7 billion dedicated specifically to the goal 
of expanding treatment for veterans diagnosed with Hepatitis C. The VA 
previously projected a goal to treat 120,000 veterans with Hepatitis C 
between FY 2016 and FY 2018. In, FY 2017, VA is expected to treat as 
many as 50,000 veterans with a projected cost of approximately $1.7 
billion. This estimate also includes the assumption of a 10 percent 
cost reduction per veteran, which we believe the VA will be able to 
achieve through the introduction of newer and cheaper Hepatitis C 
medications, and if the VA renegotiates the price of current 
medications.

Prosthetics and Sensory Aids

    In order to meet the increase in demand for prosthetics, the IB 
recommends an additional $150 million. This increase in prosthetics 
funding reflects a similar increase in expenditures from FY 2015 to FY 
2016 and the expected continued growth in expenditures for FY 2017. 
With the development of new advanced prosthetics that will benefit 
veterans with the most catastrophic disabilities, such as loss of 
single or multiple limb functions, significant resources must be 
provided to support this advancement. Failure to do so will limit the 
options available to veterans with the greatest need.

Caregiver Support Program

    Our increased program cost recommendation also includes $120 
million (above the projected baseline of $605 million) for the 
Comprehensive Family Caregiver Program in FY 2017. The additional $120 
million for VA's Caregiver Program will provide for the steady rate of 
increase in the number of caregivers participating in the program, 
currently averaging between 350 and 400 per month. The amount 
recommended will also provide for a more robust number of Caregiver 
Support Coordinators to address issues regarding the program 
administration at local facilities. This will directly benefit an aging 
and severely disabled veteran population whose lives are significantly 
impacted by the availability of comprehensive VA Caregiver Support 
services.

Women Veterans

    The Medical Services appropriation should be supplemented with $90 
million designated for women's health care programs, in addition to 
those amounts already included in the FY 2017 baseline. These funds 
would be used to help the Veterans Health Administration deal with the 
continuing growth in ensuring coverage for gynecological, prenatal, and 
obstetric care, other gender-specific services, and for maintenance and 
repair of facilities hosting women's care to improve privacy and safety 
of these facilities. The new funds would also aid VHA in making its 
cultural transformation to embrace women veterans and welcome them to 
VA health care services, and provide means for VA to improve 
specialized mental health and readjustment services for women veterans.

Spinal Cord Injury/Disease Care

    The IBVSOs remain concern that adequate resources are not being 
directed towards the VA's largest inpatient system of care. The Spinal 
Cord Injury & Disease (SCI/D) continuum of care model for the lifetime 
treatment of veterans with SCI/D has evolved over a period of more than 
50 years. VA SCI/D care has been established in a unique ``Hub and 
Spokes'' model. If SCI/D centers are underfunded, and thus 
insufficiently staffed, spoke facilities (often secondary VA medical 
centers) are forced to care for veterans in need of types of complex, 
acute care that they are unprepared to provide. Like private sector 
non-specialized care, care at spoke facilities is insufficient to treat 
SCI/D-specific acute conditions (e.g. pressure ulcer debridement, 
complex urinary tract infection) because the spokes are only equipped 
to provide basic primary and preventative health care. Both Congress 
and VA must work together to ensure all VA SCI/D Centers have the right 
number of available operating beds and nurse staffing ratios to care 
for referred veterans, and revisit annual reporting requirements to 
measure capacity for VA SCI/D and other specialized care as previously 
required by Public Law 104-262.

                                       Advance Appropriations for FY 2018
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
FY 2018 IB Advance Appropriations Recommendation                                                   $64.0 billion
FY 2018 Administration Advance Appropriations Request
Medical Services                                                                                   $44.9 billion
Medical Community Care (New Proposed Account in FY17)                                               $9.4 billion
Medical Care Collections                                                                            $3.6 billion
Subtotal                                                                                           $57.9 billion
----------------------------------------------------------------------------------------------------------------

    The Independent Budget once again offers baseline projections for 
funding through advance appropriations for the Medical Care accounts 
for FY 2018. While the enactment of advance appropriations for VA 
medical care in 2009 helped to improve the predictability of funding 
requested by the Administration and approved by Congress, we have 
become increasingly concerned that sufficient corrections have not been 
made in recent years to adjust for new, unexpected demand for care.
    For FY 2018, The Independent Budget recommends approximately $64.0 
billion for Medical Services. Our Medical Services level includes the 
following recommendations:

            Current Services Estimate............$61,011,026,000
            Increase in Patient Workload............$1,351,883,000
            Additional Medical Care Program Cost.......$1,670,000,000
            Total FY 2017 Medical Services...........$64,032,909,000

    Our estimate of growth in patient workload is based on a projected 
increase of approximately 93,000 new patients. These new unique 
patients include priority group 1*-8 veterans and covered nonveterans. 
We estimate the cost of these new patients to be approximately $1.1 
billion. This recommendation also reflects an assumption that more 
veterans will be accessing the system as VA expands its capacity and 
services and we believe that reliance rates will increase as veterans 
examine their health care options as a part of the Choice program. The 
increase in patient workload also assumes a projected increase of 
49,500 new OEF/OIF and OND veterans, at a cost of approximately $207 
million.
    Last, as previously discussed, the IBVSOs believe that there are 
additional medical program funding needs for VA. The Independent Budget 
recommends $285 million directed toward VA long-term-care programs. In 
order to continue to provide the critically needed Hepatitis C 
treatments, we recommend $1 billion to treat 30,000 veterans. In order 
to meet the increase in demand for prosthetics, the IB recommends an 
additional $160 million. Our additional program cost recommendation 
includes continued investment of $125 million in the Comprehensive 
Family Caregiver program. Finally, we believe that VA should invest a 
minimum of $100 million as an advance appropriation in FY 2018 to 
expand and improve access to women veterans' health care programs.

                                         Medical Support and Compliance
 
 
 
FY 2017 IB Recommendation                                                                         $6.223 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Enacted Advance Appropriations                                                            $6.524 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Revised Administration Request                                                            $6.524 billion
----------------------------------------------------------------------------------------------------------------
 
FY 2018 IB Advance Appropriations Recommendation                                                  $6.314 billion
----------------------------------------------------------------------------------------------------------------
FY 2018 Administration Advance Appropriations Request                                             $6.654 billion
 

    For Medical Support and Compliance, The Independent Budget 
recommends $6.2 billion for FY 2017. Our projected increase reflects 
growth in current services based on the impact of inflation on the FY 
2016 appropriated level. Additionally, for FY 2018 The Independent 
Budget recommends $6.3 billion for Medical Support and Compliance. This 
amount also reflects an increase in current services from the FY 2017 
advance appropriations level.

