[Senate Report 110-141]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                                 SENATE
 1st Session                                                    110-141

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



 
 LEGISLATIVE AND OVERSIGHT ACTIVITIES DURING THE 109TH CONGRESS BY THE 
                 SENATE COMMITTEE ON VETERANS' AFFAIRS

                                _______
                                

                 August 3, 2007.--Ordered to be printed

                                _______
                                

   Mr. Akaka, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

    Pursuant to paragraph 8 of rule XXVI of the Standing Rules 
of the Senate, the Committee on Veterans' Affairs (hereinafter 
``Committee'') submits its report on legislative and oversight 
activities during the 109th Congress.

                        I. HEARINGS AND MEETINGS


A. First session

    During the First Session of the 109th Congress, the 
Committee held 29 hearings on legislative and oversight 
matters, nominations to positions in the Department of Veterans 
Affairs (hereinafter ``VA'') and the Department of Labor 
(hereinafter ``DoL''), and on the legislative recommendations 
of various veterans service organizations (hereinafter 
``VSOs'').
    During the First Session, the Committee held five days of 
hearings on VA health care programs, legislation, and related 
matters (on March 17, May 12, June 9, October 20, and November 
3); six days of hearings on VA compensation and pension 
programs, legislation, and related issues (on February 3, April 
19, May 26, June 23, September 22, and October 27); two days of 
hearings on veterans' programs budget matters (on February 15 
and June 28); four days of hearings on nominations (on January 
24, April 7, July 14, and September 29); six days of hearings 
to receive VSOs legislative recommendations (on March 8, March 
9, March 10, April 14, April 21, and September 20); and four 
field hearings (Chicago IL, Boise 10, Seattle WA, and Grand 
Junction CO).
    (1) On January 24, 2005, the Committee held a hearing to 
consider the nomination of R. James Nicholson to be the 
Secretary of the Department of Veterans Affairs. The nomination 
was reported to the Senate later that same day with a favorable 
recommendation. Mr. Nicholson was confirmed by the full Senate 
on January 27, 2005.
    (2) On February 3, 2005, the Committee held a hearing on 
benefits matters titled ``Benefits for Survivors: Is America 
fulfilling Lincoln's charge to care for the families of those 
killed in the line of duty?'' This hearing addressed the issue 
of whether death and disability benefits are sufficient to the 
meet the needs of veterans' survivors.
    (3) On February 15, 2005, the Committee held a hearing on 
the proposed Fiscal Year 2006 budget for VA programs.
    (4) On March 8, 2005, the Committee held a joint hearing 
with the House Committee on Veterans' Affairs to receive the 
legislative presentation of the Disabled American Veterans.
    (5) On March 9, 2005, the Committee held a joint hearing 
with the House Committee on Veterans' Affairs to receive the 
legislative presentation of the Veterans of Foreign Wars of the 
United States.
    (6) On March 10, 2005, the Committee held a joint hearing 
with the House Committee on Veterans' Affairs to receive the 
legislative presentations of: the Non-Commissioned Officers 
Association; the Blinded Veterans of America; The Military 
Order of the Purple Heart of the United States of America, 
Inc.; the Paralyzed Veterans of America; and the Jewish War 
Veterans of the United States of America.
    (7) On March 17, 2006, the Committee held a hearing on 
health care related matters titled ``Back from the Battlefield: 
Are We Providing the Proper Care for America's Wounded 
Warriors?'' The Committee received testimony from the 
Department of Defense (DoD), VA, the Government Accountability 
Office (GAO), as well as current patients and health care 
