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


                  TO RECEIVE THE SECRETARY'S TESTIMONY
                  REGARDING THE PENDING VA HEALTHCARE
                  BUDGET SHORTFALL AND SYSTEM SHUTDOWN

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

                                 HEARING

                               BEFORE THE

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        WEDNESDAY, JULY 22, 2015

                               __________

                           Serial No. 114-34

                               __________

       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-         Minority 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

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
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both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
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                            C O N T E N T S

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                        Wednesday, July 22, 2015

                                                                   Page

To Receive the Secretary's Testimony Regarding the Pending VA 
  Healthcare Budget Shortfall and System Shutdown................     1

                           OPENING STATEMENTS

Jeff Miller, Chairman............................................     1
    Prepared Statement...........................................    51
Corrine Brown, Ranking Member....................................     3
    Prepared Statement...........................................    52

                                WITNESS

Hon. Robert McDonald, Secretary, U.S. Department of Veterans 
  Affairs........................................................     5

 
     TO RECEIVE THE SECRETARY'S TESTIMONY REGARDING THE PENDING VA 
            HEALTHCARE BUDGET SHORTFALL AND SYSTEM SHUTDOWN

                              ----------                              


                        Wednesday, July 22, 2015

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:01 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[chairman of the committee] presiding.

           OPENING STATEMENT OF CHAIRMAN JEFF MILLER

    Present: Representatives Miller, Lamborn, Bilirakis, Roe, 
Benishek, Huelskamp, Coffman, Wenstrup, Walorski, Abraham, 
Zeldin, Costello, Radewagen, Bost, Brown, Takano, Brownley, 
Titus, Ruiz, Kuster, O'Rourke, Rice, Walz, and McNerney.
    The Chairman. Good morning, everybody. Welcome to this 
hearing. I appreciate your attendance.
    We are again gathered to discuss VA's budget execution for 
this fiscal year. And if you will remember, less than 3 weeks 
ago we gathered to hear Deputy Secretary Sloan Gibson testify 
regarding a budget shortfall at the Department of Veterans 
Affairs. I am sure everyone may be asking why we are here again 
on the very same topic, and I intend to explain in just a 
minute. But as we all know, the stakes have been raised 
considerably since the Deputy Secretary's testimony on June 25.
    At that hearing, Deputy Secretary Gibson was asked the 
following question by Ms. Brownley, and I quote: ``If Congress 
doesn't act on the fiscal year 2015 budget shortfall, what is 
it going to look like in the VA in July and August and on 
October 1,'' end quote. The Deputy Secretary responded that we 
get into dire circumstances the longer we go, but that, quote: 
``Before we get to the end of August, we are in a situation 
where we are going to have to start denying care to veterans in 
the community because we don't have the resources to be able to 
pay for it,'' end quote.
    The Deputy Secretary also testified about antiquated 
financial systems contributing to the problem, costs associated 
with the new hepatitis C drug treatments, and an unrealistic 
assumption of how fast VA could set up and effectively utilize 
Veterans Choice Program.
    Now, imagine my surprise when on July 13 I received a 
letter again from the Deputy Secretary that in the absence of 
providing the flexibility, that VA is seeking to plug the 
shortfall with Choice Fund money, that VA hospital operations 
would shut down in the month of August, and that non-VA care 
authorizations would cease at the end of July.
    This is unprecedented. A true Budgetgate, if you will, of 
our time. First, never can I recall, or other individuals that 
I have talked to can recall, or any agency for that matter, 
other than VA, completely exhausting its operational funds 
prior to the end of the fiscal year with the consequences for 
VA being cessation of hospital operations.
    Second, never can I recall an issue of such enormous 
magnitude evading the direct attention of the President, and 
until just recently, you and I speaking about it, Mr. 
Secretary. This is not a flying-under-the-radar issue. Yet I 
feel that it is exactly how the VA and the President have 
treated it in an effort to avoid responsibility of what is 
going on.
    So that everybody understands where I am coming from, let 
me start by reviewing how we have arrived at this point. The 
first real hint of serious financial issues came as a result of 
a briefing for our staffs with the VA on June 4 on a very 
separate topic. At the conclusion of the briefing, committee 
staff noted that there appeared to be a $2 billion to $3 
billion difference between VA's projected $10.1 billion 
obligation rate for care in the community compared with the 
funds that VA budgeted for care in the community.
    The VA official that was briefing agreed with the 
discrepancy but stated cryptically that just because VA was on 
pace to spend $10.1 billion, it didn't mean that the money to 
address the discrepancy was either found or was available. That 
assertion was repeated upon further questioning, leaving it to 
staff to read between the lines what was meant.
    At around the same time, during a June 8 visit to the 
Cincinnati VA Medical Center, I myself began to hear rumors of 
an impending financial issue consistent with the cryptic 
warning that had been provided by VA officials in a staff 
briefings on the 4th of June. As a result, on the 10th of June, 
I called on either the Secretary or the Deputy Secretary to 
testify on the state of VA's budget.
    As a consequence of my calling this hearing, staff received 
a prehearing briefing, again at our request, on June 18. It was 
at this briefing that VA for the first time publicly revealed a 
possible $2.5 billion shortfall in funding. Notwithstanding 
this briefing, there was no mention of a hospital shutdown.
    On the 23rd of June we received a letter from the Secretary 
citing the looming shortfall of $2.5 billion and also 
requesting of the Appropriations Committee a transfer of funds 
from the medical facilities account to the medical services 
account. Again, there was still no mention of a hospital 
systemwide shutdown.
    And, finally, at the hearing on June 25 itself there was no 
mention of a hospital system shutdown coming in August.
    Mr. Secretary, I am disappointed about the slow, 
painstaking revelation of this crisis by the Department that is 
led by you. I understand there are excuses as to why we are in 
this position. However, somebody somewhere took their eye off 
the ball. Just as Congress established a cap on spending for 
the Denver project that VA busted, Congress also provided a 
budget for VA for fiscal year 2015, which the President signed 
into law, and it too is now busted. In both instances, VA has 
left Congress with very little time to react to a crisis 
created by VA's own management decisions.
    While we will not penalize veterans for VA's management or 
transparency failures, the days when VA can come to Congress 
and just say, ``Cut us a check,'' are gone. Asking for 
flexibility without supporting information is not enough. 
Similar to the way a large corporation board of directors sets 
a budget and the corporate management implements that budget, 
the President and 535 members of your current board of 
directors set a budget and expect you and your staff to carry 
out the Department's mission; that is, to manage the taxpayers' 
resources in a fiscally responsible manner.
    Just as emerging circumstances in the private sector might 
cause a CEO to go back to the board armed with information 
supporting a request for additional resources or flexibility, 
we have the same expectation. And despite unsupported hints of 
a problem by the Department, that supporting information was 
not provided until extraordinarily late.
    We have already passed legislation to take VA out of 
managing major construction programs. Perhaps we need to bring 
in an outside entity to manage the Department's finances. I 
hope not.
    I recognize Ranking Member Brown for an opening statement.

    [The prepared statement of Chairman Jeff Miller appears in 
the Appendix]

       OPENING STATEMENT OF RANKING MEMBER CORRINE BROWN

    Ms. Brown. Thank you, Mr. Chairman. And thank you for 
calling this hearing today to discuss the VA's current budget 
shortfall and the possibility that VA may have to close 
hospitals or ration healthcare.
    Mr. Chairman, I know everyone in this room agrees that this 
committee is committed to providing the resources that VA needs 
to take care of our veterans. We all need straight answers to 
our questions. How much is needed, and why?
    We are all supportive to make sure our veterans get the 
care that they need. But yet again we are faced with an 11th-
hour VA budget crisis. We must all work together, VA and 
Congress, in order to properly anticipate the resources needed 
for VA. The VA must do a better job of predicting requirements. 
It is important that VA starts planning and anticipating what 
our veterans will need and where they will need it.
    We have been hearing that this shortfall is due to the 
increase of veterans coming to get medical care, resulting in 
more veterans being treated outside of VA. I also think it 
takes care of the veterans with hepatitis C, many of whom are 
Vietnam veterans who we recently honored in a celebration in 
the Capitol, should be one of our highest priorities. But I 
wonder if this shortfall is fundamentally due to lack of 
planning and forecasting or for a variety of programs which 
provide services to our veterans.
    So today let's figure out what we need to do to ensure that 
our veterans are getting the healthcare they had earned and 
begin to fix what steps we need to take, a fix that will 
prevent any more 11th-hour budget crisis.
    In February the Secretary began asking this committee for 
more flexibility to move money between accounts that would 
enable him to run his administration more like a business and 
better care for the veterans. Let me repeat that. In February, 
and again in March, the Secretary came right there and asked us 
to give him the flexibility to run the VA like a business so he 
could care for the veterans.
    We have over 60 additional accounts that the VA has to 
decide whether or not to allow flexibility. And as we track the 
VSO support and providing allowing the Secretary access to 
choice towards funds, I want to present for the record the VA 
physician productivity is up 8.5 percent. And it gives the 
account of every category that we are service veterans for 
fiscal year 2015 and the increase. I want to submit that to the 
record.
    The Chairman. Without objection.
    Ms. Brown. In addition to that, I want to submit for the 
record a letter from each of the service organizations 
indicating that they support the Secretary having the 
flexibility to move this money around.
    When we did the Choice Act, the purpose of the Choice Act 
was to provide services to the veterans. We didn't say what 
services, just services to the veterans, and the Secretary 
needs the flexibility and able to provide those services.
    And with that, Mr. Chairman, I yield back the balance of my 
time. And did you take the VA's without objection----

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

    The Chairman. Without objection, I will accept those 
letters.
    And I do appreciate you submitting those letters of 
support, and remind my colleagues that all the veteran service 
organizations also support my accountability bill as well. So 
as we meet later on this week to talk about it, I hope that we 
will keep that in mind.
    I would remind the members that this committee and the 
Senate as well rejected on a bipartisan basis an attempt to go 
into the Choice Fund to fix the budget shortfall at the Aurora 
hospital as well. And I think we need to focus, rightly so, as 
Ms. Brown has pointed out this morning, forecasting and getting 
a better grasp on what is going on with the dollars that are 
appropriated to the Department of Veterans Affairs. And that is 
why we have asked the Secretary to be here.
    And I know you had to change your schedule in order to 
come, and I appreciate that.
    Without question, once we spoke, the Secretary said, ``I 
will be there,'' along with Dr. Tuchschmidt.
    So, Mr. Secretary, you are recognized for your opening 
statement. I know you also have some charts you brought with 
you. I don't know if we are going to post them up here or if 
people have----
    Secretary McDonald. We have given them out, Mr. Chairman.
    The Chairman. Okay. All right. Thank you, Mr. Secretary. 
You are recognized.

  STATEMENT OF THE HONORABLE ROBERT MCDONALD, SECRETARY, U.S. 
     DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY JAMES 
TUCHSCHMIDT, M.D., ACTING PRINCIPAL DEPUTY UNDER SECRETARY FOR 
  HEALTH, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 
                        VETERANS AFFAIRS