                                               Medical Facilities
 
 
 
FY 2017 IB Recommendation                                                                         $5.742 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Enacted Advance Appropriations                                                            $5.074 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Revised Administration Request                                                            $5.723 billion
----------------------------------------------------------------------------------------------------------------
 
FY 2018 IB Advance Appropriations Recommendation                                                  $6.684 billion
----------------------------------------------------------------------------------------------------------------
FY 2018 Administration Advance Appropriations Request                                             $5.435 billion
 

    For Medical Facilities, The Independent Budget recommends $5.7 
billion for FY 2017, nearly $700 million more than the enacted advance 
appropriation from December 2015. Our Medical Facilities recommendation 
includes $1.35 billion for Non-Recurring Maintenance (NRM). The 
Administration's request over the past two budget cycles represented a 
wholly inadequate level for NRM funding, particularly in light of the 
actual expenditures that were outlined in the budget justification. 
While VA has actually spent on average approximately $1.3 billion 
yearly for NRM, the Administration has requested only $460 million for 
NRM. This request level is clearly insufficient. This decision means 
that VA is forced to divert funds programmed for other purposes to meet 
this need. Additionally, our recommendation includes $692 million for 
operating and capital leases.
    The Independent Budget recommends approximately $6.7 billion for 
Medical Facilities for FY 2018. Our FY 2018 advance appropriation 
recommendation also includes $1.35 billion for NRM. Last year the 
Administration's recommendation for NRM reflected a projection that 
would place the long-term viability of the health care system in 
serious jeopardy. This deficit must be addressed.

                                         Medical and Prosthetic Research
 
 
 
FY 2017 IB Recommendation                                                                           $665 million
----------------------------------------------------------------------------------------------------------------
Million Veteran Program                                                                              $75 million
----------------------------------------------------------------------------------------------------------------
Total IB Medical and Prosthetic Research                                                            $740 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $631 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $663 million
 

    The VA Medical and Prosthetic Research program is widely 
acknowledged as a success on many levels, and contributes directly to 
improved care for veterans and an elevated standard of care for all 
Americans. The research program is an important tool in VA's 
recruitment and retention of health care professionals and clinician-
scientists to serve our nation's veterans. By fostering a spirit of 
research and innovation within the VA medical care system, the VA 
research program ensures that our veterans are provided state-of-the-
art medical care.

Investing Taxpayers' Dollars Wisely

    Despite documented success of VA investigators across many fields, 
the amount of appropriated funding for VA research since FY 2010 has 
lagged far behind annual biomedical research inflation rates, resulting 
in a net loss over these years of nearly 10 percent of the program's 
overall purchasing power. As estimated by the Department of Commerce, 
Bureau of Economic Analysis, and the National Institutes of Health, for 
VA research to maintain current service levels, the Medical and 
Prosthetic Research appropriation should be increased in FY 2017 by 2.7 
percent over the FY 2016 baseline simply to keep pace with inflation. 
With this in mind, The Independent Budget recommends approximately $17 
million to meet current services demands for research.
    Numerous meritorious proposals for new VA research cannot be funded 
without an infusion of additional funding for this vital program. 
Research awards decline as a function of budgetary stagnation, so VA 
may resort to terminating ongoing research projects or not funding new 
ones, and thereby lose the value of these scientists' work, as well as 
their clinical presence in VA health care. When denied research 
funding, many of them simply choose to leave the VA.

Emerging Research Needs

    In addition to covering uncontrollable inflation, the IBVSOs 
believe Congress should appropriate an additional $17 million for FY 
2017, for expanding research on emerging conditions prevalent among 
newer veterans, as well as continuing VA's inquiries in chronic 
conditions of aging veterans from previous wartime periods. For 
example, additional funding will help VA support areas that remain 
critically underfunded, including:
      Post-deployment mental health concerns such as PTSD, 
depression, anxiety, and suicide in the veteran population;
      The gender-specific health care needs of the VA's growing 
population of women veterans;
      New engineering and technological methods to improve the 
lives of veterans with prosthetic systems that replace lost limbs or 
activate paralyzed nerves, muscles, and limbs;
      Studies dedicated to understanding chronic multi-symptom 
illnesses among Gulf War veterans and the long-term health effects of 
potentially hazardous substances to which they may have been exposed; 
and
      Innovative health services strategies, such as telehealth 
and self-directed care, that lead to accessible, high-quality, cost-
effective care for all veterans.

Million Veteran Program

    The VA Research program is uniquely positioned to advance genomic 
medicine through the ``Million Veteran Program'' (MVP), an effort that 
seeks to collect genetic samples and general health information from 1 
million veterans over the next five years. When completed, the MVP will 
constitute one of the largest genetic repositories in existence, 
offering tremendous potential to study the health of veterans. To date, 
more than 400,000 veterans have enrolled in MVP. The VA estimates it 
currently costs around $75 to sequence each veteran's blood sample. 
Under the President's Precision Medicine Initiative, the IBVSOs 
recommend $75 million to enable VA to process one quarter of the MVP 
samples collected.

                                        General Operating Expenses (GOE)
                                        Veterans Benefits Administration
 
 
 
FY 2017 IB Recommendation                                                                         $3.056 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                               $2.708 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                    $2.826 billion
 

    The Veterans Benefits Administration (VBA) account is comprised of 
six primary divisions. These include Compensation; Pension; Education; 
Vocational Rehabilitation and Employment (VR&E); Housing; and 
Insurance. The increases recommended for these accounts primarily 
reflect current services estimates with the impact of inflation 
representing the grounds for the increase. However, two of the 
subaccounts-Compensation and VR&E-also reflect a substantial increase 
in requested staffing.
    The IB recommends approximately $3.056 billion for the VBA for FY 
2017. This amount reflects an increase of approximately $348 million 
over the recently enacted FY 2016 appropriations level. Our 
recommendation includes approximately $171 million in additional funds 
in the Compensation account above current services, and approximately 
$17.6 million more in the VR&E account above current services to 
provide for new full-time equivalent employees (FTEE).