providers on the process of transition from the DoD to the VA 
health system.
    (8) On April 7, 2005, the Committee held a hearing to 
consider the nomination of Jonathan B. Perlin, M.D., Ph.D., to 
be Under Secretary for Health, Department of Veterans Affairs.
    (9) On April 14, 2005, the Committee held a joint hearing 
with the House Committee on Veterans' Affairs to receive the 
legislative presentations Of: the Military Officers Association 
of America; the National Association of State Directors of 
Veterans Affairs; AMVETS; American Ex-Prisoners of War; and the 
Vietnam Veterans of America.
    (10) On April 19, 2005, the Committee held a hearing on 
benefits related matters titled ``Back from the Battlefield, 
Part II: Seamless Transition to Civilian Life.'' The hearing 
was the second of two hearings held to explore the government's 
efforts to assist Servicemembers as they return to civilian 
life following a period on active duty.
    (11) On April 21, 2005, the Committee held a joint hearing 
with House Committee on Veterans' Affairs to receive the 
legislative presentations of: the Fleet Reserve Association; 
the Air Force Sergeant Association; The Retired Enlisted 
Association; and the Gold Star Wives of America, Inc.
    (12) On May 12, 2005, the Committee held a hearing on 
health related matters titled: ``An Open Discussion: Planning, 
Providing, and Paying for Veterans' Long Term Care.'' The 
hearing provided VA with an opportunity to explain its budget 
proposal to limit VA-provided geriatric nursing home care to 
certain special populations and to allow others to share their 
views on the long term care needs of veterans.
    (13) On May 26, 2005, the Committee held a hearing on 
benefits related matters titled ``Battling the Backlog: 
Challenges Facing the VA Claims Adjudication and Appeals 
Process.'' The hearing examined the current state of VA's 
claims adjudication and appeals process, focusing on measures 
VA is taking to achieve its objective of providing timely and 
accurate decisions. The Committee also explored challenges that 
VA faces in striving to meet that objective as well as measures 
that could be taken to address those challenges.
    (14) On June 9, 2005, the Committee held a hearing to 
consider the merits of health care related legislation pending 
before the Committee. The bills on the agenda for discussion 
included: S. 481, S. 614, S. 716, S. 1176, S. 1177, S. 1180, S. 
1182, S. 1189, S. 1190, and S. 1191.
    (15) On June 23, 2005, the Committee held a hearing to 
consider the merits of benefits related legislation pending 
before the Committee. The bills on the agenda for discussion 
included: S. 151, S. 423, S. 551, S. 552, S. 909, S. 917, S. 
1138, S. 1234, S. 1235, S. 1252, S. 1259, and S. 1271.
    (16) On June 28, 2005, the Committee held a hearing to 
examine allegations that VA's Medical Care budget lacked the 
funding necessary to ensure needed care for all veterans for 
the remainder of the fiscal year. The Committee also explored 
ideas that would help to ensure such a shortfall would be less 
likely to occur in the future.
    (17) On July 6, 2005, the Committee held a field hearing in 
Chicago, Illinois titled, ``Is the VA Prepared to Meet the 
Needs of Our Returning Vets?'' The Committee received testimony 
concerning VA's ability to address the needs of veterans coming 
back from a tour of duty overseas in Operation Enduring Freedom 
or Operation Iraqi Freedom.
    (18) On July 14, 2005, the Committee held a hearing to 
consider the nominations of James P. Terry to be Chairman of 
the Board of Veterans' Appeals and Charles S. Ciccolella to be 
Assistant Secretary for the Veterans' Employment and Training 
Service, U.S. Department of Labor.
    (19) On July 28, 2005, the Committee voted to report the 
nominations of James P. Terry and Charles S. Ciccolella to the 
Senate with favorable recommendations. Mr. Terry and Mr. 
Ciccolella were confirmed by the full Senate on July 29, 2005. 
In addition, the Committee marked-up: S. 1234, the ``Veterans' 