             STATEMENT OF THE HON. ROBERT McDONALD

    Secretary McDonald. Mr. Chairman, if I may, I would like to 
start, and I know you would agree with this, by honoring our 
five servicemembers who were senselessly killed in Chattanooga. 
On behalf of all veterans and on behalf of our Department, I 
extend my deepest condolences to their families, their fellow 
servicemembers, and their friends who grieve their loss. We 
will never forget their service to our Nation, nor their 
supreme sacrifice on behalf of all of us, and the freedom that 
we so cherish.
    Thanks to the chairman and the ranking member for joining 
your Senate counterparts at our most recent Four Corners 
meeting at VA's central office last Thursday morning. And I 
appreciate this opportunity to continue our dialogue publicly 
so veterans and all Americans can understand these important 
issues.
    Representing veterans and servicemembers this morning are 
senior leaders of some of our most important partners, veterans 
and military service organizations, and I want to thank them 
for being here as well.
    A year ago today at my Senate confirmation hearing I was 
charged to ensure that VA is refocused on providing veterans 
with the highest quality service that they have earned. I 
welcome that opportunity.
    For the last year, I have been working with a great and 
growing team of excellent people to fulfill that sacred duty. 
Over the last year, since my swearing in, 9 of the 17 top 
leaders in VA are all new. We have to get the right people on 
the bus, and we have to get them in the right seats on the bus.
    Because of their hard work, VA has increased veterans' 
access to care and completed 7 million more appointments this 
year than last year; 2.5 million within VA and 4.5 million in 
the community. So 7 million total more than last year, 4.5 
million in the community, 2.5 million inside VA.
    We have increased VA Care in the Community authorizations, 
including Choice, by 44 percent since we started accelerating 
access to care a year ago. That is 900,000 more authorizations 
than the previous year. While Choice has been just a small 
proportion of that 4.5 million, it is on the rise, and 
utilization has doubled in the last month.
    Today, because of growth in access, the Department is 
struggling to meet veterans' needs through the end of the 
fiscal year. We need your help.
    You have already appropriated funds to meet these needs, 
but you haven't given me the flexibility or the authority to 
use them. Without flexibility, we will have no option at the 
end of July but to defer all remaining non-Choice Care-in-the-
Community authorizations until October, provide staff furlough 
notices, and notify vendors that we cannot pay them as we begin 
an orderly shutdown of hospitals and clinics across the 
country. These are unfortunate conclusions to an otherwise 
productive year of progress.
    In fact, we have doubled the capacity that we thought was 
required to meet last year's demand by focusing on four 
pillars: staffing, space, productivity, and VA Community Care, 
or what we sometimes call Choice Care. We have more people 
serving veterans. Since April 2014, we have increased net 
staffing by over 12,000, including over 1,000 new physicians, 
and we have used Choice Act funding to hire over 3,700 medical 
center staff.
    We have more space for veterans. We have activated over 1.7 
million square feet since last fiscal year and increased the 
number of primary care exam rooms so providers can care for 
more veterans each and every day.
    We are more productive, identifying unused capacity, 
optimizing scheduling, heading off no-shows, and we are also 
stopping late appointment cancellations and extending clinic 
hours at night and on the weekends.
    We are aggressively using technology like telehealth, 
secure messaging, and e-consults to reach more veterans. 
Clinical output, as you can see in this chart, has increased 
8.5 percent, where our healthcare budget has increased only 2.8 
percent.
    We are aggressively using Care in the Community. The Choice 
Program and our Accelerating Access to Care Initiative 
increased veteran options for care in the community. We have 
provided VA Care in the Community authorizations, including 
Choice, for 36 percent more people than we did over the same 
period last year, a total of 1.5 million individual VA 
beneficiaries.
    In short, we are putting the needs and expectations of 
veterans and beneficiaries first, empowering employees to 
deliver excellent customer service, improving or eliminating 
processes, and shaping more productive and veteran-centric 
internal operations.
    That is MyVA, our top priority to bring VA into the 21st 
century.
    Our strategy is paying dividends for veterans. We have 
increased VA Care in the Community authorizations, including 
Choice, by 44 percent since we started accelerating access to 
care a year ago. That is 900,000 more authorizations than the 
previous year.
    Between the end of June last year and May, we have 
completed 56.2 million appointments, a 4 percent increase over 
last year. And there were 1.5 million encounters during 
extended hours, a 10 percent increase, and that is particularly 
important to our women veterans.
    Even with that increase, we completed 97 percent of 
appointments within 30 days, 93 percent within 14 days, 88 
percent within 7 days, and 22 percent same-day appointments. 
For specialty care, wait times are down to an average of 5 
days. For primary care, wait times are down to an average of 4 
days. And we have an average of about 3 days for mental 
healthcare.
    So we are making verifiable progress for veterans, and with 
your support, VA can be the best customer service agency in 
Federal Government. But even as we increase access and 
transform, important challenges remain. And there will be more 
in the future as veterans' demographics evolve.
    It is now clear that the access crisis in 2014 was 
predominantly a matter of significant mismatch of supply versus 
demand, exacerbated by greater numbers of veterans receiving 
services. That sort of imbalance predicts failure in any 
business, public or private, especially when we promise 
veterans benefits without the flexibility to fulfill the 
obligations.
    So a fundamental problem is VA working to a budget, not to 
the package of benefits and services veterans have earned and 
have been promised by Congress. Budgets are static, our 
requirements are fluid, and changes in veterans' needs and 
preferences for care far outpace the Federal budget cycle.
    Here is an example. Last year on average we added 51,000 
veterans to our healthcare rolls each month. This year--this 
year--the monthly average of new enrollees has have been 
131,000--131,000. That is a 147 percent increase. And we 
welcome them all, and I am sure you do too.
    But we can't miss that today enrolled veterans only rely on 
VA for 34 percent of their care. Just 1 percentage point growth 
in reliance increases costs by approximately $1.4 billion.
    Let me say that again. Today, enrolled veterans only rely 
on VA for 34 percent of their care. Just a 1 percent increase, 
a 1 percentage point increase in reliance increases costs by 
$1.4 billion.
    So we are working hard to best serve more veterans, but 
without flexibility, we can't provide what they need the way 
you have directed it. We have reached a decision point. 
Congress can either shape a different benefit profile for 
veterans or give VA the flexibility and money for legislated 
entitlements. My worst nightmare is a veteran going without 
care because I have the money in the wrong pocket.
    I earlier compared the inflexibility we face to having one 
checking account for gasoline in your household and one 
checking account for groceries. The price of gasoline falls in 
half and you can't move money from the gasoline account to the 
food or grocery account.
    Well, the inflexibility we are talking about today is even 
worse than that. It is even more puzzling. I can't move money 
from the food account to another food account, from a Care in 
the Community account to another Care in the Community account.
    Altogether, we have over 70 line items of budget that are 
inflexible, yet the veteran has choice. Freed up, they would 
help us give veterans the VA that you envision and that they 
deserve. We need flexibility to move money from line item to 
line item, just like you would a business. We need flexibility 
to move money from VA Community Care to Choice, and from Choice 
to VA Community Care. Both are Care in the Community. We need 
flexibility to transfer both directions depending upon demand 
because we will not ever be able to predict the demand exactly.
    We owe it to veterans and ourselves to be more agile 15 
years into the 21st century. It was February when I asked for 
flexibility to move resources. It was May when we again asked 
for flexibility to use some Choice Program funding to provide 
Care in the Community. I am asking again for the simple 
flexibility to serve veterans with the money you have already 
appropriated so we can resource the capacity that we have 
grown. More flexibility will go far toward meeting veteran care 
and increasing access across the country.
    Money for the Denver Replacement Medical Center will be 
depleted by early October, and work on the project will cease 
unless we receive congressional authorization for the full cost 
of the project and flexibility in fiscal year 2016 to transfer 
$625 million of our existing resources to the major 
construction account.
    We have presented several plans to Congress, the latest 
being on June 5, and we will have an update shortly. We 
anticipate the Corps of Engineers will award a contract to 
complete the facility in October and assume construction 
management on the project if we receive full authorization and 
that flexibility that we seek.
    To improve community care for veterans, we need to 
streamline antiquated business processes for purchasing care. 
For years, a variety of authorities and programs have provided 
community care to veterans. And I have trouble holding this up 
and talking at the same time, but you have this at your table.
    Today we have seven different programs for providing 
community care. Each one has its own exclusions, each one has 
its own payment option. It is incredibly confusing. We have 
traditional VA care. We have Choice. We have Patient-Centered 
Community Care. We have two separate plans for emergency care 
in the community. We have something called ARCH. We have Indian 
Health Service and Tribal Health Program. And these don't 
include other programs for veterans' beneficiaries.
    It is all very difficult to understand. Veterans don't get 
it, providers don't get it, our employees don't get it, and I 
can tell you from our breakfast earlier last week, Members of 
Congress don't understand it completely.
    We look forward to continuing to work with you on an 
integrated network of VA and community care and a single 
integrated reimbursement system to get the providers we need on 
board. You see, what happens is providers cherry pick the 
program to get the highest reimbursement rates.
    On May 1, we sent you our proposal, the Purchased 
Healthcare Streamlining and Modernization Act, a bill to make 
critical improvements in provider agreements and give us the 
flexibility to provide timely local care to veterans. Our 
proposal, modeled on the purchased care authority in the Choice 
Act, includes protections for procurement integrity, provider 
qualifications, and reasonable cost.
    Flexibility with respect to Choice is central to resolving 
the budget shortfall and ensuring veterans continue receiving 
timely care as we strive to meet the 30-day access goal.
    On top of the $7.5 million of VA Community Care we already 
provide, Congress added new entitlements for veterans in the 
Choice Act. But there are many programs that the Choice Act 
doesn't cover. Because Choice authorizations and community care 
authorizations are in different buckets, we have a funding 
shortfall, in spite of the fact that both types of care are 
community care.
    At the current rate, we expect Care in the Community in 
2015 will cost an additional $2.5 billion. New hepatitis C 
drugs for veterans will cost an additional $500 million. All we 
seek is flexibility, flexibility through limited authority to 
use money for community care to the extent those exceed our 
fiscal year 2015 budget.
    To meet these growing requirements next year, VA needs the 
adequate funding the President's 2016 budget request provides. 
But the House-proposed $1.4 billion reduction means $688 
million less for veterans' medical care, meaning as many as 
70,000 veterans may not receive care. Further, it means no 
funding for four major construction projects and six cemetery 
projects, and 17,000 veterans and family members may not 
receive VA burial honors. The construction budget was cut 50 
percent, and that is at a time when over 50 percent of our 
buildings are over 50 years old.
    The increase in requirements we are seeing anticipates 
greater challenges ahead. Services and benefits peak years 
after conflicts end. Remember, during my budget testimony I 
talked about the fact that we are now seeking the peak years of 
the Vietnam crisis, even though the Vietnam war ended 50 years 
ago. The healthcare requirements and the demand for benefits 
increase as veterans age and exit the workforce.
    So full funding of the 2016 budget request is a critical 
first step in meeting these challenges, but we have to look 
much further ahead for the sake of Afghanistan and Iraq 
veterans. In 1975, just 40 years ago, the year I graduated from 
West Point, only 2.2 million American veterans were 65 years 
old or older. That is 7.5 percent of the veteran population. By 
2017, we expect 9.8 million will be 65 years or older. That is 
46 percent of the veteran population.
    What does that mean? Well, consider this. VA provides the 
best hearing aid technology anywhere. Medicare doesn't cover 
hearing aids, and most insurance plans have limited coverage at 
best. So choosing VA for hearing aids saves veterans around 
$4,200.
    As VA continues to improve access, more veterans are going 
to come to the VA because they want to and because it makes 
financial sense. So it is a foregone conclusion that the cost 
of fulfilling our commitments will grow for the foreseeable 
future.
    It bears repeating that the 2014 access crisis was in part 
a Vietnam debt, not a debt of Afghanistan and Iraq where 
servicemembers will still serve. So we can't be shortsighted. 
We have to respond today with a long-term view that underlines 
a commitment to VA transformation.
    Veterans who have preserved our freedom are watching us. As 
the military drawdown continues, servicemembers are also 
watching us. And young men and women who might choose to serve 
are watching us. They rightly expect us to fulfill our 
obligations with the same degree of dignity and fidelity with 
which they put their lives on the line for our Nation. If we 
choose shutdown, we fail all of them.
    Given the commitment we made at breakfast last week to keep 
working together, I know we will honor all of our obligations 
to veterans and their families of every generation.
    Thank you very much, Mr. Chairman and committee. We look 
forward to your questions.
    The Chairman. Thank you very much, Mr. Secretary.
    I would like to ask, you talked about additional enrollees 
this year, and I don't have the numbers right in front of me. 
Did you say that was a net number, so it would include those 
that died, or is this just new enrollees? So you had 100,000 
new enrollees. How many folks died and came off the system?
    Secretary McDonald. I don't have the number, Mr. Chairman, 
of how many died. But I can tell you that with 7 million more 
appointments this year versus last, that a lot more are alive 
than are dead.
    The Chairman. And I understand that. But you made a point 
of talking about how many new people enrolled into the system, 
and I just want, for clarity purposes, I think it is important 
not just to focus only on that number----
    Secretary McDonald. We will get you that number.
    The Chairman [continuing]. But that we get a net number.
    Secretary McDonald. We will get you the number of the 
number of people who died and the number of enrollees.
    The Chairman. And I think the simple question I think that 
we need to talk about today--and I know you wanted to focus on 
the appropriations process, which is still ongoing. I would 
hope very soon that the Senate will move and move a piece of 
legislation so we can get the MilCon-VA budget passed, I think 
it is very critical that we get that done.
    But if we didn't have the Choice Program to fall back on 
today, that $10 billion, $9 billion, whatever the number is 
today, how would this problem be solved?
    Secretary McDonald. Well, Mr. Chairman, we agree with you. 
As we said last week, and as we have said from the very 
beginning, we very much favor the Choice Program. The Choice 
Program is the shock absorber that has allowed us to care for 
veterans at a time when more veterans are entering the system 
and when that care is necessary.
    You know, the Choice Program allocated $10 billion for care 
over 3 years. We are already spending $6 billion for community 
care from the current VA budget. So the idea that has been 
propagated in the media that somehow we are against the Choice 
Program or we are gutting the Choice Program is absolutely, 
positively wrong, proven by the data. We have overspent $6 
billion this year in community care. Community care is 
absolutely essentially.
    The Chairman. I think that the issue is your hepatitis C 
drug, $1.5 billion or whatever the number is for hepatitis C, 
is part of the issue. And I don't think any one of us thinks 
that we should not be providing that drug. In no budget 
submission that I can recall was it discussed about that, 
although I am hoping that somebody, and Ms. Brown actually 
talked about the forecasting, that somebody was looking at the 
approval of that drug, and it was coming on, and that if it did 
come on, that it was going to cause a significant issue as it 
relates to the non-VA care line item of $6 billion, which is 
gone now, has never been gone before, but all of a sudden this 
year it has disappeared.
    And my questions was, if we didn't have the pot of money 
that you are looking at now to solve this crisis, how would we 
solve the crisis?
    Secretary McDonald. Well, Mr. Chairman, what we are saying 
is that based on the laws that the Congress has passed, there 
are certain benefits we have to give to veterans, and the 
budget has to match that. Without the Choice Act, the budget 
clearly would not match the laws that we provide to veterans.
    And remember, as I said, only just about over a third of 
veterans are using the system. And with every new 1 percentage 
point of veterans who enter the system, we are talking about 
$1.5 billion, an incremental $1.5 billion.
    I think the point you make on the hepatitis C drug is a 
really important one. I talked about the length of budget 
cycles in the Federal Government. We started the appropriation 
for 2015 because it is an advanced appropriation sometime 
around 2013. These drugs were invented between 2013 and 2015. 
They couldn't have been anticipated. We have had two more new 
hepatitis C drugs come out. We are going to have new drug 
inventions in the future.
    How do we work together to create the flexibility in the 
budget cycle so that we can deal with incremental demand to 
veterans and new special causes like new drugs? And that is 
what we are proposing to work together with you on.
    The Chairman. According to your staff, the Veterans Health 
Administration has taken a number of steps to curtail the 
shortfall, including revised guidance on the use of non-VA 
care, halting all nonessential hires, purchase and travel, and 
pulling salary dollars for medical center accounts.
    One area that I see that hasn't been looked at, and that is 
the issue of bonuses. What is sacred about the $350 million 
bonus pot that would prevent you from accessing that money? And 
if you need flexibility, we will be glad to give you 
flexibility to use that too. Would you not look at every 
crevice possible?
    Secretary McDonald. Mr. Chairman, you probably recall the 
meeting you and I had in your office where we went through the 
relative ranking and the accountability steps that we have 
taken within VA. One of those steps, as you may recall, is 
nobody in the Veterans Health Administration, nobody, is 
receiving a bonus for 2014. And also, the relative ranking that 
we did of their performance, no one in the Veterans Health 
Administration received an outstanding rating.
    And I would defy you, as I did that day, to compare our 
relative rating, our relative performance rating, versus the 
relative performance rating of every other department of 
government and the best companies in the private sector, 
because we were following the principles of the best companies 
in the private sector.
    The Chairman. And I appreciate the meeting that we had, the 
information you provided. And my time has expired, but I want 
to get for clarity, nobody within the Veterans Health 
Administration is getting a bonus?
    Secretary McDonald. No executive, yes, sir.
    The Chairman. There is a very distinct difference between 
executive and the line employee, and I just wanted to make that 
clear.
    Ms. Brown.
    Ms. Brown. Thank you, Mr. Chairman.
    First of all, let me just say that it was a beautiful 
service that we had here last week in the Capitol for the 
Vietnam veterans. And, you know, that glitter is very nice. I 
mean, they deserve it. But they also deserve the services.
    Now, I participated in every Choice meeting, every 
conference, voted on it, and the purpose of the Choice was to 
provide veterans services to veterans, their care. Can you 
expound more on the flexibility that you need? Because when I 
think about it, I think about the GI Bill. Veterans can go to 
any school that they want to. So the money follows the 
veterans.
    So can you expound on that flexibility that you need, that 
you have come to Congress, both openly and in private, and 
explain to us that you need the flexibility?
    Secretary McDonald. Yes, ma'am. Well, thank you, Ms. 
Ranking Member.
    As we have said, there are about 23 million veterans in 
this country. Only 9 million are signed up for our healthcare 
system, and probably only 6 million, 7 million use it on any 
given day. So there is an opportunity for every veteran to use 
our health system, and we would like that. But in order for 
that to happen, we have got to have the flexibility to be able 
to deal with an influx of veterans as we improve care.
    One of the things that you are probably aware of is if you 
get your knee replaced with Medicare, it costs you roughly 
$5,000. If you are a veteran and you get your knee replaced 
using the VA, you save $5,000. So to the degree we improve our 
system and we improve access to our system, more and more 
veterans will enter the system. And as we said earlier, every 
percentage point of veterans who enter the system is going to 
add another $1.5 billion of cost.
    With 70-plus line items of budget where we can't move money 
from one line item to another, it distorts what we do. It 
causes situations like we are in today. And the whole purpose 
of the Choice Act was to improve care for veterans. The whole 
purpose of the Choice Act was to get veterans care in the 
community. What we are talking about is a shortfall in care in 
the community.
    So it really defies my logic to understand why we can't use 
Choice care money for care in the community since that is the 