Compensation Service Personnel 1,700 New FTEEs$171 million

    Over the past few years, VBA has made significant progress in 
reducing the disability compensation backlog, which stood at over 
600,000 claims in March 2013, to just over 77,000 in January 2016; this 
represents nearly an 87 percent reduction in the backlog in just under 
three years' time. In 2009, VBA issued decisions on 2.74 million 
medical issues; that number more than doubled to 6.35 million in FY 
2015. Today, VBA reports that on average, 92 days are required to 
process a claim; in March of 2013, VBA required roughly 282 days.
    Some of VBA's claims processing progress can be attributed to the 
development and deployment of a new organizational model and new 
information technology (IT) systems, including the Veterans Benefits 
Management System (VBMS), e-Benefits, and the Stakeholder Enterprise 
Portal (SEP). However, much of the increased productivity is the result 
of simply putting more resources into processing claims, specifically, 
the use of mandatory overtime. What remains unknown is whether VBA will 
be able to manage its current claims inventory of 352,000 claims, 
without needing to rely on mandatory overtime.
    Recognizing that rising workload, particularly claims for 
disability compensation, could not be addressed without additional 
personnel, Congress provided VBA with more than 1,000 FTEEs between FY 
2013 and FY 2016, primarily in Compensation Service. In FY 2016 alone, 
Congress authorized VBA to hire an additional 770 FTEE. The new FTEE 
were to be purposed for non-rating activities. However, taking into 
consideration VBA's total workload, including appeals, these increases 
in personnel have not been sufficient to keep pace with incoming 
workload or to reduce the backlogs in these non-rating areas.
    A blend of technology and people will be required to enable VBA to 
provide veterans and their dependents with more timely and accurate 
decisions. Necessary personnel increases should not be tempered against 
a hoped-for future technological capability. Although VBA's new claims 
processing systems have the potential to transform the delivery and 
accuracy of benefits, its full effect may not be realized for years.
    As a consequence of this concentrated effort to reduce the claims 
backlog, the backlogs for other activities, including appeals, have 
grown. As of February 2016, 440,000 appeals were pending, 360,000 
within the jurisdiction of the VBA and the remainder within the 
jurisdiction of the Board of Veterans Appeals. This growing appeals 
backlog is a result of VBA's shift in focus and resources to process 
disability claims, as evidenced by the fact that Decision Review 
Officers (DROs) and Quality Review Specialists (QRSs) were performing 
development and rating duties during both regular and overtime working 
hours at many VA regional offices (VARO).
    Considering the enormous growth in appeals, non-rating-activities 
and other services, the IBVSOs believe that more accurate staffing and 
production models are required to determine future resources for VBA.
    For FY 2017, the IBVSOs will focus resource recommendations on 
VBA's non-rating related work, appeals processing, and call center 
needs. We recommend an additional 1,000 FTEE for FY 2017 that would be 
dedicated to processing appeals at VBA in an effort to eliminate the 
backlog of 360,000 appeals within the next three years. Depending on 
the progress made over the next year, further personnel increases may 
still be necessary to address this appeals backlog.
    To address the growing backlog of non-rating related work such as 
dependency claims, the IBVSOs recommend an additional 300 FTEE. In 
order to address the delays experienced by callers contacting VBA call 
centers, the IBVSOs recommend an additional 300 FTEE.
    In addition, the IBVSOs recommend an increase of 100 FTEE for the 
Fiduciary program to meet the growing needs of veterans participating 
in VA's Caregiver Support programs. This recommendation is also based 
on a July 2015 VA Inspector General report on the Fiduciary program 
that found, ``.Field Examiner staffing did not keep pace with the 
growth in the beneficiary population, [and] VBA did not staff the hubs 
according to their staffing plan..''
    Since VA may achieve future technological and organizational 
productivity gains, we recommend that VBA hire a blend of permanent and 
two-year temporary FTEEs to fill all new positions. At the end of the 
two years, the best of those hired on a temporary basis could be 
transitioned into permanent positions made available through attrition. 
The IBVSOs believe this approach to staffing would offer a temporary 
surge capacity, while also developing a group of experienced and 
trained employees to fill positions that occur through attrition.

VR&E Service Personnel 158 New FTEEs $17.6 million

    The Vocational Rehabilitation and Employment Service (VR&E), also 
known as the VetSuccess program, provides critical counseling and other 
adjunct services necessary to enable service disabled veterans to 
overcome barriers as they prepare for, find, and maintain gainful 
employment. VetSuccess offers services on five tracks: re-employment, 
rapid access to employment, self-employment, employment through long-
term services, and independent living.
    An extension for the delivery of VR&E assistance at a key 
transition point for veterans is the VetSuccess on Campus (VSOC) 
program deployed at 94 college campuses. Additional VR&E services are 
provided at 71 select military installations for active duty service 
members undergoing medical separations through the Department of 
Defense and VA's joint Integrated Disability Evaluation System (IDES).
    These additional functions of VR&E personnel are undoubtedly 
beneficial to disabled veterans; however, staffing levels throughout 
VR&E services must be commensurate with current and future demands and 
their global responsibilities.
    At the end of FY 2014, VR&E reported a total of 1,416 FTEEs 
dedicated to direct VR&E services. VR&E projected an increase of 7.3 
percent in program participation for FY 2015, and for FY 2016 an 
additional 3.8 percent increase in participation was expected. Over the 
previous two fiscal years, program participation was expected to 
increase by 11.1 percent; however, the Administration failed to request 
adequate staffing levels to keep pace with anticipated demand. In fact 
for FY 2015 and FY 2016, only 1,442 direct personnel were requested, 
with no increase for FY 2016.
    Over the past five years, program participation has increased by an 
average of 7.1 percent each year, and the IBVSOs project that total 
program participation for FY 2017 will grow by at least 7.1 percent for 
total caseload of approximately 147,000. In July 2015, VR&E reported 
that its average Vocational Rehabilitation Counselor (VRC)-to-client 
ratio was 1:139, which represented an increase from its previous 1:135 
ratio. A more reasonable VRC-to-client ratio would consist of 1:125; 
however, this benchmark may even be too high when taking into 
consideration the overall responsibilities of VRCs, such as VSOC and 
IDES.
    In order to achieve and sustain a 1:125 counselor -to-client ratio 
in FY 2017, we estimate that VR&E would need 158 new FTEE, for a total 
workforce of 1,600 FTEE, to manage an active caseload of 147,000 VR&E 
participants. At a minimum, three-quarters of the new hires should be 
VRCs dedicated to providing direct services to veterans.
    While increased staffing levels are required to provide efficient 
and timely services to veterans utilizing VR&E services, it is also 
essential that these increases be properly distributed throughout all 
of VR&E to ensure that VRC caseloads are equitably balanced among 
VAROs, which typically experience variable caseloads. As an example, a 
January 2014 GAO Report found the Cleveland VARO's VRC ratio to be 
1:206 and in the Fargo VARO, the ratio was 1:64.