Compensation Cost-of-Living Adjustment Act of 2005''; as well 
as the Committee Print of S.1235, the ``Veterans' Benefits 
Improvement Act of 2005.''
    (20) On August 1, 2005, the Committee held a field hearing 
in Boise, Idaho titled, ``The 116th Armored Cavalry Brigade: 
Are We Ready for the Return of Idaho's Soldiers?'' The hearing 
focused predominately on the sufficiency of resources and 
outreach activities available to assist the State of Idaho with 
those service members returning from Iraq as part of the 116th 
Armored Cavalry Brigade.
    (21) On August 3, 2005, the Committee held a field hearing 
in Seattle, Washington titled ``Coming Home from Combat: Are 
Veterans Getting the Help They Need?'' The hearing focused 
predominately on the sufficiency of resources and outreach 
activities available to assist the veterans of the State of 
Washington.
    (22) On August 16, 2005, the Committee held a field hearing 
in Grand Junction, Colorado titled ``Forgotten Veterans: 
Improving Health Care for Rural Veterans.'' The hearing focused 
on the adequacy of the delivery of health care provided by VA 
to veterans living in rural communities.
    (23) On September 15, 2005, the Committee marked-up the 
Committee Print of S.1182, the ``Veterans Health Care 
Improvements Act of 2005'' as well as S. 716, the ``Vet Center 
Enhancement Act of 2005.''
    (24) On September 20, 2006, the Committee held a hearing to 
receive the legislative presentation of The American Legion.
    (25) On September 22, 2005, the Committee held a hearing on 
the rules governing burial in National Cemeteries titled 
``Preserving Sacred Ground: Should Capital Offenders be Buried 
in America's National Cemeteries?'' The hearing explored the 
interpretation of a 1997 law that sought to bar veterans 
convicted of Federal and State capital crimes from burial at 
Arlington National Cemetery and VA National Cemeteries and the 
question of whether the interpretation was sufficient to 
address peculiarities in State sentencing of those offenders.
    (26) On September 29, 2005, the Committee held a hearing to 
consider the nominations of: Robert J. Henke to be Assistant 
Secretary of Veterans Affairs for Management; John M. Molino to 
be Assistant Secretary of Veterans Affairs for Policy and 
Planning; Lisette Mondello to be Assistant Secretary of 
Veterans Affairs for Public and Intergovernmental Affairs; 
George Opfer, to be Inspector General, Department of Veterans 
Affairs; and William F. Tuerk to be Under Secretary of Memorial 
Affairs of the Department of Veterans Affairs.
    Mr. Henke, Mr. Molino, Ms. Mondello, Mr. Opfer, and Mr. 
Tuerk were reported to the full Senate on October 18, 2005 with 
a recommendation that each be confirmed. The Senate confirmed 
Mr. Henke, Ms. Mondello, and Mr. Tuerk on October 26, 2005. Mr. 
Opfer was confirmed by the full Senate on November 10, 2005. 
Mr. Molino's nomination was withdrawn by the President of the 
United States on December 13, 2005.
    (27) On October 20, 2005, the Committee held a hearing on 
health care and technology related matters titled ``Information 
and Technology at the VA--Is It Ready for the 21st Century?'' 
The hearing explored Congressional concern regarding the manner 
in which VA administers the $2 billion budget for its 
information technology programs.
    (28) On October 27, 2005, the Committee held a hearing on 
employment related programs titled ``The Rising Number of 
Disabled Veterans Deemed Unemployable: Is the System Failing? A 
Closer Look at VA's Individual Unemployability Benefit.'' The 
hearing analyzed the purpose of the unemployability benefit and 
explored whether the program adequately serves the goal of 
restoring the capability of disabled veterans.
    (29) On November 10, 2005, the Committee held a hearing 
titled ``Rebuilding the Gulf Coast Following Hurricane 
Katrina.'' This hearing examined VA's efforts to rebuild its 
physical infrastructure and assets as well as resume services 
along the Gulf Coast following Hurricane Katrina.