reason it was appropriated. The money has already been 
appropriated. It is sitting there. We would like to use it to 
care for veterans. And as more veterans come into the system, 
we want to care for them too.
    Ms. Brown. One of the complaints or challenges is, you 
talked about knee replacement, so if someone goes into one of 
the Choice programs for knee and the doctor determined that 
both knees need to be replaced, you can't do it based on 
exactly how the Choice is working right now because that other 
knee has had to carry. I mean, I know this is getting 
technical, can the medical person explain to me why?
    Dr. Tuchschmidt. Yes. So I think if the veteran needs both 
knees replaced, under the Choice Program they could get both 
knees replaced. It would require a second authorization for the 
second procedure that needs to be done.
    I think that the challenge for us is really--you know, the 
chairman asked what would we do if we weren't in a situation 
where we have Choice funds. And the fact of the matter is, is 
we probably this year would have done what we always have done. 
We would have managed to a budget. But we didn't do that this 
year. We managed to a requirement, and that requirement was 
that no veteran would wait more than 30 days for care.
    And while we have worked very hard to make the Choice 
Program an option for that patient who needs that knee 
replacement, the fact of the matter is today a lot of our care 
is going--we are buying it through mechanisms outside the 
Choice Program, but we are doing it so that no veteran waits 
more than 30 days for care, and then accessing the resources to 
be able to pay for that is, I think, our challenge today.
    Ms. Brown. My concern is those community programs that we 
have been working with for years, universities, other 
stakeholders, what is happening to those programs, because we 
have cut the uses of some of those programs because of the 
shortfall.
    Dr. Tuchschmidt. We have curtailed the use of those 
programs for elective care today. Our interest is actually 
making Choice Program the premiere program, to make that 
program the predominant way that we get care. And we have 
worked very hard with both Health Net and TriWest to get the 
87,000 providers that we have used in the past--some of those 
are our academic affiliates--to sign up to be providers under 
the Choice Program. And for our academic affiliates, we offer 
them both indirect and direct medical education, overhead 
expenses in the reimbursement that they have negotiated with 
CMS.
    Ms. Brown. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Lamborn, you are recognized.
    Mr. Lamborn. Thank you, Mr. Chairman. Thank you for having 
this important hearing.
    Secretary McDonald, you have come in here basically 
demanding $3 billion or healthcare in large part shuts down on 
August 20. And I am just amazed that we are in this position. 
Do you and your leadership team at the VA have any 
accountability or any responsibility at all for this happening? 
And if so, how much?
    Secretary McDonald. Well, of course we do. And as Deputy 
Secretary Gibson laid out in the last hearing on the same 
subject just a few weeks ago, there are many reasons that we 
are where we are, and I think we all share some of the 
responsibility, including Members of Congress.
    We have a new program called the Choice Program. It is hard 
to predict new programs. We have seven different ways of 
providing care in the community. And at the time the Choice.
    Mr. Lamborn. Okay----
    Secretary McDonald. Excuse me, sir. You want to interrupt?
    Mr. Lamborn. Well, yes. Let me interrupt because my time is 
limited. We have described what the layout of the land is. You 
have gone through----
    Secretary McDonald. I was trying to go through the reasons 
we are where we are, and I was going to show you what 
accountability we have.
    Mr. Lamborn. Okay. Do you have any role in this, is what I 
am getting at.
    Secretary McDonald. We all do. We all do. You know, one of 
the first things you learn your first day at West Point is to 
say, ``No excuse, sir.'' We all do. And one of the things that 
baffles me in this case is we are dealing with a computer 
system that is over 30 years old. It is called the FMS system. 
It is written in COBOL, which is a language I wrote at West 
Point in 1973. We have got to change the management system of 
the financials of this enterprise called the VA.
    The problem that we have is when we benchmark private 
industry, our IT budget is about 50 percent of what a 
healthcare system IT budget is. So we have got to fix that.
    At the same time, we have got to improve our management of 
the financial systems, and we are going to work hard to do 
that.
    At the same time, it would help us if we had flexibility 
rather than over 70 line items of different budget that we 
can't move around.
    Mr. Lamborn. See, my issue is that every time one of these 
problems comes up, on an almost weekly basis it seems like this 
year, we hear pleas for more money or more flexibility or 
something like that to go forward, but we never really get to 
the bottom of what caused it in the first place. And that is 
just what I am trying and the rest of us here are trying to get 
to the bottom of.
    Secretary McDonald. Do you want me to repeat my opening 
statement? I thought I was pretty clear on what caused it. I 
mean, last year you talked about mismanagement being not giving 
veterans care. Now mismanagement is giving veterans too much 
care. You know, the Congress passes the law----
    Mr. Lamborn. No, no, no, no. Here is my real problem here. 
You say that on August 20 there is no other option except for 
an emergency supplemental by Congress. You are going to start 
closing down operating rooms, hospitals, clinics all over this 
country. And with a $60 billion healthcare budget out of a $160 
billion total budget, there is no other way for you to see 
around this problem than to tell veterans they can't come into 
the operation room after August 20.
    Secretary McDonald. Sir, I didn't say that. I did not talk 
about a supplemental. What I talked about was using part of the 
$10 billion that has already been appropriated by Congress for 
care in the community to pay for care in the community. That is 
the lunacy of why we are here talking about this. You 
appropriated $10 billion for care in the community. We are 
talking about using it to pay for care in the community.
    Mr. Lamborn. Mr. Chairman, I yield back.
    The Chairman. Ms. Brownley.
    Ms. Brownley. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your continued leadership 
to right the ship here. I appreciate it very much.
    I do think that flexibility is part of the solution. It is 
not the panacea, but it is part of the solution. And I think, 
clearly, that we need to be more nimble to serve our veterans 
and to serve them appropriately in the way that they deserve 
it.
    Closing hospitals is not a choice, as far as I am 
concerned. I think we have an IT system that can't track 
spending and can't reconcile a budget in a timely way. And I 
would argue, and I think that you have alluded to this in your 
testimony, but I would argue that, yes, there has been an 
increase in demand from our veterans. But I would also argue 
that the VA is pushing more resources out the door than they 
have in the past, and that is a good thing because pushing more 
resources means that more veterans are being served and being 
served appropriately.
    So I guess my question, you have mentioned about areas that 
we need to improve upon, you mentioned IT, that we are spending 
50 percent of what private industry spends on their IT systems, 
and better management checks and balances, but what are we 
going to do?
    I think we need, before we move forward in any way, shape, 
or form, we need assurances that these kinds of things are 
going to get fixed, that we can't move towards flexibility and 
hope and pray that the next time we are going to be better off.
    We need assurances that these are going to be fixed and 
that we will know in a timely way where we are, if we ask the 
question today, we know exactly where we are in terms of money 
that has been spent and what the balances are.
    So share with us the specifics and when you think these 
things are going to be fixed so that we don't approach another 
fiscal year with this same kind of calamity that we are facing 
today.
    Secretary McDonald. Thank you.
    I again want to reiterate that we do own these problems. We 
do want to fix these problems. I didn't want to give any 
different kind of impression with Congressman Lamborn's 
question or yours.
    It starts with getting the right people in place. We just, 
as you know, just got confirmed Ms. LaVerne Council, who is our 
Assistant Secretary for the Office of Information Technology. 
She was the IT leader for Johnson & Johnson. She was the IT 
leader for Dell. I have been working to recruit her for many 
months, almost since the day I was confirmed.
    We have got to get the right leaders in place. I think we 
now have them. What we then need to do is we need to benchmark 
other operations, which we are doing. And in the case of the 
financial management system we use, FMS, the COBOL system I am 
talking about, we have got to replace it. And until we do 
replace it, we have got to take brute force effort to make sure 
we do a better job of keeping track of our budgets and keeping 
you informed of them.
    I didn't mention it earlier, but one of the issues here 
was, when you passed the Choice Act, you demanded in the Choice 
Act that we account for care in the community in a different 
way than we were doing it previously. You asked us to 
centralize that at our business office. And I am sure you did 
that in order to keep control of that money and make sure we 
weren't spending it for something else.
    Well, that change helped exacerbate this situation. 
Nevertheless, we tried through brute force to try to keep that 
accounting whole so that we could understand what was going on. 
But there is no question we have got to do a better job.
    Ms. Brownley. Well, Mr. Secretary, for me at least, I 
presume that we have the resources to find the right people for 
the job. So that is part of the solution.
    I have to say that I don't have a lot of confidence, having 
served on this committee now for 2\1/2\ years, that the VA--you 
haven't asked us for additional money for an IT system yet. I 
presume that potentially will come. But I don't have the 
confidence that within a year we are going to have a new IT 
system that provides the tools necessary that we would need to 
be able to have timely data and timely information in terms of 
where we are.
    Is there something that you are working on specifically to 
give us some assurances?
    Secretary McDonald. Well, obviously, this is a high 
priority for us. But I think before we design an IT system to 
deal with seven different ways of paying for care in the 
community, we ought to work together, as we talked at our 
breakfast last week, to go to one way of paying for care in the 
community, and then making the IT system will be a lot easier.
    Ms. Brownley. Thank you. I yield back.
    The Chairman. Dr. Benishek.
    Dr. Benishek. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here this morning. I 
think you did a pretty succinct history of what was going on 
here.
    I guess my biggest problem, frankly--and I agree with 
having more flexibility in accounts. Nothing irks me more than 
seeing new windows put in at VA that just were replaced 4 years 
ago when we don't have a nurse anesthetist. I mean, it is stuff 
like that. I mean, I completely agree with that.
    I guess what I am most concerned about is the fact that we 
didn't know about this whole situation until, what, 2 weeks ago 
or less than that? And we had Mr. Gibson here. And all of a 
sudden it is like a crisis.
    And I think, from my perspective, I was kind of hoping that 
you would have, like, a plan to reform the VA and make it all 
good, and you talked about some of that stuff here. But I 
haven't really seen you come out and tell me, maybe the 
chairman knows something I don't, about the reform process 
going on.
    And I am really disappointed in this $3 billion shortfall. 
Why weren't we knowing more about this in advance because--what 
is the story with that? Why don't we know about it sooner?
    Secretary McDonald. Congressman Benishek, I just want to 
draw your attention to this. This I gave you on June 5, we gave 
all members of the committee on June 5. This was about Denver. 
It was about replacing the Denver facility. But I thought it 
was important at the time we published this to also give you a 
heads-up on the work we are doing to transform VA.
    So if you turn to the back of this book, the last 56 pages 
are all about the transformation of VA. And we have sat down 
with those Members of Congress who are interested and gone 
through the detail. They happened to be mostly in the Senate. 
But we would love to take you through the detail.
    We have set up an external advisory board, which includes 
some of the most outstanding CEOs in this country that are 
helping us, and the VA is going through the largest 
transformation in its history. And every member on this 
committee has 56 pages of what is going on. And we are happy to 
spend more time with you. We would like you to be part of it. 
In fact, we would like to have hearings that talk about what 
are we doing to transform the future.
    Relative to the shortfall, our first knowledge of it was 
around the middle of May. At the time we had a meeting with the 
Eight Corners, both the Senate and the House appropriations and 
authorizing. At that time we mentioned three issues that were 
emerging. One was hepatitis C, one was Denver--of course Denver 
was the one that was the reason for the meeting--and the third 
was the cost of care in the community.
    At that time we thought we could solve the problem. We 
thought we could solve it by putting more veterans into the 
Choice Program and, therefore, not relying as much on our 
internal care for the community budget. We obviously couldn't 
solve the problem.
    We also thought that we could use unspent money from 
previous years to do it, and we got legal opinions and OMB 
opinions that we couldn't do that. So we couldn't solve the 
problem.
    Dr. Benishek. Is there unspent money from previous years 
sitting around?
    Secretary McDonald. Yes, sir. I mean, anytime you have 
budget line items that are over 70, where you are inflexible in 
moving money from one budget line item to another, you are 
going to have unspent money.
    In fact, one way to rid the government of unspent money is 
to allow more flexibility between accounts. That is the way 
businesses do it.
    Dr. Tuchschmidt. Yes, if I could just add, so, in prior 
years, the last 5 years sit in the Treasury, and as those 
obligations are expensed, the obligations, there are funds that 
get de-obligated, and those funds sit in the Treasury for 5----
    Dr. Benishek. How much is there?
    Dr. Tuchschmidt. I think for the last--about last 5 years, 
there is about $1.3 billion.
    Dr. Benishek. I had another question, too, about maybe 
third-party reimbursement for nonservice-connected care, and I 
have heard that is an issue that the collections are not what 
they should be. Can you give me a situation update with that?
    Dr. Tuchschmidt. Yes, I think our--so our collections this 
year are actually up significantly. I don't have the--I haven't 
refreshed that figure in my head recently. I want to say it is 
about 7 percent higher than we had anticipated, so we are 
working very hard to improve collections. A lot of our patients 
who have insurance have actually Medigap coverage, and without 
a Medicare EOB, those insurance firms don't----
    Dr. Benishek. EOB, what is that?
    Dr. Tuchschmidt. Explanation of benefits. So because we are 
not a Medicare provider, those providers don't necessarily pay 
us. But we are working very hard to collect every penny that we 
can.
    Dr. Benishek. I am out of time apparently.
    The Chairman. Ms. Titus.
    Ms. Titus. Thank you, Mr. Chairman. A lot of that money 
that is left over, though, was kind of used quietly to pay for 
the continuation of the Denver project, wasn't it?
    Dr. Tuchschmidt. Are you talking about the money in the 
Treasury for the last 5 years?
    Ms. Titus. Wherever you found that money in programs 
around.
    Dr. Tuchschmidt. Well, that money actually is in the 
Treasury. It is not available to us, so we can't use that 
money. We had--we thought we could, and it is money that 
essentially becomes, as I said, de-obligated as expenses come 
in. Also sometimes there are new expenses for whatever might 
have happened in, let's say in 2014 and that money is then used 
in that year, so you can actually become antideficient after 
the fact, so to speak.
    So that 1.3 billion was not available to us. We had hoped 
it would be. I was actually the staff person that had the 
cryptic conversation with the House staff back in June, and we 
had--we thought we had a plan. When--I mean, in my opinion, 
quite frankly, we are a victim of our success. I mean, we have 
gotten many more veterans care.
    Ms. Titus. Okay. But where did you find that money for 
Denver? That was a little piece----
    Dr. Tuchschmidt. That 1.3 billion is not for Denver.
    Ms. Titus [continuing]. That was around, right?
    Secretary McDonald. The money for the Denver project that 
we have talked about for this year came from the current year 
budget, not from previous years' budgets.
    Ms. Titus. Okay. And, also, in that report that you 
referenced, that is where you also listed as a possible 
solution for Denver taking a 1-percent across-the-board cut, 
which in retrospect now seems like not a very good idea when we 
are so in the hole now. We couldn't have afforded a 1-percent 
cut, but apparently, at that time, you thought you could.
    Secretary McDonald. That is correct.
    Ms. Titus. Well, we are going--there is a lot of teeth 
gnashing and hair pulling here today. I agree with many of the 
things that have already been said, but the fact of the matter 
is we can't let hospitals close. We are going to have to look 
for some flexibility.
    I think my confusion and maybe a confusion here, too, is 
over the difference between the care in the community programs 
that have now been consolidated and Choice. Seems to me there 
is very little difference in those, aside from some regulation, 
some contractors, and some naming. They are both really about 
care in the community. Is that accurate, so that would mean 
that flexibility is really not that big a problem?
    Secretary McDonald. Yes, your statement is accurate in 
principle. In execution, though, it is incredibly complex, and 
I would ask you to look at the chart that we gave you, and what 
you will find is we have seven different--seven different 
programs.
    Ms. Titus. Right.
    Secretary McDonald. All of which have different payment 
methods and different exclusion amounts. I was traveling with a 
Senator who brought in providers, and they all complained to me 
about every program we have except one, and obviously, I knew 
that the reimbursement rate for that program was higher.
    So because we have different reimbursement rates, you have 
different providers distorting the system and encouraging one 
program over another. What we have proposed--and we provided 
the legislation to the chairman and also to the Senate--is to 
bring all those together under one program, one reimbursement 
rate, make it easier for the veteran, make it easier for the VA 
employee. There is----
    Ms. Titus. If you do that, though, doesn't that mean that 
the flexibility that you need from the Choice program to that 
consolidated community and the care would make sense?
    Secretary McDonald. Yes, ma'am.
    Ms. Titus. I am trying to help you here.
    Secretary McDonald. Yes, ma'am. That is exactly right. You 
go to one program, you have one budget.
    Dr. Tuchschmidt. There is one really important point here, 
though, and that is that our--you know, our community care 
programs are what we used to call purchased care, used to call 
fee. There are a lot of things in those programs right now that 
are not covered by Choice and will require statutory change to 
fix that. So long-term care is not covered by Choice right now. 
Home care is not covered by Choice.
    Ms. Titus. Can you work with us to look for legislative 
fixes?
    Dr. Tuchschmidt. Absolutely.
    Ms. Titus. And not just the Senate, but maybe some of us on 
this committee?
    Dr. Tuchschmidt. We absolute have. We are working on 13 
things that we think need to be changed and have--we will have 
made a commitment to sit down with staff from this committee 
and from the Senate to make sure that we can address those 
issues.
    Ms. Titus. Great. And one last thing. I have been notified 
that you all are looking at moving southern Nevada from the 
VISN 22 to the VISN 21. That means our veterans, instead of 
being able to drive 4 hours to Los Angeles, will drive 8 hours, 
9 hours, 10 hours to San Francisco. I am going to be speaking 
this week later with somebody, Dr. Shulkin, but I just want to 
put it on your radar because this is something that we are very 
concerned about.
    Secretary McDonald. Thank you. We are trying to simplify 
the organization structure, but we are not--we want to make 
sure it is better for veterans, not worse.
    Ms. Titus. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Secretary, have you provided us with 
draft legislative language that would combine all of this?
    Secretary McDonald. I haven't as yet. I made a mistake when 
I said that. What we have provided is the providers agreement 
legislative language, which you do have. We have not yet 
provided the consolidation legislation language.
    The Chairman. Thank you.
    And, Ms. Titus, the biggest difference between the non-VA 
fee care pot of 6 billion that sits in there today and the $10 
billion Choice is the non-VA fee care money was at the 
discretion of the Department of Veterans Affairs whereas the 
Choice program is at the discretion of the veteran, so that was 
the biggest thing that was done from our standpoint.
    Dr. Huelskamp.
    Dr. Huelskamp. Thank you, Mr. Chairman, and I appreciate 
the topic of consideration today.
    And Mr. Secretary, I appreciate you coming. This is a very 
difficult discussion for me.
    I had great hopes that we would move forward in the last 2 
years to fix some of these problems, but as I see it, you are 
coming here before us with the most massive shortfall in VA 
history, nearly $3 billion. And I am not for certain, when did 
you personally know that we had this shortfall, Mr. Secretary?
    Secretary McDonald. What I said to Dr. Benishek was around 
the middle of May.
    Dr. Huelskamp. Middle of May. And if I understand the 
numbers correctly, in this particular line item, it is 
approximately 50 percent over the budget amount. Is there a 
level at which they come to you earlier than halfway through 
the fiscal year to say, hey, we have got a problem? Is that 
normal manner in which budget shortfalls and problems are not 
brought to your attention unless they are 50 percent over 
budget?
    Secretary McDonald. When there is a budget overage, you 
obviously try to resolve the issue as quickly as you can.
    Dr. Huelskamp. But is there a level? Again, 50 percent over 
budget. They tell you, I guess, in May and well before the 
fiscal----
    Secretary McDonald. Remember there is a $10 billion source 
of funds called Choice, and what we are talking about is 
Choice.
    Dr. Huelskamp. Without----
    Secretary McDonald. We are talking about care in the 
community and----