                                             General Administration
 
 
 
FY 2017 IB Recommendation                                                                           $346 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $337 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $417 million
 

    The General Administration account is comprised of nine primary 
divisions. These include the Office of the Secretary; the Office of the 
General Counsel; the Office of Management; the Office of Human 
Resources and Administration; the Office of Policy and Planning; the 
Office of Operations, Security and Preparedness; the Office of Public 
and Intergovernmental Affairs; the Office of Congressional and 
Legislative Affairs; and the Office of Acquisition, Logistics, and 
Construction. For FY 2017, the IB recommends approximately $346 
million, an increase of nearly $9.0 million over the FY 2016 
appropriated level. This increase reflects only an increase in current 
services based on the impact of uncontrollable inflation across all of 
the General Administration accounts.

                                           Board of Veterans' Appeals
 
 
 
FY 2017 IB Recommendation                                                                           $134 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $110 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $156 million
 


Board of Veterans' Appeals Personnel 166 New FTEEs $23.1 million

    Faced with a growing number of claims and resultant appeals, the 
Board's staff grew from 510 FTEE in FY 2012 to 676 FTEE in FY 2015. For 
2016, the Administration did not request funding for increased 
staffing, despite an ever increasing workload; instead the FY 2016 
budget proposed a reduction from of 669 FTEE to 662 FTEE.
    Over the past few years, the Board has averaged approximately 90 
appeal dispositions per FTEE, producing a record 55,532 decisions in FY 
2014. Current data was not available at the time of this report; 
however, we estimate that for FY 2015 the Board issued nearly 60,000 
dispositions. Although most of the 440,000 pending appeals are in 
various stages of processing at VBA, the Board currently has nearly 
80,000 appeals in its jurisdiction. In order to process these 80,000 
appeals in one year, based on 90 appeals per Board FTEE, the Board 
would need approximately 890 FTEE; however, it did not receive any 
increase for FY 2016, and will likely only be able to again dispose of 
approximately 60,000 appeals.
    Furthermore, as the number of claims processed annually continues 
to rise as a result of the increased capacity of VBA, the number of 
appeals is also expected to continue rising. Even with increased 
accuracy in rating board decisions, on average 10 to 12 percent of 
claims decisions are appealed. Thus, assuming VBA processes 1.5 million 
claims next year-a reasonable estimate considering VBA processed over 
1.4 million claims in both FY 2014 and FY 2015-roughly 150,000 appeals 
would enter the system, with roughly half of them continuing on to the 
Board for appellate review. In order for the Board to keep pace with 
only this new incoming workload and not those appeals already in the 
system, a total FTEE level of 833 would be required. Furthermore, a 
significant number of Board remands return to the Board for another 
round of appellate review, as many as 20,000 per year, requiring an 
additional 217 FTEE to manage that workload.
    About 360,000 appeals are backlogged at VBA, of which approximately 
180,000 are expected eventually to reach the Board. If the goal were to 
eliminate the backlog in three years, while simultaneously disposing of 
both new incoming appeals and returning remanded appeals, then an 
additional 666 FTEE would be required. In total, without any increases 
in productivity, the Board would require 1,716 FTEE, almost tripling 
its current workforce. Even if the Board could increase its 
productivity by one-third to 120 appeals per FTEE, approximately 1,291 
FTEE, almost double the current workforce, would be needed.
    To meet current and future workload requirements, the Board will 
need to continue adding new attorneys and veteran law judges, as well 
as sufficient support staff; however, the Board could not absorb that 
level of staffing growth while simultaneously managing its overall 
workload. Approximately 18 months of training and orientation are 
required for a new Board attorney to reach full productivity. Given the 
time taken away from existing staff to train and mentor new staff, the 
Board must strike a balance in its hiring strategy.
    For FY 2017, the IBVSOs recommend an increase 166 FTEE for FY 2017, 
a 25 percent increase, bringing the Board's total FTEE to 828. The 
Board must expect to increase its personnel over the next couple of 
years to continue to grow its capacity to handle the rising number of 
appeals that will come from VBA's increased productivity.
    Another option the Board may want to consider in future years would 
be to authorize a mix of full-time and temporary hires, utilizing the 
temporary workforce in a ``surge-capacity'' role to help reduce the 
appeals backlog.

                             Departmental Administration and Miscellaneous Programs
                                             Information Technology
 
 
 
FY 2017 IB Recommendation                                                                         $4.209 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                               $4.133 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                    $4.278 billion
 

    In contrast to significant department-level IT failures, the 
Veterans Health Administration (VHA) over more than 30 years 
successfully developed, tested, and implemented a world-class 
comprehensive, integrated electronic health record (EHR) system. The 
current version of this EHR system, based on the VHA's self-developed 
VistA public domain software, sets the standard for EHR systems in the 
United States and was a trailblazer for years. However, parts of VistA 
require either modernization or replacement. For example, one of its 
component parts, the outdated scheduling module, contributed to VA's 
recent access to care crisis. According to VA, this module is being 
replaced on an expedited basis.
    For FY 2017, the IBVSOs recommend approximately $4.2 billion for 
the administration of the VA's IT program. This recommendation includes 
no new funding above the planned current services level. Significant 
resources have already been invested in VA's IT programs in recent 
years, and we believe proper allocation of existing resources can allow 
VA to fulfill its missions while modernizing its systems. We continue 
to call for acceleration of the VBMS, and the implementation of an 
appropriate solution for the Board of Veterans Appeals IT system.
    Additionally, it is critical to ensure that sufficient funds are 
directed at the incremental costs of implementation for the new 
Veterans Choice Program (VCP). The VA identified a series of one time 
incremental costs for IT systems in order to redesign, develop, and 
deliver systems and technology solutions for the new VCP. Those 
incremental costs range from $421 million in Phase I of the project, to 
$606 million in Phase II, and finally $851 million in Phase III. 
Without having a clear plan for when each of these Phases might 
actually take place, The Independent Budget has chosen not to 
explicitly recommend these funds in our IT funding recommendation. 
However, we believe Congress must consider these costs in an effort to 
assist the VA in implementing the new VCP.