    Dr. Huelskamp. Mr. Secretary, I do know that.
    Secretary McDonald [continuing]. The same thing.
    Dr. Huelskamp. And what I would like to know is why you 
lowballed----
    Secretary McDonald. I didn't lowball.
    Mr. Huelskamp [continuing]. Non-VA care estimates. The 
actual, you came in and projected they would be 25 percent less 
of the actual figures for 2014. You came in and projected you 
would save 1.5 billion. They would be lower, and they are 
actually coming in at 1.5 billion over your estimates. So on 
one hand, you lowballed----
    Secretary McDonald. When did I say that?
    Dr. Huelskamp. In the budget submission to Congress.
    Secretary McDonald. In my 2016 budget testimony?
    Dr. Huelskamp. Let me give you these figures that you 
provided the committee, and maybe your staff didn't tell you 
this, and that is why I ask about the 50 percent.
    Fiscal 2014, $6.3 billion of actual spending, and you come 
in and said we only need 4.9 billion. That is a 25-percent cut. 
And then you are surprised to come in and say you are actually 
going to spend more than you were spending in 2014.
    So you come in and lowball the figures by 1.5 billion, then 
come in here later and say not only did we not cut 1.5 billion, 
we are going to add another billion on top of it. That is what 
I don't understand, Mr. Secretary.
    Secretary McDonald. I am not familiar with the figures you 
are talking about. Maybe Jim is, but as I said, I learned about 
this----
    Dr. Huelskamp. I don't need to hear the explanation. I 
want----
    Secretary McDonald. And as I learned about it, we got the 
information as quickly forward as we can.
    Dr. Huelskamp. Mr. Secretary----
    Secretary McDonald. We had the hearing, as I told you 
about----
    Dr. Huelskamp. Please.
    Secretary McDonald. The Deputy Secretary was here, and we 
are here today.
    Dr. Huelskamp. Mr. Secretary, I would like an explanation 
of why you projected a 25-percent reduction in this line item, 
and now you are saying you want a 25-percent increase over last 
year.
    Dr. Tuchschmidt. I am not familiar, actually, with the 
information you have, but--and I would be happy to look at it, 
but what I can tell you is that----
    Dr. Huelskamp. If I yield back to the chairman.
    The Chairman. Very quickly. I believe it was the VHA CFO 
that did provide that information to us.
    Dr. Huelskamp. And here is my concern, Mr. Secretary, and I 
know, in our closed-door meeting back in February, you did tell 
us and many on this panel, you do support VA Choice, but then 
you come in and requested to raid those funds and use them 
elsewhere. And then we hear from others in the Department that 
you have many employees that are not very supportive of Choice, 
and somehow we don't have a lot of veterans moving to Choice, 
and it came in well under budget.
    But what you wanted in next year's budget, we decided we 
are not going to do that, but then, somehow, a few months 
later, you come in and request essentially what we wouldn't do 
for you earlier. So--but I believe your Department either 
lowballed purposely or severely--created a severe mistake, but 
how could you claim that massive cut, and that is what I don't 
understand.
    Dr. Tuchschmidt. So, actually, I don't know what you have, 
but I can tell you that this year, we started off with a budget 
of $8.2 billion for care in the community, and if----
    Dr. Huelskamp. No, you are wrong on that. That was----
    Dr. Tuchschmidt. No, I am not wrong on that.
    Mr. Huelskamp [continuing]. What you spent last year.
    Dr. Tuchschmidt. No, I am not wrong on that.
    Dr. Huelskamp. The budget amount was 7.2 billion. That is 
what you put in your budget.
    Dr. Tuchschmidt. What we budgeted internally this year was 
$8.2 billion for purchase care, and we had hopes of--that the 
Choice program would offset some of that, and we took 688 
million out to pay for hepatitis C drug.
    Dr. Huelskamp. And out of a $3 billion, that leaves 80 
percent, but those are not the numbers you provided to the 
committee, and I would like to see those clarified, Mr. 
Chairman.
    One last thing as well. And for the Secretary, for 
everybody here, I know yesterday you apparently told the VFW 
that we were cutting the VA budget. That has never happened. 
That has never happened. You know that is not true. Hopefully 
that has been misreported in the media that you told the VFW 
that Congress has cut your budget.
    But I want to know, just for the record that has come up, 
beginning in how many employees have actually been fired for 
the waiting scandal? Is it only two? Is that correct?
    Secretary McDonald. I think you have seen over the weeks 
that we have made progress. As you know, we sought disciplinary 
action against six. Four are gone; two retired. We have got 
over 100 under investigation for wait time manipulation, and 
just last week, I think you saw an announcement that the FBI 
has actually indicted someone, and so these investigations do 
take time, Congressman. And the good news is they are getting 
to fruition, and as they do, we are taking action.
    As you know, since I have been Secretary, I think over 
1,300 people have been terminated. We take this very seriously. 
That is why we have 9 of our 17 members and new leadership team 
in our medical centers; 91 percent of our medical center 
directors or leadership teams are new. So the leadership is 
changing. And I hope with that change, we have a change in 
culture and a change in performance, and that is why we have 
had 7 million more appointments this year than last year.
    Dr. Huelskamp. I yield back.
    Secretary McDonald. Thank you.
    The Chairman. Thank you.
    Mr. Secretary, we do have an outstanding question in to you 
in regard to the 1,300 people that you say have been 
terminated, how many were probationary? And we are still 
awaiting the information for that.
    Secretary McDonald. We will get you the answer as quickly 
as we can.
    The Chairman. Thank you.
    Secretary McDonald. Unfortunately, our HR systems are 
similar to our financial systems, so we have to count them by 
hand.
    The Chairman. Ms. Kuster.
    Ms. Kuster. Thank you very much, Mr. Secretary, and I 
appreciate you being here with us today.
    I want to try to focus in on an issue that I think may be 
causing some confusion in the question of community care. The 
VA has recently redefined what had traditionally been viewed as 
non-VA care to include some other programs, so CHAMPVA, State 
veterans' homes, which I am very proud of the one in New 
Hampshire, community nursing homes. I think you have mentioned 
home healthcare, and I just want to be realistic, given the 
aging demographic of veterans in New Hampshire, we have 65,000 
Vietnam veterans who we are committed to serving. But just so 
that we all understand going forward, we are referring to this 
as sort of a crisis situation in the short term, but long term, 
if we are making the commitment, a bipartisan commitment, that 
we have made to shorten timeframes for waiting, to provide 
greater access, to hire more professionals, I want to 
understand exactly what is in this umbrella of community care 
and how we expect to meet this need and pay for this need going 
forward.
    Dr. Tuchschmidt. So we, under the--in the VACAA 
legislation, we were required actually to centralize all these 
programs under the chief business office and to centralize 
those fundings.
    Ms. Kuster. Required by whom?
    Dr. Tuchschmidt. By the Choice legislation. So we did that. 
And when we did, I mean, we have always called them purchased 
care really, and when I came in 23 years ago, it was fee care, 
but we were calling it non-VA care, non-VA community care, 
right, and we said, well, when 20 percent of our care on a cost 
basis is out in the community, it is not non-VA care anymore. 
It is VA care, so we call it now VA community care. We are 
trying to change how we talk about it and the mind-set in the 
organization about what we are trying to accomplish.
    So you are correct, that that bucket of things includes 
both outpatient and inpatient care that you normally think of 
as, you know, the purchased care stuff, whether we do. It also 
includes our nursing home care, our State home care, home care, 
CHAMPVA, those list of things are there, and I am happy to get 
you the detailed list of those and the breakout financially of 
what is in--being spent in each of those buckets.
    Ms. Kuster. And is it your proposal going forward that we 
would consolidate all of those into one program that we on 
Capitol Hill refer to as Choice, but it could also be referred 
to as community?
    Dr. Tuchschmidt. So we have all these programs, and then we 
also have, as the Secretary said, seven different ways of 
acquiring those services through sharing agreements, through 
contracts, PC3, ARCH, all these things. I think our proposal--
and we really want to sit down with the staff and jointly 
hammer out what a future state might look like. I think that 
the Choice program is a good program. I think that if we can 
figure out how to make that model work across all of these 
community care benefits so that we have a more unified and 
structured way where we have one billing system, one way to 
authorize the care, one way to get information back, the same 
kinds of providers that can provide those services, then I 
think we would be much better off because we could actually 
explain it, not only to other people but to ourselves.
    Ms. Kuster. And then let me understand when that was 
consolidated under the Choice Act to a central--presumably here 
in Washington, or is it located somewhere else?
    Dr. Tuchschmidt. Well, the CBO--it is--the chief business 
officer is here, but we have pieces of that office in Atlanta 
and Denver and----
    Secretary McDonald. Austin.
    Dr. Tuchschmidt. Austin.
    Ms. Kuster. So when that was consolidated, it sounds like 
there was an unintended consequence or inadvertent result in 
that you no longer had the information that is very regional. I 
know in our area, these are individual decisions. And as the 
Secretary mentioned, the reimbursement rate, whether a 
particular clinic, a particular nursing home, a particular home 
care program is going to accept this rate, enter into a 
contract, have we--is it fair to say that--and it is 
inadvertent, but Congress wrote it that way----
    Dr. Tuchschmidt. I think you hit the nail right on the 
head.
    Ms. Kuster. Is it fair to say that that has created a 
problem?
    Dr. Tuchschmidt. I think you hit the nail on the head. So I 
think that these programs typically--well, most of the 
outpatient care, the big bulk of it, the nursing home care, 
State homes, all that stuff was managed locally by a medical 
center. They had a budget for it. They had the clunky 
information systems that we had, but they kind of were able to 
keep track on it.
    And when we centralized that, maybe we should have 
anticipated some of the problems, but we didn't, and I think 
that we lost a lot of intelligence about the obligations that 
were being made and, you know, because you have the 
authorizations in one system and you have the obligations in a 
different system and at a time, quite frankly, when we have 
unprecedented volume of care that we are buying in the 
community.
    So maybe we should have anticipated those things, but I 
think it was an unintended consequence, and we did not expect 
this to happen.
    Ms. Kuster. So--and I appreciate your candor, and this is 
something that we also have to own on our side of the table, 
having drafted the legislation that way. I think we were 
probably anticipating a better data system, which, clearly, we 
have a problem with, but this is not unique to the VA that the 
Federal Government make authorizations and obligations and then 
ends up having to pay the piper, so our balance here as members 
of this committee is meeting the needs of the VA and the 
veterans all across our districts in every corner, from El Paso 
to Pittsburgh, my northernmost town in New Hampshire on the 
Canadian border.
    But the question becomes, going forward, how do we 
reintegrate that vital local information? And my time is well 
up. I apologize, Mr. Chair. I apologize. I was watching his 
clock, and I thought I was on the way down. I was on the way 
back up. Excuse me.
    The Chairman. Did you have--was there a question that 
needed to be answered?
    Ms. Kuster. I didn't get it.
    Secretary McDonald. Mr. Chairman, I think the answer is we 
are going to work with you to develop that legislation that 
integrates all the different ways of community care.
    The Chairman. Ms. Brown has a statement.
    Ms. Brown. Yes, I just want a followup to that question 
because once we pass the Choice, and we move how we--we had the 
account on the system, you all caught the problem because when 
you all reviewed it, and you were looking at the requisitions 
that were coming in, it wasn't adding up, and so that is when 
you all went in and did an individual audit. Can you explain 
that?
    Dr. Tuchschmidt. Yes. That is exactly correct. So back when 
the first quarter ended, we were--it was clear that we had 
about a 40-something-percent increase in the authorizations, 
but we were on plan with our $7.6 billion expenditures for 
purchased care in the community.
    When we sat down and said somehow this doesn't make sense, 
I could think of a lot of reasons why it might actually make 
sense, but we didn't really know, and we felt like we needed to 
look at this. So we did in January and February look at that. 
It took us a while to understand exactly what the problem was 
going through the system, and then once we did that, we had to 
sit down and reconcile millions of authorizations by hand to 
understand the magnitude of the problem. And it wasn't until 
really late April that we understood that, the magnitude of 
that problem.
    We put a plan together, which we thought was going to 
resolve the situation. And as I said, the pillars of that plan 
started getting pulled out kind of from underneath us, and it 
wasn't really until May, the middle of May when we said: Look, 
the plan is not viable, and we don't really know how to fix 
this problem without driving more of the care really through 
Choice and accessing Choice dollars for their intended purpose, 
which is to buy care in the community.
    Ms. Brown. Thank you.
    The Chairman. I do think it is important to note that just 
prior to folks finding out that this was an issue, we swept 
150----
    Ms. Brown. Is that you?
    The Chairman. No, but somebody has got a cell phone on that 
needs to be turned off.
    We got $150 million that we swept out of the VA to give to 
Denver. Is that correct?
    Secretary McDonald. I believe so. I don't know for sure.
    The Chairman. So you knew that there was a shortfall 
coming, but you thought it was critical that you go take 150 
million and give to Denver rather than allocate it to the 
problem.
    Secretary McDonald. Mr. Chairman, I wouldn't have sequenced 
it that way. I think the action on Denver predated this 
understanding that was discussed. I mean, please understand 
that every tool was being pulled out of the toolbox to do away 
with this, even to the point where we had medical center 
directors voluntarily reducing their salary budgets, their 
compensation budgets. We had employees willing to give up their 
compensation in order to meet this need of veterans in the 
community.
    The Chairman. Maybe some bonuses, too.
    Ms. Walorski.
    Ms. Walorski. Thank you, Mr. Chairman.
    Mr. Secretary, good to see you. Thanks for being here 
today. You know, the problem that I don't understand with this, 
this is what I don't get, is that this--it seems like it keeps 
coming back to this issue of perception. You know, you come 
today, you talk--you have all your stats. You have your tables 
and your graphs and those kinds of things. And we, over here, 
we want solutions just as badly as everybody does because we 
are fighting for veterans in our district, and we are fighting 
in a bipartisan manner, and we are doing everything that we can 
do legally through a legislative process.
    But what we have been up to since you were here last is 
multiple hearings that go on every other day in this place. We 
have looked at the continued whistleblower retaliation, 
continued procurement failures, systematic failures in 
management in Philadelphia and Oakland, Denver cost overruns, 
purchase card programs waste, fraud, and abuse. And I have been 
involved, and every time your IT chief has been here, and we 
have talked about this as well as earlier, you know, getting 
answers from the IT department: Do you need any money to 
upgrade what you have? No, ma'am, no, we don't. Do you have 
what you need and what you have needed to keep up with? Yes, we 
do. Do you have a, you know, domain issue that has been 
encrypted? No, we don't.
    And so that is what we have been up to, and that is what 
the American people have been up to is we have been sitting 
here asking questions since the last time we met personally in 
a body like this, and I think the issue of trust and this issue 
of verify becomes dominant in my mind because my fear is that, 
you know, I love the issue of flexibility. You know, I sit with 
another Member, I have a--I am on the Armed Services Committee. 
We did that with the DoD. They need to be able move funds. We 
understood that. But there was also a history that we could 
track that was very transparent, very open, and the American 
people saw it as well that there was a really verifiable need. 
My concern is back to some of the other points folks made is 
what is going to be the guarantee today when we leave here? And 
we are going to continue our pursuit of all this oversight of 
everything else that goes on in the VA that the American people 
hear about as well. And I sit here today shocked thinking, man, 
we just heard about this crisis.
    And is there anything other, number one, than the threat of 
shutting down medical facilities to take care of our veterans, 
is there anything else that can be done, number one? But number 
two, if this flexibility of funds is the answer, then where is 
the guarantee? Are we going to be looking for a marker that you 
can say, ``Hey, in 6 months, here is what you are going to see, 
and I guarantee it, I put the power of my office behind it''?
    Secretary McDonald. I think that the only guarantee I can 
give you is, one, that we are putting the right leaders in 
place and that those leaders are leaders who are trustworthy, 
and we have to earn your trust. I think that is the strongest 
guarantee I can give you.
    Ms. Walorski. I understand, and I appreciate that, and with 
all due respect, I accept that as your answer. I guess the 
problem is this, that we have been at this longer than you have 
been at the table, and we are still celebrating the day you 
came and took this----
    Secretary McDonald. And I apologize for everything that 
happened before me.
    Ms. Walorski. And your confirmation was a year ago, and I 
think in some areas you have been incredibly helpful, but I 
guess my concern is this, that when we talk about being 
flexible and moving funds, and we don't see--and you know, we 
are the eyes and the ears for a quarter of a million people, 
each of us, that is what we hear and see. And when we still get 
the information back, and we still sit here in hearings and 
don't have the verification on 1,300 people, whether they are 
probationary, whether they are full employees, we don't see the 
shake, rattle, and rolling of your side, and those are the 
kinds of things that I want to see, you know.
    It wasn't too long ago that veterans were dying because of 
intolerable kinds of instances that were exposed here in this 
place through media of what was happening to our veterans. You 
know, I wanted to see people go to prison. There were people 
that died that will never be accounted for again, and the gross 
abnormalities that were happening at the hands of the 
administrators. And I would think that with the 1,300 people 
terminated, the FBI investigations, and those kinds of things, 
that maybe we wouldn't have as many hearings as we have had, 
but we still have instances of offenses against whistleblowers. 
IT issues that the American people just shake their head at, 
the billions of dollars spent, no reforms, nothing is working, 
and we still sit here today, and I feel bad.
    Secretary McDonald. I wouldn't say nothing is working. A 
year ago, more than a year ago, we had virtually 300,000 people 
on wait lists. Today we have 7 million more completed 
appointments. We have wait times, on average, that are----
    Ms. Walorski. And that is fine. I understand.
    Secretary McDonald [continuing]. 5 days for specialty, 4 
days for primary care, 3 days for mental health. I defy you to 
find another medical system in the country that has that. I 
mean, we are here, and we are all for shining light on what we 
are doing because we think it makes us better, and we 
appreciate your partnership to do that, just like----
    Ms. Walorski. I understand, but----
    Secretary McDonald [continuing]. You appreciate your----
    Ms. Walorski. I don't want to make light here today of the 
fact that this is an easy decision, and I don't want the 
American people to think--in the State of Indiana where I live, 
$2.5 billion is more than real money. It is shocking money, and 
we toss that figure around out of a $168 billion budget like, 
oh, we are just asking for this little amount of money, but I 
am asking for a guarantee and for somebody someplace to be able 
to stand up and say, you know, never again on my watch, never 
again on the Secretary of Defense watch or anybody else's or 
this President will we tolerate what has happened, and I want a 
guarantee that says, here is what history says, we are still 
having hearings on massive amount of issues. That is what 
history says.
    I want a guarantee going forward that this will stop, and 
I--the final question I have for you is when did the President 
know that there was a crisis in the VA?
    Secretary McDonald. I think the President has been working 
on a crisis in the VA for a long time.
    Ms. Walorski. When did the President know about this budget 
crisis?
    Secretary McDonald. Well, the first thing I--the first 
discussion I had with the President was the crisis that we 
have.
    Ms. Walorski. When did----
    Secretary McDonald. And that is when he nominated----
    Ms. Walorski. When did our President know about this 
hearing we are having today that we are $2.5 billion short?
    Secretary McDonald. I don't remember.
    Ms. Walorski. Did you tell the President?
    Secretary McDonald. Pardon me?
    Ms. Walorski. Did you tell the President?
    Secretary McDonald. Oh, of course. I told chief of staff, 
sure.
    Ms. Walorski. When did you do that? In June?
    Secretary McDonald. I don't remember.
    Ms. Walorski. May, when it started happening? Okay
    Secretary McDonald. I knew about the middle of May, so it 
was probably around that time.
    Ms. Walorski. I appreciate it.
    Thank you, Mr. Chairman. I yield back my time.
    The Chairman. I do have information, Mr. Secretary, that 
your office did provide to us regarding terminations, and I 
have 958 were probationary terminations out of that number.
    Mr. O'Rourke.
    Mr. O'Rourke. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary and Dr. Tuchschmidt, for your 
answers today, your testimony, and your service to the country.
    I had a townhall meeting this Saturday, and as with almost 
every townhall that I have, it was dominated by concerns about 
access to the VA, and primarily mental healthcare access, which 
seems to reflect your own recent rankings as of July 1. Out of 
141 mental healthcare systems within the VA, El Paso ranks 
141st. We are dead last.
    One of the veterans who came up, wonderful young man, 
incredibly patient and polite, said that that Friday, the day 
before, he had had a mental healthcare appointment that had 
been scheduled for some time at 9 a.m. At 7:30 a.m., he was 
called to inform him that his provider would not be available 
and that somebody would call him back to reschedule that 
appointment. No one called him back, so he came to the townhall 
to let me know. I immediately called Gail Graham, the new 
interim director, and she got him an appointment this week, so 
he is going to be seen.
    But I tell you that anecdote because even though we are 
ranked the worst in the country for access, you show us at 
about 17 days. When I asked the veterans in my community, we 
did a statistically valid survey of veterans in El Paso about 
access, with a margin of error under 4 percent, they tell me 
that it takes about 64 days, on average, to see someone. So I 
just want to register this note of concern, especially given 
the wait time scandal that we had last year that I don't think 
VA statistics and reporting on wait times reflect what veterans 
actually experience. And when I ask veterans, as opposed to the 
VA, I get a very different number, and so I just--I want to 
register that with you and I want to thank you for your 
commitment to turning the situation around in El Paso. It could 
not be a graver crisis.
    You know, Mr. Secretary, you said you worst nightmare is a 
veteran not being able to get access to healthcare because we 
haven't provided flexibility. I think the worst nightmare for 
veterans, and they are currently experiencing that in El Paso, 
is that despite record funding, they are unable to get access 
to see somebody, and fully 34 percent of the veterans we 
surveyed could not see a provider at all for mental healthcare 
access, whether it was 16 days, 60 days, 34 percent could not 
get in at all.
    So I just want to make sure that we go back and look at 
those numbers and make sure that they reflect the reality as 
veterans are experiencing.
    Secretary McDonald. Yes, I would suggest we do that. Let's 
get your numbers and our numbers together.
    Mr. O'Rourke. Great.
    Secretary McDonald. And understand the basis of your 
research and the basis of our numbers and see if we can sort 
through it. Obviously, we have work to do in El Paso. You and I 
and others have been working on that. We know that.
    Mr. O'Rourke. And we have submitted a proposal, a pilot 
project to you, and I thank you for reviewing it so quickly. 
Would love to work with you going forward to actually implement 
that or a better idea if you have got one, but we have been at 
the bottom of the barrel, and that translates into care 
deferred, care denied, suffering on the part of veterans and 
veteran suicides in my community. And I have met with too many 
families, surviving members of veteran suicides now. This 
cannot go on.
    So I don't mean to be parochial, but I have got to, on 
behalf of the veterans I represent, tell you that we are in 
crisis right now, and we really need your help. So whether it 
is our plan that we propose to you or your plan, let's turn 
this around.
    I would like you to talk about--I don't disagree with your 
request for flexibility. I think it makes sense, and I don't 
know that I would have a problem long term if I knew you were 
going to be the VA Secretary, you know, for the next 5 or 10 
years to carry this out, but in thinking about a policy and a 
set of rules that we lay down for future Secretaries and the VA 
to follow, going forward, how do we not create a moral hazard 
in the Aurora funding, in this $3 billion shortfall, in future 
requests from the VA that whatever happens at the VA and 
whatever additional resources are needed, Congress will provide 
them without necessarily getting accountability or safeguards 
going forward that we won't need to plug additional gaps to the 
tune of billions of dollars?
    Secretary McDonald. We want to help with that. As we put 
together this proposed legislation, we would like to put in the 
safeguards and restrictions that we think would be necessary, 
regardless of who is in office. We think that is certainly a 
part of it, and I said that in my prepared remarks.
    The thing also that we have got to work on is we have got 
to find a better way to predict what demand will be. You know, 
I talked earlier about the 34 percent of veterans who are 
accessing care and a 1 percentage point difference being 
another billion and a half dollars. I mean, it is just--we got 
to get a handle on that and we have got to work together on 
forecasting what that will be and building that system because, 
remember, as I said 2014, the crisis was because of the Vietnam 
era veterans. It was not because of Iraq and Afghanistan.
    If we don't get ready for Iraq and Afghanistan veterans 
today, we won't be ready for them 20, 30, 40 years from now as 
they age.
    Mr. O'Rourke. And I would also like to ask you again to 
consider an idea, not my original idea. In fact, it was brought 
by a Somers family at a hearing we had on the survivors of 
veterans who had committed suicide because of lack of access or 
problems within the VA. And that suggestion on their part was 
as you are referring care out, and you said you had a 36-
percent increase in community care last year, their suggestion, 
which I think holds a lot of sense, is, why not refer that care 
out that as comparable to what the civilian population would 
need? I use the example of diabetes, or you have the flu or 
dental care. And then for those signature disabilities and 
conditions related to service in combat, post-traumatic stress, 
traumatic brain injury, military sexual trauma, the VA truly 
becomes a center of intelligence for access, quality of care 
and outcomes. Any quick thoughts on that suggestion from the 
Somers family?
    Secretary McDonald. My only quick thought is that patients 
like to go through the same medical doctor, so if you have a 
primary care physician, you want that primary care physician 
connected to the specialty physicians.
    One of the things I am trying to work, given we are doing 
community care, is I am trying to improve the understanding of 
the military culture amongst private sector doctors. We have 
been working with Secretary Burwell on this and if--somehow we 
have got to do that because the primary care physician in the 
private sector has to ask the person, you know, ``have you 
served,'' ``have you been in the military,'' because there is a 
different culture and a different set of questions that need to 
be asked if they have, so we are working on that.
    Dr. Tuchschmidt. And I think we agree with your position, 
actually. I am not--I think coordination of care issue says we 
need to provide as much of the services as we can, but there 
are some things, mental health is one of them, that you cannot 
readily go out and buy in a community.
    Mr. O'Rourke. Right.
    Dr. Tuchschmidt. And we have to be the center of 
excellence. We have to be able to provide the infrastructure to 
support those services for veterans.
    Mr. O'Rourke. Great. I would like to use this basis of 
agreement to actually prototype this in El Paso, if possible, 
somewhere in the country so we can see if this actually works.
    With that, I yield back to the chair.
    The Chairman. Why El Paso?
    Mr. O'Rourke. I don't know. It just comes the mind.
    The Chairman. I want to wish a very happy birthday to Dr. 
Roe who is now recognized for his 5 minutes.
    Dr. Roe. Thank you, Mr. Chairman.
    And a couple of things, obviously, Mr. Secretary, you are 
here for the same reasons we are here, that is to provide the 
highest quality care for veterans that we can provide in this 
country and as they have earned.
    I think one of the frustrations that I have had on this 
committee is that where he have--as a committee, I have been 
here 6 and a half years and we keep providing more and more and 
more and more money, and then we have the VA come back for more 
money. And we see things like the building in Aurora, we beat 
that horse to death, moves that cost hundreds of thousands of 
dollars.
    I mean, I think of a billion dollars that was wasted in 
Aurora that could have provided VA veterans healthcare. It 
was--I don't know where it went. We had a failed system between 
DoD and VA that spent a billion dollars trying to get--that was 
way before you got here--to try to integrate two healthcare 
records. Vanished, the money is gone. That is the waste that I 
see, and no way on this Earth will you have allowed that to 
happen at your shop when you were--and no way would I have 
allowed that to happen when I was the mayor of a local city, 
Johnson City, Tennessee, where I was, or in my own practice. I 
couldn't have survived doing that.
    And what has happened is, is that both sides of the aisle 
want to provide for the care, and we feel like we are caught in 
this trap. And the chairman mentioned bonuses. All these other 
things that we see, when we go back out and go home and talk to 
our veterans, and to Mr. O'Rourke's point, I have got to tell 
you, in Johnson City, Tennessee, these numbers at the Mountain 
Home VA hospital--and they do a fine job. And as a matter of 
fact, we get--I get veterans all the time that tell me how much 
they appreciate the care they get there, but there is no way on 
this Earth that the primary care is 4 days and that mental 
health is 3 days and the specialty care is 5 days. I don't know 
where that information came from. It doesn't exist at our shop, 
I can tell you.
    And Mr. O'Rourke, I think just pointed--not to beat a dead 
horse, but I don't know where that came from, but that is a 
fairy tale where I live.
    Secretary McDonald. I would love to get the information 
from you as to the veteran, the name, the date, you know, where 
that--where you believe that that is not true because we really 
do need to make sure that our data is--has integrity----
    Dr. Roe. That----
    Secretary McDonald. And the only way that we can solve that 
problem is if we work together to make sure we have the right 
data, but we can't--you know, anecdotes are helpful, but we 
really needs names and dates and so we can really dig into it.
    Dr. Roe. I can----
    Secretary McDonald. And I would love to do that.
    Dr. Roe. I have got a big long thick stack of names and 
dates of people that can't get in this--in this number. And 
that is--I think that is amazing that you could--if this is 
true. I certainly couldn't do this in my own private practice, 
I can tell you that. I couldn't meet that criteria, an average 
clinic appointment, 4 days or 5 days. Most doctors are booked 
up for weeks ahead or at least a month ahead, so anyway, enough 
on that.
    The other thing I wanted to bring up, and I think the 
Choice program, as I understand it, as we envisioned it, was to 
help get rid of the backlog, not the VA care that is going on 
currently but was to eliminate the backlog. If that program is 
going to continue, and it is sunsetted, then I think you are 
absolutely right. There ought to be one system of taking a 
veteran from the VA to outsource care. I don't think there 
ought to be three or four ways you have to figure out how to do 
it. It ought to be easy.
    And I talked to several veterans, and I would be delighted 
to let you talk to one of the Veterans Service Officers in 
Hawkins County, Tennessee, that cannot make sense of the Choice 
program to this day. His comment was it is a joke. I put that 
in the record, his letter to us, and he certainly doesn't mind 
using his name.
    The other issue, I think, that disturbed me was when the 
Veterans Choice Program came out, the first $500 million that 
was spent--and we had a hearing on that--300 million of it was 
administration. And I don't think--I don't understand that. I 
don't understand why 60 percent of the money went to the 
bureaucracy and $200 million of it actually went to get 
veterans in to see me as a doctor. And maybe that was a need. I 
don't know, but that just seemed a little excessive to me.
    Secretary McDonald. Well, that was the amount that was 
required to set up the network. Nevertheless, you know, we are 
trying to maximize the use of that network as much as we can to 
provide more care to veterans.
    Dr. Roe. I think the other thing I would look into, and 
certainly the flexibility has been talked about. You need--any 
CEO needs that to operate their shop. I agree with that.
    The other thing that I have--just want to comment in the 
last few seconds I have is that the morale certainly at VA 
hospitals, if you talk to the staff, is down now. Those folks 
feel beat down, and I think there needs to be an evaluation of 
the morale of the physicians and so forth.
    The other thing I am going to do is bring a bill up very 
soon as a trial process, and a lot of people have done this. 
When you go to your doctor anymore, not only does the assistant 
come into the room but another person shows up, and that person 
is a scribe, and because of electronic health records, a lot of 
doctors now use a scribe to enter the data so that they can see 
more patients.
    I would like to do a pilot program in the VA of four, five, 
six, you pick it, and let scribes come in and see if the 
physicians that are there--or the providers--are not more 
productive. I guarantee you they will be if you do that. I have 
my friends who work at the VA tell me they could see 25, 30 
percent more people.
    Mr. Chairman, I am sorry I am over.
    Secretary McDonald. This is a big issue that you raise 
about the scribe. We are piloting a program with scribes. It is 
uneven right now, but we are in the process of systematizing. 
Morale also is a big issue. As I have said earlier, we have 91 
percent of our medical centers with new medical center 
directors, new leadership teams. We had a lot of people leave 
for various reasons, and morale is a big issue.
    And VA people, a third of which who are veterans, don't 
want to be called out as somehow different and failing to 
perform. They really care about veterans, and they are working 
hard every single day.
    Dr. Roe. I yield back, Mr. Chairman.
    The Chairman. Thank you.
    Miss Rice, you are recognized.
    Ms Rice. Thank you, Mr. Chairman.
    Mr. Secretary, I just want to make sure I heard you 
correctly. You said you found out about the extent of the--or 
the shortfall in May?
    Secretary McDonald. Yes, that is what I said.
    Ms Rice. So I believe that we were given information, this 
committee was given information that the shortfall was actually 
discovered as far back as either February or actually, 
actually, I think it goes back to even December. Can you 
explain that discrepancy?
    Secretary McDonald. No, I can't. I haven't heard that.
    Dr. Tuchschmidt. Well, I don't think we knew that there was 
a shortfall. I think that what we knew in February was that 
there was a difference between the increase in authorizations 
that were up substantially and the obligations for that care, 
which were on plan.
    So all the data we had in February actually suggested that 
financially we were on path to--for our 7.6 billion estimated 
expenditures for the year. We questioned that, that data, 
right. I mean, so it doesn't make sense, why would you have 40 
percent more authorizations, but the obligation rate isn't up? 
So that is what we knew in February, and it was at that time 
that we actually sat down and said: We have got to figure this 
out. Maybe there is a good explanation and it all makes sense, 
but maybe it doesn't.
    And it wasn't really until April that we understood the 
problem and the magnitude of that problem.
    Ms Rice. So that just sounds like semantics to me.
    Dr. Tuchschmidt. In what way?
    Ms Rice. You knew about a shortfall. You just didn't want 
to say those--it sounds like you just don't want to say that 
word.
    Secretary McDonald. No, I think it gets to, do you have a 
solution? I think what we said is we thought we had a solution 
until about the middle of May, and that solution fell apart as 
we tended to work the different options for that solution.
    Ms Rice. Okay. So----
    Secretary McDonald. We said that earlier in the hearing.
    Ms Rice. Mr. Secretary, so if you can put it in 30 words or 
less, the reason for the shortfall, the--tell me, hep C, give 
me an idea concisely.
    Secretary McDonald. Well, the easiest description is more 
veterans are coming for care, 7 million more appointments than 
a year ago.
    Ms Rice. So that is the reason.
    Secretary McDonald. That is the reason.
    Ms Rice. So I kind of feel like this is--maybe you agree, 
Mr. Chairman, I don't know, Groundhog Day. I feel like, once 
again, this committee is sitting here with members of the VA, 
whether it is you or Sloan Gibson or anyone else talking about 
a crisis in the VA, right, that is a recurring theme, another 
request for yet more money and--and the most disturbing point 
to me is a complete and utter lack of accountability.
    Secretary McDonald. I don't agree with you, obviously, and 
remember, this money is already appropriated. We are not asking 
you to appropriate new money. What we are asking you to do is 
use money that has already been appropriated for the Choice 
program for care in the community to be spent for care in the 
community. That is what we are asking.
    Ms Rice. And how are you going to pay----
    Secretary McDonald. It is already appropriated.
    Ms Rice. Then how are you going to pay for care in the 
community next year?
    Secretary McDonald. Well, what we are asking for is a part 
of the Choice budget. What we have talked about is let's put 
together an integrated way of doing care in the community. One 
budget, one way to do it, not the seven that we have today that 
members of the committee have already said, veterans don't 
understand, members of the committee don't understand, and our 
employees have trouble actually executing.
    Ms Rice. So where is the accountability, I guess, is what I 
am asking for. There is no part of this shortfall that is 
related to misuse of funds or potential fraud or anything like 
that?
    Secretary McDonald. There has been no misuse of funds or 
fraud in this regard.
    Ms Rice. Have you done an audit? Have you had someone maybe 
externally do an audit? Just yes or no.
    Dr. Tuchschmidt. We have done an internal reconciliation of 
these, but----
    Ms Rice. No. So is that a yes or a no?
    Dr. Tuchschmidt. We have not had an external audit.
    Ms Rice. Okay. Well, you think that might be a good idea, 
yes or no?
    Dr. Tuchschmidt. No, I am not sure it is necessary, but I 
think that we have 40 percent more authorizations for care in 
the community. You asked us to make sure that no veteran was 
waiting more than 30 days for care. We have done that. That is 
exactly what we are trying to do.
    Ms Rice. Okay. What I think is disgraceful, just because I 
have about 20 seconds left.
    Dr. Tuchschmidt. Yes.
    Ms Rice. Is for you to insinuate that by not giving money, 
no one on this committee cares about veterans.
    Dr. Tuchschmidt. I think you----
    Ms Rice. Hold on a second. I am so sick and tired of that 
insinuation.
    And I yield back my time. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Secretary McDonald. Just to clear, we didn't insinuate 
that. We think you all care for veterans dramatically.
    What we are faced with is you pass the laws to give 
veterans benefits; you pass the budget to pay for those 
benefits; and we have got to execute that. When there is a 
mismatch between those laws and that budget, it is a very 
difficult proposition.
    I get letters from all of you every single day trying to 
give more benefits to more veterans, and I am all for it, but 
we have got to have the money to do it.
    The Chairman. I think the law also says that a Secretary 
must manage within available resources.
    Secretary McDonald. That is why we are here.
    The Chairman. But the Choice Act is not a resource that is 
available to you at this point.
    Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for your service in the United 
States Army.
    Secretary McDonald. Thank you, sir.
    Mr. Coffman. Although I think that the President--I like to 
think the President chose you in recognition of your experience 
in Proctor & Gamble, and we had, in this committee, I think, my 
predecessor on the Oversight Subcommittee had requested a GAO 
study of major construction projects. And that study was done 
and published in April of 2013, and it said at that time that 
there were four ongoing projects, one in Las Vegas, one in 
Orlando, one in New Orleans, and one in Aurora Colorado--it 
listed as Denver--that they were--that they averaged $366 
million over budget and that they were each, on average, was 
about 3 years behind schedule, so we clearly knew that there 
was a big problem.
    Now, if you, in Proctor & Gamble, were to step in and you 
had a department that was that dysfunctional, you would have 
fired the management team, straightened it out, and spun it 
off. And when I look at the VA, that your core competency is 
really benefits to veterans is obviously healthcare being a 
very significant part of that, construction management is not a 
core of the mission. And I would love it if you would reexamine 
extricating the VA from being involved in major construction 
management projects.
    I know we will have legislation today that will reduce the 
amount--I have talked to Sloan Gibson about this on numerous 
occasions. I think he was at the $250 million figure, projects 
above $250 million would be outsourced to the GSA or Army Corps 
of Engineers. I think we have legislation today, $100 million.
    One of the problems we have in the legislation today is 
that the Denver construction administrative investigation board 
was supposed to be finished with their work in June. It will 
not be done in June, may be done in September, but I just think 
that it is a real concern. And we held a--the subcommittee--
Oversight and Investigations Subcommittee--held an 
investigative hearing in Denver on the Aurora projects at our 
State capital. I think it was last year. The chairman was 
there. Mr. Lamborn was there, and Mr. Hagstrom was in charge of 
construction at that time, and stuck to this $604 million 
figure, that the project could be built for $604 million. Lost 
it in litigation late in 2014 on every single count that this 
was a plan over a billion dollars that could not be built for 
$604 million.
    The Army Corps of Engineers is in the process of taking 
over the project, but we are talking about a shortfall today, 
and we are also talking about a half-finished hospital, 
hopefully a little over a half-finished hospital right now, 
that will cost another $625 million, I believe, is the figure, 
which is more than its initial projected amount to finish the 
hospital.
    And so I would just really ask you, I mean, as a veteran, 
that it is just not the core competency of your organization, 
and to focus on healthcare, focus on benefits, and to leave, as 
many other agencies of the Federal Government do, these major 
construction projects to others, I would love your response.
    Secretary McDonald. Well, Congressman Coffman, as you know, 
we agree, in part, with you. I think, as you indicated, the 
only difference between your point of view and ours is what 
that right level is, if it is 250 or 100. But I do want you to 
know that we have taken a lot of steps to improve our 
construction process. We are doing integrated master planning 
now. We are requiring that major construction has at least 35 
percent plans design made prior to cost and schedule 
information, that we are doing the very deliberate requirements 
control process, that we are instituting a project review 