                                        National Cemetery Administration
 
 
 
FY 2017 IB Recommendation                                                                           $275 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $271 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $286 million
 

    The National Cemetery Administration (NCA), which receives funding 
from eight appropriations accounts, administers numerous activities to 
meet the burial needs of our nation's veterans.
    In a strategic effort to meet the burial and access needs of our 
veterans and eligible family members, the NCA continues to expand and 
improve the national cemetery system, by adding new and/or expanded 
national cemeteries. Not surprising, due to the opening of additional 
national cemeteries, the NCA is expecting an increase in the number of 
annual veteran interments through 2017 to roughly 130,000, up from 
125,180 in 2014; this number is expected to slowly decrease to 126,000 
by 2020. This much need expansion of the national cemetery system will 
help to facilitate the projected increase in annual veteran interments 
and will simultaneously increase the overall number of graves being 
maintained by the NCA to 3.7 million in 2018 and 3.9 million by 2020.
    Even as the NCA continues to add veteran burial space to its 
expanding system, many existing cemeteries are exhausting their 
capacity and will no longer be able to inter casketed or cremated 
remains. In fact, as of 2016, the NCA expects four national cemeteries-
Baltimore, Maryland; Nashville, Tennessee; Danville, Virginia; and 
Alexandria, Virginia-to reach their maximum capacity and will be closed 
to first interments, though they will continue to accept second 
interments.
    In order to minimize the dual negative impacts of increasing 
interments and limited veteran burial space, the NCA needs to:

      Continue developing new national cemeteries;
      Maximize burial options within existing national 
cemeteries;
      Strongly encourage the development of state veteran 
cemeteries; and
      Increase burial options for veterans in highly rural 
areas.

    Additional areas of growth within the NCA system include:

      An increase in the issuance of Presidential Memorial 
Certificates, which is expected to increase from approximately 654,000 
in 2013 to more than 870,000 in 2017;
      The expected increase in the burial of Native American, 
Alaska Native, and Pacific Islander veterans; and
      The possible increase, thanks to local historians and 
other interested stakeholders, in requests for headstones or markers 
for previously unidentified veterans.

Budgetary Resources for NCA Programs

    With the above considerations in mind, The Independent Budget 
recommends $275 million for FY 2017 for the Operations & Maintenance of 
the NCA. The IBVSOs believe that this should include a minimum of $20 
million for the National Shrine Initiative. Since FY 2013, national 
shrine funding has decreased each year. The NCA must continue to invest 
sufficient resources in the National Shrine Initiative to ensure that 
this important work is completed.

                                         Office of the Inspector General
 
 
 
FY 2017 IB Recommendation                                                                           $138 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $137 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $160 million
 

    The Office of Inspector General (OIG) received a significant 
infusion of new resources for FY 2016 due to the high volume of work 
that it has produced. And yet, the OIG has been under significant 
scrutiny over the past year. We believe that the work requirements 
assigned to this office have placed it under great stress and 
potentially stretched it beyond its capacity. That being said, the 
IBVSOs believe that the office does not warrant a staffing increase at 
this time. We believe that the substantial increase that the OIG 
received in FY 2016 should allow it to expand its staffing sufficiently 
to meet the ever-growing demands on its work. With this in mind, the IB 
recommends funding based on current services of approximately $138 
million.

                                              Construction Programs
                                               Major Construction
 
 
 
FY 2017 IB Recommendation                                                                          $1.50 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                $1.24 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $528 million
 

    Each year the Department of Veterans Affairs outlines its current 
and future major construction needs in its annual Strategic Capital 
Investment Planning (SCIP) process. In its FY 2016 budget submission, 
VA projected it would take between $11.2 billion and $13.6 billion to 
close all current and projected gaps in access, utilization, and 
safety. Currently, VA has more than 30 major construction projects that 
are either partially funded or funded through completion, but in which 
construction is incomplete.
    Last year VA requested and Congress appropriated a significant 
increase in funding for major construction projects-approximately $1.24 
billion. While these funds will allow VA to begin construction on key 
projects, many other previously funded sites still lack the funding for 
completion. One of these projects was originally funded in FY 2007, 
while others were funded more than five years ago but no funds have 
been spent on the projects to date. Of the 33 projects on VA's 
partially funded VHA construction list, nine are seismic in nature.
    It is time for the projects that have been in limbo for years or 
that present a safety risk to veterans and employees to be put on a 
course to completion within the next five years. To accomplish this, 
the IBVSOs recommend that Congress appropriate $1.5 billion for FY 2017 
to fund either the next phase or fund through completion all existing 
projects, and begin advance planning and design development on six 
major construction projects that are the highest ranked on VA's 
priority list.
    The IBVSOs also recommend, as outlined in its Framework for 
Veterans Health Care Reform, that VA realign its SCIP process to 
include public-private partnerships and sharing agreements for all 
major construction projects to ensure future major construction needs 
are met in the most financially sound manner.

Research Infrastructure

    State-of-the-art research requires state-of-the-art technology, 
equipment, and facilities. For decades, VA construction and maintenance 
appropriations have not provided the resources VA needed to maintain, 
upgrade, or replace its aging research laboratories and associated 
facilities. The impact of funding shortages was vividly demonstrated in 
a Congressionally-mandated report that found major, system wide 
deficits in VA research infrastructure. Nearly 40 percent of the 
deficiencies found were designated ``Priority 1: Immediate needs, 
including corrective action to return components to normal service or 
operation; stop accelerated deterioration; replace items that are at or 
beyond their useful life; and/or correct life safety hazards.''
    The report cited above estimated that approximately $774 million 
would be needed to correct all deficiencies found, but only a fraction 
of that funding has been appropriated since this report was made public 
in 2012. The VA Office of Research and Development is conducting a 
follow-up study of over a dozen key research sites. This update should 
be available in mid-2016, the results of which can be used to guide VA 
and Congress in further investment in VA research infrastructure. 
Nevertheless, Congress needs to begin now to correct the most urgent of 
these known infrastructure deficiencies, especially those that concern 
life-safety hazards for VA scientists and staff, and for veterans who 
volunteer as research subjects.
    The IBVSOs believe that Congress should break this chronic 
stalemate and designate funds to improve specific VA research 
facilities in FY 2017 and in subsequent years. In order to begin to 
address these known deficits, the IBVSOs recommend Congress approve at 
least $50 million for up to five major construction projects in VA 
research facilities.
    The full report discussed above is available at www.aamc.org/varpt. 
The House reports associated with this issue are House Report 109-95, 
and House Report 111-559.