board, that we are using a project management planning system, 
that we are establishing a VA activation office.
    I could go on, but all of these things are best practices 
that come from the private sector. At the same time, we also 
have met repeatedly with the Association of General 
Contractors. They had boycotted VA. We met with them, the 
Deputy Secretary Gibson and I did. We took them through all the 
changes that we are making to our process, and we asked them 
their point of view if we are missing anything, and they are 
helping us redesign.
    So wherever we end up with the legislation, what I can 
assure you is, we are now operating against the new and 
improved process, and what happened in Denver, which is really 
regrettable, was awful, should never have happened, will not 
happen again.
    Mr. Coffman. Mr. Turner, we have gone through these cycles 
before where VA was going to try and reinvent itself in terms 
of construction management, wound up in the same position. I 
think a $100 million ceiling will be a $300 million ceiling 
when cost overruns are done. I just don't have confidence that 
the culture is going to change.
    And, with that, I yield back.
    The Chairman. Thank you.
    Ms. Brown.
    Ms. Brown. I just want to be quick, but as we move forward 
with this construction discussion, when you say general service 
or even Army Corps of Engineers, I think you have got to have 
some of the input--and I know no one likes the word ``czar,'' 
but we have got to have someone because even when I look at the 
Army Corps of Engineers, I know what happened with Katrina and 
that project, so we need accountability. I don't care what 
agency is handling it.
    I yield back.
    The Chairman. Mr. Takano.
    Mr. Takano. Thank you, Mr. Chairman.
    Mr. Secretary, you are introducing, in my view, a new way 
of talking about contract care with non-VA providers, providers 
that are not salaried within the VA. Is that correct?
    Secretary McDonald. Yes, sir.
    Mr. Takano. So you are calling this care in the community, 
and I think, on a bipartisan basis, we are encouraging the VA 
to cooperate more with what you refer to as the community, or 
non-VA providers, and I think you are trying to change the 
culture of the VA so that there is not this enmity toward--that 
there is not--it is not a conspiracy to disappear the VA. That 
is kind of what I am reading.
    Secretary McDonald. That is why we changed the name of care 
in the community from non-VA care to care in the community 
because we in the VA own that care, even though it is in the 
community.
    Mr. Takano. And relative to that, I have seen others within 
VA health testifying before this committee, the concern, since 
you do own the care and you are ultimately responsible for it, 
there needs to be ways in which the contractor, the contract 
providers are also accountable, that that care is accountable.
    And I have raised a number of times this issue with 
interoperability of health records. Now, you have centralized 
the billing and payment operations from the regional areas, and 
you are saying in your testimony what I have heard is that that 
centralization was--had a lot to do with driving the shortfall, 
the misunderstanding that arose from what you knew from the 
regional billing to the centralized billing. Is that--is that 
somewhat accurate?
    Secretary McDonald. The requirement in the Choice Act to 
centralize the accounting and billing and administration of the 
Choice Act helped make it more obscure for us to figure out 
what was going on.
    Mr. Takano. So that was--so when you, in February, were--
you were seeing a discrepancy between the authorizations and 
the payouts, you weren't able to figure that out, this 
centralization obscured--was obscuring a clear understanding of 
what your cash position was.
    Secretary McDonald. Yes, sir. It was a new practice.
    Mr. Takano. My concern is, is there any feeling that the 
centralized authorization has resulted in inappropriate 
authorizations? Because my concern is that the regional offices 
have problems with records that were paper records being passed 
back and forth, and there was complaints that even registered 
mail wasn't being acknowledged, and I envisioned, you know, 
stacks and stacks of records that had to be scanned in, and 
there were delays in payments to doctors because of that.
    Mr. Takano. Has the centralization improved that situation 
at all?
    Secretary McDonald. So far, from what we know, the 
centralization, not just of the Choice Act, but across the 
payment function of VA, has actually accelerated our ability to 
pay bills and that----
    Mr. Takano. It has accelerated it, but you are not worried 
about the acceleration, the rise in authorizations is 
authorizations that were authorized that shouldn't have been? I 
mean, the accountability in the system is still sound?
    Secretary McDonald. No. In fact, no, if anything 
centralization usually leads to better security. That is my 
experience.
    Dr. Tuchschmidt. The care is still determined at a local 
facility level. A clinician seeing a patient decides the 
patient needs something, puts in that request, and the 
authorization is entered at a local level by the business 
office people at that facility into the system, and the medical 
record information is transmitted to the third party 
administrator.
    Mr. Takano. So there is a great deal of umbrage about this 
surprise, what is information that we have to act on rather 
immediately. But the overall narrative that I am getting, 
though, is that more money is being pushed out the door 
appropriately, meaning more veterans are being served, more 
veterans are finding out about the superior service, meaning 
that--you used the example of the knee replacement. There is no 
copay, and copays under Medicare are significant.
    So it means it is a rational decision that a lot of 
veterans who qualify for both programs are choosing to come to 
the VA. That accounts for--can you give me that number again, 
the increase in the number of people coming to the VA that you 
had before?
    Secretary McDonald. It is over 2 million. But what we are 
talking about is 7 million more appointments in the last year 
versus----
    Mr. Takano. I was looking at the increase.
    Secretary McDonald. Yes. Seven million more appointments, 
4.5 million out in community care, 2.5 million in VA care.
    Mr. Takano. Well, and this was obscured by the--part of it 
was obscured by the change in the Choice Act and how you did 
the accounting. Well, I don't like these short notices, but we 
have to act quickly. And the important thing is we serve the 
veterans, and the good news is that we are serving more and 
more veterans, and let's keep doing it.
    The Chairman. Dr. Wenstrup.
    Dr. Wenstrup. Thank you, Mr. Chairman.
    I want to thank you gentlemen both for being here.
    You spoke today about the increase in productivity, and I 
think that the number you said, every 1 percent of increase is 
$1.4 billion? Was that the number I got?
    Secretary McDonald. I am sorry. I may have confused you. 
Basically veterans are getting 34 percent of their care from 
the VA. Any increase of 1 percentage point of that leads to a 
$1.5 billion increase in budget need. That is different than an 
increase in productivity.
    Dr. Wenstrup. Okay. But on that vein also with the increase 
in productivity, the VA is different than a private practice, 
right, because when you increase your productivity, that is not 
money coming in, that is money going out in most cases. There 
may be some silos there. Whereas on the flip side, in private 
practice, you increase your productivity, you got more coming 
in. And I think that is the reality that we all have to face in 
this situation. We asked for more productivity.
    One question I have is that amount of productivity, that 
increase, within the same amount of hours, if you will, in 
other words, if I increase my productivity because I work 
Saturdays and Sundays, that is a little different than did I 
increase my productivity during the same amount of time.
    Secretary McDonald. Right. And also what we looked at was 
productivity, disregarding how many more physicians we brought 
in. But as we shared, the first chart we shared was on the 8.5 
percent increase in productivity. Jim can drill down on this 
more.
    Dr. Tuchschmidt. Yes. So we have done it, I think increased 
productivity, in a number of ways. And so one of them is what 
you suggested, in that we have evening clinics, we have had 
weekend clinics. And particularly those evening clinics have 
been very popular with younger female veterans in particular.
    Dr. Wenstrup. Well, one of the things I think we really 
need to focus, though, and, again, this is the comparison of 
private practice to the VA, is how do we increase the 
productivity within the same amount of time. And we have talked 
about poor set-ups within a clinic, you have one room when you 
need four, those types of things.
    So the increase in productivity has to be looked at 
realistically as well. These are good things to add, but if we 
are not getting the caregivers more productive in the same 
amount of time, then we are hurting ourselves.
    Dr. Tuchschmidt. And we are. So I think it is a little bit 
of both, right? I think it is a little bit of increasing 
productivity during their kind of normal hours, as well as 
using extended hours. And I think that one of our biggest 
hurdles to improving access to care is the physical plant 
infrastructure that we have. And if we can use that physical 
plant infrastructure more efficiently by having extended hours, 
having weekend hours, then everybody benefits from that.
    Dr. Wenstrup. Yes. I know I had a little frustration when I 
first came here, and this is before Phoenix broke and 
everything else, where I went to the former Secretary and said: 
I will go into clinics with you, as a doctor, I will go into 
the OR with you and tell you why you are not productive, why 
you are not getting more out of your caregivers. And I think we 
still need to do that. We have got doctors on this committee 
that I think would be willing to partake in that process.
    The other thing is we talked one time before about third 
party payments, when people come to the VA. I would love to see 
the VA be centers of excellence for things that our veterans 
wouldn't want to go anywhere else and where people outside, 
that aren't veterans would prefer to go to the VA because we 
are centers of excellence. But in that process, we do have 
veterans that come in and they have other insurance.
    And I am not sure how this is really taking place, what 
percentage you are actually capturing that can bring more money 
into the VA, but maybe we should turf that out to people that 
do claims like this all the time and take it out of the VA and 
let it be done and increase the revenue to the VA.
    These are productive things that we can do. And as we see 
more people wanting to go to the VA, and especially if they 
have other insurance, that is what we should do and be good at 
it.
    Dr. Tuchschmidt. So our collections are up substantially 
this year, but we are sitting down and revaluating a lot of our 
business office practices. And one of the things that we are 
looking at is whether that collections is something that should 
be outsourced.
    Dr. Wenstrup. And I would suggest we take bids from some 
outside sources on what that would look like.
    The other thing, and we have talked about this before, is 
at some point we have got to be able to know what we spend per 
RVU, relative value unit. And if we don't know that, then we 
really don't know what our cost is compared to when we pay 
somebody per RVU outside of the walls of the VA.
    I do agree with you on what you said, care in the 
community, I agree with that, rather than non-VA care, because 
if I was still in practice seeing veterans, I would like to say 
I am a VA provider, even if it is in my private practice.
    Dr. Tuchschmidt. And we have cost data per RVU. We should 
come over and discuss that with you.
    Dr. Wenstrup. I have been asking about it for several 
times.
    Dr. Tuchschmidt. I will make sure----
    Dr. Wenstrup. Deputy Secretary Gibson said: We can't do 
that. And I am talking about everything, I am not just talking 
what you are paying the doctor. I am talking about your 
physical plant, your staff, your supplies, everything involved, 
because that would be very important to this entire committee.
    Dr. Tuchschmidt. We will get you the information.
    Dr. Wenstrup. Yes. I think the Secretary would understand 
the cost of Pampers is not just the paper.
    Thank you both for being here. I appreciate it.
    The Chairman. Dr. Ruiz.
    Mr. Ruiz. Thank you to the chairman and ranking member for 
holding this hearing.
    When brave young men and women volunteer to serve in our 
Armed Forces, they swear to support and defend the Constitution 
of the United States against all enemies, foreign and domestic. 
These servicemembers make a promise to their country, to all of 
us, to keep us safe and protect our way of life. In recognition 
of that service, we promise to care for them when they return. 
So veterans have served and sacrificed to hold up their end of 
the bargain, and we must do whatever it takes to hold up our 
end.
    Many veterans in my district who are excluded from the 
strict requirements of the Choice Program are unable to receive 
care in the community for which they are statutorily authorized 
because the VA has already begun delaying elective care due to 
this budget shortfall. And as a physician, I can tell you that 
even if a condition arguably does not meet the VA's urgent and 
emergent working standard for authorizing non-Choice purchased 
care, it may feel painful and very urgent to the patient.
    Veterans being deprived of healthcare they have earned, 
whether due to unforeseen increases in cost or demand, 
budgetary mismanagement at the VA, congressional dysfunction, 
or any other problem outside the veteran's control is 
completely unacceptable, and it is absolutely critical that we 
stabilize the immediate problem and resume serving veterans who 
need community care at full capacity, prevent any furloughs or 
facility closures, and reform whatever structural systems at 
the VA have failed.
    You are actively searching for new ways to be able to 
predict the future needs of veterans. This is a problem due to 
the success of having 7 million more appointments. But as a 
physician and public health expert, I understand that you 
really can't predict to the tee the health needs of a growing 
population, of a system in transition that needs to take risk 
to identify best practices and understand that some of these 
practices may fail and therefore we may need to learn from 
those lessons in order to improve.
    And you mentioned before the term manage to budget, which 
is what this committee has done in the past. Now you are 
managing to the requirement. But I want to warn you that the 
one requirement that you are managing to is only one of a 
larger piece and complex, because whether a veteran gets seen 
within 30 days is not the same whether they get the quality 
care, the respect that they need, and the efficiency of care 
when they are being seen. And, thankfully, in a lot of our VAs 
veterans rate their care very highly.
    So we need to manage to the veteran's healthcare needs with 
efficiency and to the point of measuring how much it costs to 
RVUs, that is the efficiency in this. And the percentage rate 
of cost due to--or the amount of cost due to an increase in 1 
percent of VA care, that reflects on the efficiency of the VA. 
So I really want to stress those points.
    And my concern here is these claims that we are shutting 
down facilities, that it is not being--and the way it is being 
presented is that you are holding these VAs hostage because you 
are not getting your way. And that is absolutely, I know with 
the sentiment, not true.
    So can you, first question, can you explain more what is 
going on in Denver and how this is affecting the care of our 
veterans in receiving that care?
    And two, one of the concerns is that if you take, with this 
flexibility, which I think it is a great idea, if you take 
money from one pot that you already have for another, there is 
always going to be takeaways. So is this a surplus fund? What 
is the takeaway that is at risk here?
    Secretary McDonald. Well, the Choice Care Act itself that 
Congress approved was to provide care in the community for 
veterans. And there is a $10 billion appropriation that is to 
expire in 3 years.
    What we are talking about is care in the community largely. 
There is another half a billion dollars for hepatitis C drugs. 
So we would be using the money for what it was set aside for, 
which is care in the community. And in that way we are using 
the money for what it was set aside for, it is not a new 
appropriation.
    Secondly, the issue you raised about Denver is, because we 
have inflexibility of moving money between accounts, the 
accounts that the money came from this fiscal year for Denver 
do not affect the healthcare of veterans in other locations. So 
in that sense Denver has no impact.
    Now, as I said in many prepared remarks, we have got to get 
Denver, the Denver medical complex, we have got to put that 
money in the 2016 budget, and I am concerned about that since 
the original House budget cut our construction by 50 percent.
    Mr. Ruiz. Okay. Thank you.
    Yield back.
    The Chairman. Mr. Costello.
    Mr. Costello. Thank you.
    I would certainly like to associate my comments with those 
of Congresswoman Rice and Congressman Ruiz in terms of some of 
the frustrations, at least what I am hearing in my district. 
And I just want to assure those veterans in Lebanon, Berks, 
Chester, and Montgomery Counties that I will work at 110 
percent to make sure that there is no uninterrupted care for 
veterans out there.
    And I very confident in the leadership of this committee, 
with Chairman Miller and Ranking Minority Member Brown, that we 
are going to resolve this so that there is in no way a 
diminishment or any interruption in the care of veterans.
    But I do also want to focus on a couple things that are 
either in your written testimony or that I have learned that 
are very, very frustrating for me. And I want to start with the 
issue of technology. So I want to talk about technology and I 
want to talk about your use of the term ``flexibility.''
    So in 2004 the VA received $475 million for their IT 
system. GAO report comes out and says that there is essentially 
nothing to show for it. In 2010, Congress was going to provide 
another $400 million for another update, and the VA pulled the 
plug on that.
    Now, you weren't around then, I wasn't around then, but it 
is very clear that in the past the VA has identified the need 
for updated technological capacity, as well as Congress being 
willing to invest in that.
    Part, I feel, of your explanation in coming here with this 
request relates to the financial systems that are in place as 
being attributable to why you have a budget shortfall. I think, 
I don't want to put words into your mouth, but I believe that 
that is sort of what you have said in your testimony thus far.
    But on the issue of flexibility, you indicate, and I will 
just quote you on page 3: ``Altogether, over 70 line items of 
the VA budget are inflexible. Freed up, they would help us give 
veterans the VA you envision and they deserve.''
    These 70 line items of the budget, are you talking about 
the entire $170-plus billion budget? And is that all the line 
items?
    Secretary McDonald. Yes. Basically what we are talking 
about is very simple. With the Choice Act, we have given the 
veteran the choice whether they get their care within the VA or 
outside the VA. Very simplistically, those two budgets cannot 
be commingled. So I have got to predict how that veteran makes 
that choice.
    Mr. Costello. Right.
    Secretary McDonald. Or come back to you each week and say--
--
    Mr. Costello. Well, I think Dr. Ruiz--I get where he is 
going. I mean, look, the need--you don't always know what the 
medical need is going to be. So I understand there has to be 
flexibility within a budget in order to appropriately address 
the medical needs of a veteran. But I also feel that in a 
budget of $170-billion-plus, that if that is itemized amongst 
only 70 line items, I mean 70 line items for $170 billion 
really isn't that many line items.
    And in terms of flexibility, the more money we just say, 
``Oh, here is the $700 billion, do what you would like with 
it,'' the more we are going to, I fear, the more we get into 
the issue of $475 million disappearing into an IT budget or, 
``Oh, well, that didn't really work out over there.''
    And so I don't like the aspect of just shifting things 
around without there being accountability to Congress. I don't 
think taxpayers----
    Secretary McDonald. We agree with you. We agree with you. 
If we are able to do this, we would work together on what are 
the restrictions and what are the budgets that should be 
potentially commingled. In the case where the aim of the budget 
is exactly the same, I would argue they should be commingled.
    Mr. Costello. Let me just, next question, related to that, 
and you are looking to use Choice money. I continue to hear 
that there is just a reluctance by many in the VA to sort of 
buy in, pardon the pun, to the Choice Program. And so Congress 
last session made a legislative determination that from a 
policy perspective the Choice Program was something that not 
only did we want to offer, but we wanted to encourage it 
through the allocation of dollars.
    Now I feel that because some in the VA either don't like 
that program or feel that since there is money left over and it 
was popular at the time to institute that legislation, that we 
can take it out of the popular programs and shift it elsewhere. 
And, again, it gets back to the issue of accountability and 
transparency.
    And so while you use the term ``flexibility,'' and I 
understand why you need it in some instances, I also feel we 
could be painting a little bit too much of a broad brush here 
when we are using the term ``flexibility'' for budgeting 
purposes. And in doing so, we are going to lose the 
accountability that we need and we haven't had and that, 
frankly, is the source of some of the problems that cause us to 
be here today.
    Secretary McDonald. We are very much in favor of care in 
the community, and as you would expect, then we are in favor of 
the Choice Program. So if you or any of your veterans are 
encountering VA employees who somehow suggest they are not in 
favor of that, we need to know about it, because that would be 
wrong. I mean, we are trying to create a culture where we don't 
care where the veteran gets their care as long as they are 
getting great care.
    Mr. Costello. So final point here. As you are talking about 
a new IT system in order to better handle budgeting and 
planning, for my opinion, mismanagement can be very visible--
and I am not suggesting you have mismanagement here--can be 
visible, and it can also be not visible. And I think on the IT 
side it is very easy to mismanage things through the years and 
not really have any ability for those doing oversight to really 
know about it, because it is sort of on the planning side, it 
is behind the scenes.
    I think moving forward, as you are talking about, I 
presume, coming forward with what your needs are going to be, 
capital needs are going to be for a new IT system, it has to be 
thorough, it has to be comprehensive, and the ad hoc ``we need 
a little bit money here and then we will need a little bit 
money the year after'' isn't going to work. I mean, I really 
think it needs to be a comprehensive plan so that we have some 
confidence that what you are proposing is going to solve 
problems and over the long term reduce costs, because from a 
management perspective, you are going to have more transparency 
and things are going to work more efficient.
    I will yield back.
    Secretary McDonald. Well, we agree with you, and we would 
love to have LaVerne Council, our new head of IT, come over and 
talk to you. The chairman has had the opportunity to meet her, 
and I think she is going to be terrific for us. She has 
experience as the head of IT for Johnson & Johnson and Dell. So 
we are taking the best out of the private sector.
    The Chairman. Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    Again, I want to thank you, Mr. Secretary, for your service 
both in the Army and as Secretary in this very complicated 
transition period. And we are hoping that it turns out well, 
and we are going to do our best to make sure that it does.
    My first question has to do with public-private 
partnerships. Under Secretary Gibson mentioned at a June 25 
hearing that he and you had spoke about this, and that you are 
in favor. Can I ask you that question? Do you feel that the VA 
could benefit from public-private partnerships?
    Secretary McDonald. Yes, sir. One of the five strategies 
for our MyVA transformation of the VA is strategic 
partnerships. We have set up an Office of Strategic 
Partnerships. We have a leader of that office, Matt Collier.
    And yesterday when I was in Pittsburgh working at our 
medical center, there was a wonderful example. I met with the 
chancellor of the University of Pittsburgh, the dean of the 
medical school. We have a great partnership there between UPMC, 
which is a medical provider, with the university, and with the 
VA. This is a system Omar Bradley set up in 1946-1947 to ensure 
veterans get the very best care in the country, and it is a 
system that works today.
    So those partnerships are absolutely critical to us.
    Mr. McNerney. Thank you.
    Mr. Secretary, I have taken a look at this graph. You are 
familiar with it, the VA Care in the Community funding 
shortfall. It is kind of a straight line. If you divide 7.6 by 
12, you get 0.36 billion per month, you are totally over. Even 
in the very first few months, it is clear that you are going to 
miss the target. Why did it take so long, given this kind of 
information, or was this not available until just recently?
    Dr. Tuchschmidt. Yes. So actually we went back and 
reconstructed. So that represents our actual obligations. So 
what we were projecting early on was lower. The obligation data 
that we had was understated early in the year. But that 
reflects our actual experience.
    Mr. McNerney. Well, how much of the 3 point billion dollar 
shortfall is due to underforecasting?
    Dr. Tuchschmidt. I don't think it is underforecasting. I 
think we had anticipated that more of the care in the community 
would have gone through the Choice Program and been paid for 
out of Choice 802 dollars that were appropriated for the 
program.
    That program, I am not going to sit here and tell you that 
it is working perfectly, because it is not. And it is a complex 
program that was--as it was structured it is--we have 
piggybacked on our PC3 contract to get it done because no one 
else in the industry was interested in taking this on. And we 
have business processes that, quite frankly, need improvement, 
and we are working on those things.
    So I think that we had a Choice--we have a Choice Program 
that we, we and you, thought were going to get more care in the 
community for veterans and make sure that veterans were not 
waiting over 30 days for care. We have not been able to get, 
and maybe some of it is cultural, but we have not been able to 
get the volume, the number of authorizations through that 
program that we had anticipated. That has not stopped us from 
trying to be faithful to the intention of Congress when it 
passed the Choice Act, which was no veteran should be waiting.
    So really what we are asking for is to be able to use funds 
that were appropriated for the purchase of care in the 
community through the Choice Program to pay for care that we 
purchased in the community, not through Choice, but through our 
normal mechanisms, because we have oversubscribed those 
programs.
    Mr. McNerney. So how soon do you think that we could 
provide that flexibility?
    Secretary McDonald. Well, we are asking you to do it before 
you leave in August. So by the end of this month.
    Mr. McNerney. So it would require a bill to be passed and 
signed into law by the end of August--or by the end of July.
    Secretary McDonald. The money has been appropriated. So I 
am not an expert on what Congress does. So I yield to the 
chairman on that. But, yes, I assume it is some kind of bill.
    The Chairman. We would have to authorize the transfer of 
those dollars out of a finite amount from the Choice Program.
    Mr. McNerney. Well, a painful question. Can you provide a 
list of the facilities that will be closed if you don't get 
that money? Or how soon can you provide that list?
    Secretary McDonald. We have an entire plan together which 
we can share with you.
    Mr. McNerney. All right.
    Dr. Tuchschmidt. I would just say that when we run out of 
money, so we will move funds around between facilities as best 
we can. Medical services will be the first appropriation that 
runs out. It will affect essentially every facility in the 
country.
    Mr. McNerney. All right. Thank you, Mr. Chairman.
    The Chairman. Dr. Abraham.
    Dr. Abraham. Thank you, Mr. Chairman.
    Let me, I guess, just start by saying the old adage in 
business: You can delegate authority but never responsibility. 
And, Mr. Secretary, I know you were CEO of a major firm before 
you came aboard, and I would just think that if you had come to 
the board of directors at the 11th hour like Ms. Brown 
indicated, they too would be a little incredulous at the 
shortfall, the, I guess, lack of vision, so to speak. And we 
don't want to disparage that. We understand that everybody in 
this room, certainly on this committee, yourself and everybody 
in this room has the veterans' best interests at heart. And I 
do believe that.
    Let me hit it just from the hepatitis C, Doc. You and I 
both know it is a very insidious disease. It takes many years 
to get to a point. I was back in my district this weekend. I 
had three Vietnam veterans come up to me and said that they had 
yet to receive anything from the VA, because I understand that 
is in the pipeline. And I do understand that Harvoni and the 
other hepatitis C drug was only approved in 2013.
    But saying that, that still gives us about a year and 
three-quarters, 2 years to formulate plans, delegate how this 
medicine is going to be divvied up, so to speak, and it hasn't 
been done yet. Can you give me some indication as to when our 
Vietnam veterans, our Iraqi, our Afghanistan veterans can 
expect some hard data as to, if they are at this point of the 
disease, they can get the treatment?
    Dr. Tuchschmidt. Yes. Of course those drugs were not 
approved by the FDA when we submitted our budget for fiscal 
year 2015.
    Dr. Abraham. I understand that.
    Dr. Tuchschmidt. But so we have a plan, we have had a plan 
all along for the treatment of hepatitis C.
    Dr. Abraham. When will it be implemented, Doc? I mean, when 
will the veteran, he or she, know that, hey, I can get 
treatment now?
    Dr. Tuchschmidt. Well, we have treated over 20,000 veterans 
this year for hepatitis C in the VA.
    Dr. Abraham. And are you basing that on liver biopsy 
results? How are you delegating which veteran gets treated and 
which veteran does not?
    Dr. Tuchschmidt. So you may be getting a little bit over my 
head in terms of hepatitis C. Our hepatologists are managing 
that. But we have a severity score based upon whether the 
veteran has advanced liver disease and----
    Dr. Abraham. Well, I guess what I would ask, if you can't 
answer, if you would just get me that information as how that 
determination is made. There are blood tests. There are viral 
loads. There are liver biopsy results. I mean, I have treated 
hundreds if not thousands of hep C and hep B cases. But if you 
would just pledge to do that, I would appreciate it, so I can 
give it back to my people in my district.
    Dr. Tuchschmidt. I would be happy to get you the 
information.
    So we have treated over 20,000 veterans with hepatitis C 
today, and we continue to treat patients with advanced liver 
disease. And patients who can go out into the community have 
the Choice Program as an option to do that.
    Dr. Abraham. And, Secretary, you said that of that $2.5 to 
$3 billion that you are anticipating shortfall, that $500 
million of that would be designated for hepatitis C treatment, 
for the treatment itself?
    Secretary McDonald. Yes, sir.
    Dr. Abraham. Okay. All right.
    I yield back, Mr. Chairman.
    The Chairman. Mr. Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for testifying today.
    Dr. Roe talked about the medical scribes. Elaborate on that 
pilot program. Because I know in the private sector these are 
great private sector solutions. And I know that the doctor will 
have more time with the--I mean, it has been proven in the 
private sector that the doctor will have more time with the 
patient. I had a town meeting, lasted 4 hours, a couple weeks 
ago, people were bringing that up.
    So you want the doctor to focus on medicine. Elaborate on 
that program, that pilot program.
    Secretary McDonald. Well, I have heard a lot of this. I 
have been to 195 different VA facilities, and every one I go to 
there is a different approach. But we are pretty consistent in 
the operation of a PACT team, which is a patient care team, a 
team of people working with a particular patient.
    On those teams today we don't yet have a scribe. So I think 
what Jim was describing was let's pilot the scribe so that 
everybody on that team can be working on the patient and not 
just entering information into the medical record.
    Dr. Tuchschmidt. Yes. I didn't come prepared today to 
really expect this question. So I will have to take it for the 
record and get you information about where we are in terms of 
standing up a pilot program.
    Mr. Bilirakis. Okay. Thank you.
    Any other innovative medical solutions coming from the 
private sector that you have implemented in the last year? Do 
you have an advisory council set up of physicians possibly to 
work in the private sector to get these ideas to make it more 
efficient and productive?
    Secretary McDonald. Yes, we do. In fact, we have two--we 
have, believe it or not, we have about 20--we have more than 25 
advisory councils, but we have two that I would like to tell 
you about.
    One is our special medical advisory council, which is the 
best medical minds, I think, some of the best medical minds in 
the country. It is chaired by--the chairman is John Perlin. 
John is the chairman of the American Hospital Association. He 
is also the chief medical officer of HCA. He is also a former 
under secretary of health. And they are providing tremendous 
leadership.
    On the MyVA work that we are doing, the transform VA, we 
have also set up an external advisory council. We have many 
doctors that are part of that, including Toby Cosgrove, who is 
the head of the Cleveland Clinic, Rich Carmona, who is a former 
surgeon general and also a veteran.
    But I have to tell you, one of the things they are bringing 
is they are not only bringing their innovations and their 
ideas, but they are taking away our innovations. A couple of 
weeks ago we published an article that was picked up in medical 
journals, not broadly in the newspaper, about a new Monte Carlo 
simulation technique we can use to predict suicide.
    This is a breakthrough. If we can validate this model of 
predicting suicide, this will be a breakthrough for the VA, but 
it will also be a breakthrough for the American public. And a 
lot of what we have seen and you and I have talked about in the 
past has been innovations that actually start in the VA, part 
of our $1.8 billion of research spending that you appropriate 
and we appreciate it, that result in positive results for the 
American people.
    Here is a copy of the article, Mr. Chairman, if you would 
be willing, I would be happy to put it in the record, about 
this breakthrough. And we have more of these breakthroughs 
coming.
    Mr. Bilirakis. Very good. Sir, we need to get the word out 
on this Choice Program. A lot of people don't know. I know you 
sent out a card. What else have you done to get the word out? 
And then I have another question with regard to access.
    Dr. Tuchschmidt. So we have mailed letters to everybody. We 
have mailed now I think three letters totally to everybody, 
first with their card and then follow-up. We have another flier 
that we have just developed.
    We have a Web site that we have just reengineered. So we 
have been doing surveys of veterans who use the Choice Program, 
asking them what they think about the program. And one of the 
biggest issues they have had is with the Web site and the 
availability of information. So we now have a redesigned Web 
site that is about to go live. It has a live chat on it so that 
the veteran, while they are looking, if they can't find the 
information, they can click the chat button and talk to 
somebody right then and there.
    So we have really done a lot. We had a set of outbound 
phone calls to people initially who were actually waiting for 
care more than 30 days to contact them about the Choice 
Program. So we have tried to do a lot of outreach.
    Mr. Bilirakis. Sir, my constituents, sir, are having 
trouble getting access to the program. Describe for the benefit 
of the constituents, our veterans, our heroes, describe the 
scenario. How would it work? They would call the VA for an 
appointment? Could you describe a real-life scenario?
    Dr. Tuchschmidt. Yes. So there are two benefits under the 
Choice Program. One is if you are waiting more than 30 days. If 
you are waiting more than 30 days for an appointment, our 
staff, if you either call in or while you are checking out of 
clinic and getting a follow-up appointment, our staff will tell 
you, if you cannot get an appointment within 30 days, that the 
Choice Program is available to you. They have information that 
they can hand out to the veteran about the Choice Program.
    At the moment, we are both booking an appointment for the 
veteran in the VA and offering them a Choice Program and making 
that referral to the third party administrator. The veteran can 
decide which of those two options they want at any time.
    We are about to change that program so that what will 
happen is at the time the veteran asks for an appointment, if 
we cannot give them an appointment within 30 days, we will ask 
them if they want an appointment in the VA beyond 30 days or if 
they would like to go to the community, and then our staff will 
contact the TPA and get an appointment for the patient.
    We need to do a contract modification to be able to put 
that program in place, but it is coming down the pike. And that 
should improve, I think, the coordination and the level of 
service.----
    If you are in the 40-mile group, what happens today is that 
the TPA, TriWest and Health Net, already have your information 
and you can contact them directly. You don't need to go through 
the VA to get an authorization for care.
    Mr. Bilirakis. Sir, we have got to make it easier for the 
veteran. That is what I have been hearing.
    Dr. Tuchschmidt. We totally agree.
    Mr. Bilirakis. Okay. Thank you very much.
    I yield back.
    The Chairman. Thank you very much.
    Members, we are not going to do a second round of questions 
unless there is one that is just absolutely pressing.
    And with that, Ms. Brown, you are recognized.
    Ms. Brown. Thank you. Mr. Chairman, I want to thank you for 
holding this hearing.
    As far as I am concerned, failure is not an option. We have 
heard a lot of discussion today, and I find it--well, when I 
was coming up there used to be a program on, Sergeant Joe 
Friday. Facts, ma'am. Just the facts. And I want people to 
understand the facts before they walk out that door, because I 
have seen a lot of people snapping pictures and us making 
different statements. I want you to give us a list of the facts 
why we are in this emergency situation and why, if we don't act 
before we go home, we are going have a crisis at the VA. Every 
Member needs to understand where we are.
    And this is not anything new. I mean, you have been saying 
it from day one. You need flexibility. And we need to give you 
the flexibility and then we will hold you accountable.
    But, I mean, to sit up here and act like we don't have 7 
million additional veterans coming into the system--or wait a 
minute--7 million additional appointments and 4 million 
veterans, and we have a community program that you have taken 
money from and used and you used the Choice where you could, 
but it had limited ramifications how you could use it.
    Give us the facts before any of us walk out the door.
    Secretary McDonald. We will. Thank you.
    Ms. Brown. No, no. I want you to answer it.
    Secretary McDonald. Well, I think, what I said, I think----
    Ms. Brown. You said it, but I want you to go back and check 
the boxes again.
    Secretary McDonald. Okay. What I said was what we would 
like to do is get the authorization to use $2.5 billion from 
the Choice Program for care in the community and half a billion 
dollars for hepatitis C treatment, and we would like to get 
that before the end of the month because we have run out of 
care in the community money in the VA budget, and we want to 
keep our care going for veterans.
    We think we are in a good place in the sense that more 
veterans are getting more care; 7 million more appointments 
this year, average wait times 3 days, mental health 4 days, 
primary care 5 days. Specialty care, admittedly we do have 
issues we have to work on in other parts of the country. But we 
are making progress in the right direction. We want to keep it 
going. Our veterans deserve it.
    Dr. Tuchschmidt. So I would like to just add that we 
continue to buy care in the community for patients so that they 
were not waiting more than 30 days. When we ran out of money in 
our budget to do that we took money out of operations to 
continue to buy that care. We could probably sit here and 
debate whether that was a wise decision or a bad decision.
    Had we decided not do that and leave it in operations, we 
would not be facing any kind of shutdown or closure. But we 
would have told people back in June, at the beginning of June, 
end of May, there was no more care in the community, you either 
waited in the VA or went someplace else.
    We chose not to have that happen, but rather to continue to 
buy care for patients that could not get care through the 
Choice Program. And so today, because of that, we find 
ourselves not having money out in the field to be able to make 
payroll and stuff during the month of September.
    And that is really what we are asking today, is to be able 
to use Choice money set aside to buy care in the community to 
pay for care in the community.
    Ms. Brown. The last thing. I know one of the discussions 
was I know we are having some problems in certain parts of the 
country. But some of the veterans, particularly those in 
Florida, they like the care that they receive from the VA. And 
I don't personally want to see VA just going to a specialty. We 
need comprehensive care in certain areas. And I do know around 
the country it is a real problem with getting comprehensive 
care.
    But when you look at the approval rates, veterans is like--
what is the percentage from?--80 something to 90 something like 
the care that they get in VA. Can you respond to that also?
    Secretary McDonald. Well, that is what the VFW study told 
us. The other thing that we see is veterans have always had 
choice. Remember, 81 percent of veterans have multiple ways of 
getting healthcare, whether it is Medicare, TRICARE, VA. And 
what we are seeing now as we improve care is more and more 
veterans are deciding to come to VA.
    So the thing we have got to be vigilant about, and I take 
responsibility for sharing the forecast with you, is as we 
continue to improve care, how many more of those veterans are 
going to be coming to VA for their care.
    Ms. Brown. All right.
    Thank you, Mr. Chairman, for this hearing. Thank you for 
the time. And I yield back my time.
    The Chairman. Thank you.
    Dr. Tuchschmidt, did I hear you just say that in June you 
were at the point that you were going to have to tell veterans 
you were out of money and there was no longer the ability for 
them to have care provided for them in the local community?
    Dr. Tuchschmidt. To the purchased care program, we started 
pulling money, I think it was about $290-something million from 
VERA to supplement that pool of money in probably early, middle 
of June.
    The Chairman. But is that an accurate statement to say that 
veterans would not be able to have care provided for them 
outside of the VA?
    Dr. Tuchschmidt. Except through Choice.
    The Chairman. Except through Choice. And, again, why do 
you--you couched your comment to make it appear that you were 
going to shut the spigot off in June. There is $9-plus 
billion----
    Dr. Tuchschmidt. Yes.
    The Chairman [continuing]. Finite dollars, Mr. Secretary, 
which is why we have been so protective of that money.
    You are the ones that sent out the notice with the card 
saying that it is a temporary program. And as you drained the 
money out of this program, and somebody made a budgeting 
decision, and you have already said rightfully or wrongly, you 
missed. You thought you could weather the storm and just squeak 
by, but you can't. You got caught. Somebody made a bad 
decision. Veterans will still get healthcare in the community 
through Choice.
    Dr. Tuchschmidt, is that correct?
    Dr. Tuchschmidt. Some veterans will get some care.
    The Chairman. I understand.
    Look, I know there are some restrictions on dental issues 
and things like that, but you are making it appear with the 
statement that you just made that as of June you thought you 
were going to have to start telling veterans they couldn't 
receive care in the community.
    Dr. Tuchschmidt. I think I said that veterans who did not--
could not get care through the Choice Program would not--would 
have to wait for care.
    The Chairman. That is not exactly what you said, but I will 
go back and check the record.
    Dr. Tuchschmidt. I stand corrected, then.
    The Chairman. And, again, we are at a crisis situation 
again. Many of my colleagues have already brought that--you 
know, scaring veterans that their hospitals are going to close, 
that we are not going to be able to pay their salaries, I think 
is just that, trying to scare them. We are the ones that will 
have to make the decision whether or not this money gets 
allocated, and I don't think there is a single person that was 
up here today that advocates anything less than trying to solve 
the problem that exists out there.
    What we are asking is when these issues arise internally, 
the sooner you can inform us, I think the better off everybody 
is. We are still not satisfied with where we are with the 
Choice Program. I don't think you are either. I think you have 
made those comments. But all hands need to be on deck.
    And with that, I would ask that all members have 5 
legislative days with which to revise and extend their remarks 
and add any extraneous material.
    The Chairman. With that, this hearing is adjourned.
    [Whereupon, at 12:45 p.m., the committee was adjourned.]