                                               Minor Construction
 
 
 
FY 2017 IB Recommendation                                                                           $749 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $406 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                      $372 million
 

    In FY 2016, Congress appropriated $406 million for minor 
construction projects. Currently, approximately 600 minor construction 
projects need funding to close all current and future year gaps within 
the next 10 years. To complete all of these current and projected 
projects, VA will need to invest between $6.7 and $8.2 billion over the 
next decade.
    In August 2014, the President signed the Veterans Access, Choice, 
and Accountability Act of 2014 (VACAA), Public Law 133-146. In this law 
Congress provided $5 billion to increase health care access by 
increasing medical staffing levels and investing in infrastructure 
using these funds. VA has developed a spending plan that will obligate 
$511 million for 64 minor construction projects over a two-year period.
    VA planned to invest $383 million of these funds in FY 2015, 
leaving $128 million for minor projects in FY 2016. It is important to 
remember that these funds are a supplement to, not a replacement of, 
annual appropriations for minor construction projects. To ensure that 
VA funding keeps pace with all current and future minor construction 
needs, the IBVSOs recommend that Congress appropriate an additional 
$749 million for minor construction projects.
    Additionally, the IBVSOs recommend $175 million in non-recurring 
maintenance and minor construction funding to address needs of 
facilities identified in the Congressionally-requested report on the 
status of VA research facilities discussed earlier in this report.

                                    Grants for State Extended-Care Facilities
                                        (State Home Construction Grants)
 
 
 
FY 2017 IB Recommendation                                                                           $200 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                 $120 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                       $80 million
 

    Grants for state extend-care facilities, commonly known as state 
home construction grants, are a critical element of federal support for 
the state veterans' homes. The state home program is a very successful 
federal-state partnership in which VA and states share the cost of 
constructing and operating nursing homes and domiciliaries for 
America's veterans. State homes provide over 30,000 nursing home and 
domiciliary beds for veterans, their spouses, and gold-star parents of 
deceased veterans. Overall, state homes provide more than half of VA's 
long-term-care workload, but receive less than 15 percent of VA's long-
term-care budget. VA's basic per diem payment for skilled nursing care 
in state homes is significantly less than comparable costs for 
operating VA's own long-term-care facilities. This basic per diem paid 
to state homes covers approximately 30 percent of the cost of care, 
with states responsible for the balance, utilizing both state funding 
and other sources. On average, the daily cost of care for a veteran at 
a State Home is less than 50 percent of the cost of care at a VA long-
term-care facility.
    States construction grants help build, renovate, repair, and expand 
both nursing homes and domiciliaries, with states required to provide 
35 percent of the cost for these projects in matching funding. VA 
maintains a prioritized list of construction projects proposed by state 
homes based on specific criteria, with life and safety threats in the 
highest priority group. Only those projects that already have state 
matching funds are included in VA's Priority List Group 1 projects, 
which are eligible for funding. Those that have not yet received 
assurances of state matching funding are put on the list among Priority 
Groups 2 through 7.
    In FY 2016, the estimated federal share for the 109 state home 
construction grants requests that have been submitted by states was 
over $1 billion. Of that amount, the states had already secured their 
state matching funds required to put them in the Priority Group List 1 
for 69 projects that will require $550 million in federal matching 
funds. Last year, VA requested only $85 million and the IBVSOs had 
recommended $200 million; Congress ultimately appropriated $120 million 
funding for FY 2016, which will fund only the first 13 projects on the 
FY 2016 Priority Group 1 List.
    With almost $1 billion in state home projects still in the 
pipeline, the IBVSOs again recommend $200 million for the state home 
construction grant program, which we estimate would provide funding for 
approximately 40 percent of the projects expected to be on the FY 2017 
VA Priority Group 1 List when it is released at the end of this year.

                                      Grants for State Veterans Cemeteries
 
 
 
FY 2017 IB Recommendation                                                                            $52 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation                                                                  $46 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request                                                                       $45 million
 

    The State Cemetery Grant Program allows states to expand veteran 
burial options by raising half the funds needed to build and begin 
operation of veterans' cemeteries. The NCA provides the remaining 
funding for construction and operational funds, as well as cemetery 
design assistance. As of September 2014, there were 49 projects with 
state matching funds.
    Funding eight projects in FY 2017 will provide burial options for 
an additional 148,000 veterans. To fund these projects, Congress must 
appropriate $52 million.

                                 
                          THE AMERICAN LEGION
    ``What we have done historically is that we have managed to a 
budget number as opposed to managing to requirements.as a result we've 
muddled along and not met the needs veterans deserve.''
    - VA Acting Secretary Sloan Gibson before the House Committee on 
Veterans Affairs July 24, 2014 \1\
---------------------------------------------------------------------------
    \1\ HVAC Hearing ``Restoring Trust: The View of the Acting 
Secretary and the Veterans Community'' - July 24, 2014
---------------------------------------------------------------------------
    When now Deputy Secretary of the Department of Veterans Affairs 
(VA) Sloan Gibson addressed this committee nearly two years ago, he was 
not advocating the budgetary planning approach he described, but 
speaking to the problems that long standing approach could cause. 
Drawing contrasts with the planning models he was familiar with in the 
private sector, Deputy Secretary Gibson noted the historical approach 
was about managing to requirements. For VA to succeed and be great, 
they need to be able to move beyond managing requirements and move 
towards building planning based on need.
    Chairman Miller, Ranking Member Brown, and Members of the 
Committee:
    On behalf of National Commander Dale Barnett and the over million 
members of The American Legion, we welcome this opportunity to comment 
on the federal budget, and programs of the Department of Veterans 
Affairs (VA).
    The American Legion is a resolution based organization; we are 
directed and driven by the millions of active legionnaires who have 
dedicated their money, time, and resources to the continued service of 
veterans and their families. Our positions are guided by nearly 100 
years of consistent advocacy and resolutions that originate at the 
grassroots level of the organization - the local American Legion posts 
and veterans in every congressional district of America. The 
Headquarters staff of the Legion works daily on behalf of veterans, 
military personnel and our communities through roughly 20 national 
programs, and hundreds of outreach programs led by our posts across the 
country.
    What we present here is an attempt to focus on a few particular 
issues and projected needs, rather than what has been the historical 
and problematic approach of presenting a budget based on a number. 
While the budget numbers have gone up for VA, indicative of the 
commitment that Congress has shown even in tight fiscal times, there 
has still been the tendency to set an number and manage to that limit, 
rather than projecting the need and divining numbers from that need.
    In terms of future planning, and ensuring that VA's budget meets 
needs in critical areas, The American Legion directs the committee's 
focus to three critical areas: the consolidation of outside care, 
ensuring VA's medical hiring needs are met, and addressing the rising 
backlog of appeals.

Consolidation of Outside Care:

    When the Choice Card program was added as a temporary emergency 
measure as a part of the Veterans Access, Choice and Accountability Act 
(VACAA) of 2014 \2\ The American Legion supported the program because 
we had seen firsthand the need across the country. During 2014 The 
American Legion set up a dozen Veterans Crisis Command Centers (VCCCs) 
in affected areas from Phoenix to Fayetteville and spoke to hundreds of 
veterans personally affected by the scheduling problems within VA. The 
Choice Card program provided an immediate short term option, but also 
provided an opportunity to learn from how veterans utilized the 
program. At the time, The American Legion advised gathering as much 
data as possible from veterans' use of the program to make all of VA's 
other existing authorities for care in the community \3\ better in 
their ability to serve veterans.
---------------------------------------------------------------------------
    \2\ Public Law P.L. 113-146
    \3\ Such as Project Access Received Closer to Home (ARCH), the 
Patient Centered Community Care (PCs) program and others
---------------------------------------------------------------------------
    Ultimately that has led to the current transformation in VA's 
community care programs. As directed by the Surface Transportation and 
Veterans Health Care Choice Improvement Act of 2015 (VA Budget and 
Choice Improvement Act) in July 2015, VA has developed a plan to 
consolidate all existing programs into a single community care program, 
the New Veterans Choice Program (New VCP). Generally, The American 
Legion supports the plan to consolidate VA's multiple and disparate 
purchased care programs into one New VCP. We believe it has the 
potential to improve and expand veterans' access to health care. Much 
depends, however, on the department's success in working with its 
employees, Congress, VSOs, private providers, academic affiliates, and 
other stakeholders as the agency moves forward in developing and 
implementing the plan.
    However, with an eye towards budgetary matters, there are two 
important considerations revolving around this new transformation that 
must be implemented in future budgets. VA must have the ability to 
spend all community care monies under the new framework, and the 
additional funding required to provide for the Choice Card program 
needs to be factored into future budgets.
    During 2015, VA ran into problems with budgetary shortfalls because 
of the separation in funding between Choice Card care and other 
community care authorities. Because of the strong push to ensure 
veterans were seen as quickly as possible, VA quickly exhausted care in 
the community funding, while emergency funding for the Choice Card 
program was still available. VA was forced to seek, and was granted, 
authority to move some of the $10 billion allocated to fund the Choice 
Card program over the three year pilot to cover care in the community 
costs.
    By now, as the transformation of care in the community moves 
forward to a plan with a single, overarching authority for this care 
(New VCP) the distinctions between the VACAA Choice funds and community 
care funding should be academic. While The American Legion understands 
there are reasons certain funding and accounts have limitations, and is 
not advocating for a wholesale removal of barriers for VA to move 
funding, in this instance is makes perfect logical sense. Care in the 
community is care in the community, and VA must have a single stream of 
funding for this.
    However, it is equally important that the need for the extra 
funding was and is real. The VACAA provided $10 billion for treating 
veterans in the community through Choice because the need to fund that 
care was real. Those needs are not going away. As of last month, VA had 
over 6.1 million appointments scheduled nationwide, and over 8.5% of 
those appointments are still waiting over 30 days for treatment. \4\ VA 
has seen their number of completed appointments jump by over 2.6 
million last year, and they are throughout his continuing to authorize 
millions of appointments for outside care.
---------------------------------------------------------------------------
    \4\ VA Pending Appointments - January 15, 2016
---------------------------------------------------------------------------
    The $10 billion from VACAA was provided as emergency funding, but 
in the future, we must plan for the tremendous demand on the VA system. 
This is a direct illustration of the managing to numbers versus 
managing to need contrast mentioned above. For future budgets, we must 
ensure that VA is receiving funding for care that adequately reflects 
how they must deliver that care. A robust budget for VA medical care is 
necessary, but as the past few years have shown VA has been dependent 
as well on care in the community to provide timely care to veterans 
where they are overburdened by scheduling, staffing, or lack of 
appropriate resources in the community. This needs to be reflected in 
the community care budgets, not as an emergency measure when the 
problem boils over and out of control.

Ensuring Proper VA Staffing:

    One reason VA may sometimes struggle to provide care within the 
Veterans Health Administration (VHA) is directly related to staffing. 
The staffing figures can be ugly. One in six positions nationally for 
some critical jobs remain vacant, and critical needs like psychiatric 
workers can see vacancy rates of 40-64%. \5\
---------------------------------------------------------------------------
    \5\ USA Today - September 2015
---------------------------------------------------------------------------
    To be fair, the VACAA already provided funding for 10,000 new 
health care positions, however funding new positions alone may not be 
the solution and there may be budgetary means to address some of the 
vacancies. Even when VA is hiring an additional 9% of their workforce 
they are losing a similar amount to attrition. \6\ Some of this could 
be improved with better hiring incentives and more competitive wages, 
particularly in key fields of need such as psychiatric care, 
physician's assistants, nurses and physical therapists.
---------------------------------------------------------------------------
    \6\ VA Office of the Inspector General (VAOIG) Report No. 15-03063-
511 ``OIG Determination of Veterans Health Administration's 
Occupational Staffing Shortages'' - September 2015
---------------------------------------------------------------------------
    To be sure, as the Office of the Inspector General recommended, VA 
also bears additional responsibility in the form of the development of 
better staffing models and examining the red tape and bureaucratic 
burdens that stretch hiring out into a process that can take nine 
months or longer. \7\ However, additional examination of where VA can 
better incentivize prospective applicants to decide on a career serving 
veterans would be helpful. We need to ensure VA has proper funding to 
get the best and brightest team members on their medical and 
psychological staffs serving veterans.
---------------------------------------------------------------------------
    \7\ Ibid
---------------------------------------------------------------------------
    The VA can further help improve their staffing, especially in 
leadership positions, with better succession planning for VA employees 
to rise to leadership levels within the organization. As an 
organization of advocates that has worked hand in hand with VA for 
decades, The American Legion notes the training programs VA had in 
place during the 1990's were better suited to creating the next 
generation of leadership than the current programs in place. The VHA 
training programs of the 1990's were specifically built to prepare 
administrative employees to assume mid-level management programs at the 
department level. This could include personnel, fiscal, medical 
administration, associate director training and other leadership 
training. The programs were replaced, over time, with VA's current 
Leadership Development Programs, but feedback The American Legion has 
garnered from interacting with VHA personnel during visits from our 
System Worth Saving Task Force has indicated these programs are not 
providing the tools the employees need to be the next generation 
leaders of VA and to lead from within. Additional consideration to 
revamping this portion of training, and ensuring this training is 
properly funded, could be a key component to reducing VA's reliance on 
the complicated process of hiring from outside VA and ultimately reduce 
the number of unfilled leadership positions.