                                APPENDIX

             The Prepared Statement of Chairman Jeff Miller

    Good morning. Welcome to today's hearing. We are again gathered to 
discuss VA's budget execution in this fiscal year.
    Less than three weeks ago we gathered to hear Deputy Secretary 
Sloan Gibson testify regarding a budget shortfall at VA. I'm sure 
everyone is asking why we're here again on the same topic. I will 
explain in a moment, but the stakes have been raised considerably since 
the Deputy's testimony on June 25th.
    At that hearing Sloan Gibson was asked the following question by 
Ms. Brownley (quote): ``[I]f Congress doesn't act on the fiscal year 
2015 budget shortfall, what is it going to look like in the VA in July 
and August and on October 1.''
    The Deputy responded that we get into dire circumstances the longer 
we go, but that (quote) ``Before we get to the end of August . . . we 
are in a situation where we are going to have to start denying care to 
veterans in the community because we don't have the resources to be 
able to pay for it.''
    The Deputy also testified about antiquated financial systems 
contributing to this problem, costs associated with new Hepatitis C 
treatments, and an unrealistic assumption of how fast VA could set up 
and effectively utilize the Veterans' Choice Program.
    Imagine my surprise when on July 13th I received a letter, again 
from the Deputy Secretary, that in the absence of providing the 
flexibility VA was seeking to plug the shortfall with Choice Fund money 
that VA's hospital operations would shut down in August, and that non-
VA care authorizations would cease at the end of July.
    Mr. Secretary, this is unprecedented. A true VA ``Budget-Gate'' for 
our time. First, never before can I recall VA--or any agency for that 
matter--completely exhausting its operational funds prior to the end of 
the fiscal year, with the consequences for VA being the cessation of 
hospital operations. Second, never before can I recall an issue of such 
enormous magnitude evading the direct attention of the President and, 
until recently, you. This is not a ``flying under the radar'' issue, 
yet I feel that is exactly how VA and the President have treated it in 
an effort to avoid responsibility.
    So that everyone understands where I'm coming from, let me begin by 
reviewing how we've arrived at this point.
    The first real hint of serious financial issues came as a result of 
a briefing for our staffs with VA officials on June 4th on a separate 
topic. At the conclusion of the briefing, committee staff noted that 
there appeared to be a two to three billion dollar difference between 
VA's projected $10.1 billion obligation rate for ``Care in the 
Community'' compared with the funds VA budgeted for Care in the 
Community. The VA official agreed with the discrepancy, but stated 
cryptically that just because VA was on pace to spend $10.1 billion, it 
did not mean that the money to address the discrepancy was either found 
or available. That assertion was repeated upon further questioning, 
leaving it to staff to ``read between the lines'' as to what was meant.
    At around the same time, during a June 8 visit to the Cincinnati VA 
Medical Center, I myself heard rumors of impending financial issues 
consistent with the cryptic warning provided by VA officials at the 
June 4 staff briefing.
    As a result, on June 10, I called on either the Secretary or Deputy 
Secretary to testify on the state of VA's budget. As a consequence of 
my calling this hearing, staff received a pre-hearing briefing--again 
at our request--on June 18th. It was at this briefing that VA, for the 
first time, publicly revealed a possible $2.5 billion shortfall in 
funding. Notwithstanding this briefing, there was no mention of a 
hospital system shutdown.
    On June 23rd, we received a letter from the Secretary citing the 
looming shortfall of $2.5 billion and also requesting of the 
Appropriations Committee a transfer of funds from the Medical 
Facilities account to the Medical Services account. Again, there was 
still no mention of a hospital system shut down.
    And finally, at the hearing on June 25th itself, there was no 
mention of a hospital system shutdown in August.
    Mr. Secretary, you are the head of the department. I am very 
disappointed about the slow, painstaking revelation of this crisis by 
the department you lead. I understand there are excuses as to why we're 
in this position. However, someone took their eye off the ball here. 
Just as Congress established a cap on spending for the Denver project 
that VA busted, Congress also provided a budget for VA for fiscal year 
2015--which the President signed into law--and it, too, is now busted. 
In both instances, VA has left Congress with very little time to react 
to crises created by its own management decisions.
    While we will not penalize veterans for VA's management or 
transparency failures, the days when VA can come to Congress and just 
say, ``Cut us a check,'' are gone. Asking for ``flexibility'' without 
supporting information is not sufficient.
    Similar to the way a large corporation's board of directors sets a 
budget and corporate management implements that budget, the President 
and 535 Members of the your current board of directors set a budget and 
expected you and your staff to carry out the department's mission; that 
is, to manage the taxpayers' resources in a fiscally responsible 
manner. Just as emerging circumstances in the private sector might 
cause a CEO to go back to the board armed with information supporting a 
request for additional resources or flexibility, we have the same 
expectation. And despite unsupported hints of a problem by the 
department, that supporting information was never provided until 
extraordinarily late.
    Mr. Secretary, we have already passed legislation to take VA out of 
managing major construction programs. Perhaps we now need to bring in 
an outside entity to manage the department's finances.
    I now recognize my good friend the Ranking Member for her opening 
remarks.

                                 ---------

                      Ranking Member Corrine Brown

    Thank you, Mr. Chairman, for calling this hearing today to discuss 
the VA's current budget shortfall and the possibility that VA may have 
to close hospitals or ration healthcare.
    Mr. Chairman, I know everyone in this room agrees that this 
Committee is committed to providing the resources the VA needs to take 
care of our veterans.
    We all need straight answers to our questions. How much is needed, 
and why? We are all supportive of making sure our veterans get the care 
they need, but yet again we are faced with an 11th hour VA budget 
crisis.
    We must all work together, VA and Congress, in order to properly 
anticipate the resource needs of the VA. It is simply not acceptable 
that VA manages to its budget. It is important that VA start planning 
and anticipating what our veterans will need, and where they will need 
it.
    We have been hearing that this shortfall is due to an increase of 
veterans coming to get medical care, resulting in more veterans being 
treated outside of VA. I also think that taking care of veterans with 
Hepatitis-C, many of whom are our Vietnam veterans, who we recently 
honored in a ceremony in the Capital, should be a high priority.
    But I wonder if this shortfall is fundamentally due to a lack of 
planning and forecasting for a variety of programs which provide 
services to our veterans.
    Today we need to decide how to solve this immediate challenge and 
walk away with a clear understanding about what steps the VA will be 
taking to prevent such a calamity in the future.
    I believe that my bill, H.R. 216, the VA Budget Planning Reform Act 
of 2015 would provide a framework for the VA to begin to get its 
financial house in order. My bill passed the House unanimously, and I 
look to the Senate taking up this important legislation.
    So today, let's figure out what we need to do to ensure that our 
veterans are getting the healthcare they have earned, and begin to 
figure out what steps we need to take to fix this and prevent any more 
11th hour budget crises.
    Thank you Mr. Chairman, and I yield back the balance of my time.

                                 [all]