The Looming Appeals Crisis:

    Last year, 2015, was the year VA was supposed to ``break the back 
of the backlog'' of veterans' claims for disability benefits. While VA 
has made substantial progress according to their public figures in 
reducing the number of initial claims - the ``claims backlog'' sits at 
around 77,000 claims today \8\ down from a peak of over 600,000 claims 
in early 2013 - those numbers do not reflect the waiting period for 
many veterans who have been waiting for three or more years for their 
appeals to be decided. Over that same period the number of appeals has 
soared to over 325,000 from their level of 250,000 in 2013. \9\ VA 
defines ``backlog'' as any case pending over 125 days. Every single 
appeal represents a veteran who has been waiting for much, much longer 
than 125 days, but those 325,000 appeals are not counted as part of the 
``backlog.''
---------------------------------------------------------------------------
    \8\ VA Claims Backlog Dashboard - January 30, 2016
    \9\ VA Monday Morning Workload Report - February 1, 2016
---------------------------------------------------------------------------
    Often the fastest way to resolve an appeal is with a Decision 
Review Officer (DRO) in a Regional Office (VARO). The DROs are among 
the most experienced employees, and can discern aspects of a claim that 
a newer employee might miss, furthermore after an initial denial the 
veteran can be better equipped to provide information the VA noted was 
lacking in the initial denial. Because everything stays within the 
VARO, correspondence with the veteran and with a service officer 
helping that veteran is direct and many claims can be resolved more 
quickly through this process. The DRO review can be one of the best 
tools for speedy adjudication of an appeal and to reduce the appeals 
backlog. However, the unfortunate case recently is that DROs have not 
always been free to handle their appeals workload.
    The Veterans Benefits Administration (VBA) has been under a 
singular mission to reduce the backlog. To this end they have forced 
over four years of mandatory overtime, and key veteran staffers 
including DROs have seen their workloads adjusted to focus on the 
initial claims, the claims that are counted in the VA statistics for 
``backlog.'' This can have the effect of keeping DROs from devoting 
full attention to their appeals workload, and the growing appeals 
backlog cannot be seen as an accident.
    Last year, The American Legion noted that occasional mandatory 
overtime in a short term crisis is prudent management, but four 
straight years is indicative of an organization that's clearly 
understaffed. The American Legion reiterates our call for better study 
of VBA staffing models, but also notes that last year VA had proposed 
making the DRO process more robust, something we wholeheartedly 
support.
    ``DROs can often resolve appeals more rapidly than the appeal 
process at the Board of Veterans Appeals (BVA) and with greater 
accuracy and clarity than the average VA rater. Reports have indicated 
in some offices the DROs have been reassigned to other tasks as the 
pressure mounts to work on initial claims. It would be the hope of The 
American Legion that renewed interest in hiring and increasing the DRO 
force would allow DROs to return to their appeals duties, and help 
prevent a rising backlog in the appeals area.'' \10\
---------------------------------------------------------------------------
    \10\ Testimony of The American Legion - HVAC Hearing February 11, 
2015
---------------------------------------------------------------------------
    There have been many recent proposals for measures to transform 
appeals as the initial claims process was transformed by the Veterans 
Benefits Management System (VBMS) and the Fully Developed Claims (FDC) 
process. The American Legion is supportive of transformative thinking, 
clearly the system as it has existed in the past has many flaws and has 
not always served veterans with the ability to develop prompt and 
accurate decisions on disability claims. However, it is also critical 
to understand that there is important due process in the system to 
protect veterans, and we cannot abandon these things in the interest of 
simply faster decisions or more convenience for VA.
    Due process is important to protect veterans, especially veterans 
who may be uniquely vulnerable due to their disabilities incurred in 
the service of this nation. It is one of the reasons the veterans' 
disability claims system has been specifically cited as ``uniquely pro-
claimant'' in the manner it serves veterans filing for benefits. \11\ 
Veterans need to depend on the ability to get a DRO review in a timely 
fashion, or to submit evidence in response to the VA when they are 
informed their claim is lacking proof of a key point, such as 
documentation of an event that happened in service.
---------------------------------------------------------------------------
    \11\ See Jaquay v. Principi, 304 F.3d 1276, 1280 (Fed. Cir. 2002); 
Nolen v. Gober, 222 F.3d 1356, 1361 (Fed. Cir. 2000); Hensley v. West, 
212 F.3d 1255, 1262 (Fed. Cir. 2000).
---------------------------------------------------------------------------
    One of the best things to help address the growing appeals backlog 
would be to increase funding for DROs to fully staff all offices and to 
add additional full time employees elsewhere within the offices to get 
the DROs back to doing what they do best, reviewing appeals in a timely 
manner. The budget should also reflect additional funding to study 
proper staffing levels within the VBA, because four years of mandatory 
overtime is a warning flag that has been waving to tell us we're not 
supplying enough staff to deal with the backlog of veterans' claims.
    Whether it is appeals or initial claims, a backlog is a backlog, 
and the budget must reflect sufficient resources to address these 
claims, otherwise veterans will be forced to do what we have become all 
too familiar with, wait.

Conclusion:

    The VA cannot afford to be run as an entity reactive to one crisis 
after another. Effectiveness stems from long term planning, and to be 
truly effective that long term planning needs to include all 
stakeholders. While there are other areas that can benefit from 
predicting crises before they occur and providing resources to 
perceived needs, these three areas represent a key start in the sort of 
thinking that must be adopted to make VA successful in the long run.
    In order to assimilate all outside care under one cohesive 
management authority VA needs the budget flexibility to utilize the 
Choice Card funds for community care as well as to see a boost to 
community care funding commensurate with the increased demand. The 
VACAA infused $10 billion in care funding because there was an 
emergency, but the demand has not gone away and future funding levels 
must reflect this as part of the plan, not a reaction to a crisis.
    There must be attention paid to VA's hiring and incentives, and if 
additional resources are needed to secure key providers like 
psychologists and physician's assistants, then VHA must be provided 
with the funding needed to secure those key performers. That is the 
long term key to ensuring veterans get the care they need in a timely 
fashion in the system that is designed to treat their unique wounds of 
war.
    Four years of mandatory overtime and reassignment of DROs needs to 
stop if VA is going to prevent the growing appeals backlog from 
reaching disaster levels. Funding must be given to better assess the 
workforce within VBA and to provide the full time employees needed to 
accomplish the mission while keeping top assets like DROs working on 
the work they do best.
    Questions concerning this testimony can be directed to The American 
Legion Legislative Division (202) 861-2700, or [email protected]

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