B. Second session

    During the Second Session of the 109th Congress, the 
Committee held 24 hearings on legislative issues, oversight 
matters, nominations, and recommendations of the VSOs.
    The Committee held seven days of hearings on VA health care 
programs, construction of medical facilities, legislation, and 
related matters (January 9, January 10, January 11, January 13, 
April 6, April 27, and May 11); one day of hearings on homeless 
veterans' programs (March 16); one day of hearings on veterans' 
programs budget matters (February 16); six days of hearings to 
receive the legislative recommendations of various VSOs 
(February 28, March 2, March 7, March 9, March 30, and 
September 20); two days of hearings on VA's management of data 
security and privacy and the Agency's information and 
technology assets (May 25 and July 20); four days of hearings 
on benefits programs and legislative matters (February 2, June 
8, July 13 and September 7); two days of hearings to consider 
pending nominations (July 27 and September 26); one hearing on 
oversight of the United States Court of Appeals for Veterans 
Claims. The Committee held one markup on health and benefits 
legislation (June 22), and met to consider nominations twice 
(April 27, September 28).
    The Committee began the Second Session of the 109th 
Congress by holding a series of field hearings in the State of 
Hawaii to assess the delivery of health care services provided 
by VA to the veterans of the various islands of the State. Each 
hearing focused on the care provided on one or more of the 
islands that make up the State while also focusing on one or 
more specific clinical services provided by VA. Details of the 
individual hearings follow:
    (1) On January 9, 2006, the Committee held a field hearing 
on the Island of Kauai in the State of Hawaii. The hearing 
focused primarily on services provided to veterans who reside 
on the island as well as long-term care services provided 
across the State of Hawaii.
    (2) On January 10, 2006, the Committee held a field hearing 
on the Island of Maui in the State of Hawaii. The hearing 
focused on care provided to veterans who reside on the island 
as well as those who reside on the neighboring islands of Lanai 
and Molokai. The hearing also focused on services provided by 
the Vet Center and the community-based outpatient clinic in 
Maui County.
    (3) On January 11, 2006, the Committee held a field hearing 
on the Island of Oahu in the State of Hawaii. The hearing 
focused on VA's efforts to coordinate care between its 
facilities and those of Trippler Army Hospital as well as the 
needs of those veterans who suffer from mental illness.
    (4) On January 13, 2006, the Committee held a field hearing 
on the Island of Hilo in the State of Hawaii. The hearing 
focused on individual difficulties accessing VA care on this 
large island and on the impending construction of Hawaii's 
first State Veterans Home.
    (5) On February 2, 2006, the Committee held a hearing 
focusing on employment benefits titled ``The Jobs for Veterans 
Act Three Years Later: Are VETS' Employment Programs Working 
for Veterans?'' The hearing examined two employment programs 
administered by the DoL's Veterans' Employment and Training 
Service (VETS): the Disabled Veterans' Outreach Program (DVOP) 
and the Local Veterans' Employment Representative (LVER) 
program.
    (6) On February 16, 2006, the Committee held a hearing on 
the President's proposedbudget for VA for Fiscal Year 2007.
    (7) On February 28, 2006, the Committee held a hearing to 
receive the legislative presentation of the Disabled American 
Veterans.
    (8) On March 2, 2006, the Committee held a hearing to 
receive the legislative presentations of: the Fleet Reserve 
Association; Air Force Sergeant's Association; The Retired 
Enlisted Association; Gold Star Wives of America; and Military 
Officers Association of America.
    (9) On March 7, 2006, the Committee held a hearing to 
receive the legislative presentation of the Veterans of Foreign 
Wars of the United States.
    (10) On March 9, 2006, the Committee held a hearing to 
receive the legislative presentations of: Paralyzed Veterans of 
America; Blinded Veterans Association; Jewish War Veterans of 
the United States of America; Non-Commissioned Officers 
Association; and Military Order of the Purple Heart of the 
United States of America, Inc.
    (11) On March 16, 2006, the Committee held a hearing to 
assess progress on the nation's long-term commitment to end 
homelessness in the veterans' population. The hearing was 
titled ``Looking at Our Homeless Veterans Programs: How 
Effective Are They?'' The hearing allowed the Committee to 
consider testimony submitted by providers of homeless services 
around the nation in an effort to better understand the full 
array of Federal programs and services available to homeless 
veterans.
    (12) On March 30, 2006, the Committee held a hearing to 
receive the legislative presentations of: National Association 
of State Directors of Veterans Affairs; AMVETS; American Ex-
Prisoners of War; and the Vietnam Veterans of America.
    (13) On April 6, 2006, the Committee held a hearing on VA's 
construction and lease authorization requests for Fiscal Year 
2007. The hearing allowed Committee members to hear the views 
of Senators as well as VA and the Veterans of Foreign Wars 
(VFW) on the funding allocation proposals.
    (14) On April 27, 2006, the Committee held a hearing on 
health care matters titled ``VA Research: Investing Today to 
Guide Tomorrow's Treatment.'' The hearing highlighted the 
Medical and Prosthetic Research program's history of 
accomplishment, the budgetary challenges it is facing, and its 
outlook for the coming years.
    (15) On May 11, 2006, the Committee held a hearing on 
health care matters titled ``Healthcare Legislative Initiatives 
Currently Pending Before the U.S. Senate Committee on Veterans' 
Affairs.'' The Committee received testimony from VA and various 
VSOs on eight bills: S. 1537, S. 1731, S. 2433, S. 2500, S. 
2634, S. 2736, S. 2753, and S. 2762.
    (16) On May 25, 2006, the Committee held a joint hearing 
with the Senate Committee on Homeland Security and Governmental 
Affairs titled ``VA Data Privacy Breach: Twenty-Six Million 
People Deserve Answers.'' The hearing explored the 
circumstances surrounding the theft of computer equipment which 
contained personal information on approximately 26.5 million 
individual veterans and their dependents. Committee members 
received testimony from the Secretary of Veterans Affairs as 
well as VA's Inspector General on the reasons for the agency's 
initial slow response to the theft.
    (17) On June 8, 2006, the Committee held a hearing on 
benefits related matters titled ``Benefits Legislative 
Initiatives Currently Pending Before the U.S. Senate Committee 
on Veterans' Affairs.'' The Committee received testimony from 
VA and various VSOs on six bills: S. 2121, S. 2416, S. 2562, 
S.2659, S. 2694, and S. 3363.
    (18) On June 22, 2006, the Committee favorably reported: S. 
2562, ``The Veterans' Compensation Cost-of-Living Adjustment 
Act of 2006''; S. 3421, a bill to authorize major medical 
facility projects and major medical facility leases for the 
Department of Veterans Affairs for fiscal years 2006 and 2007; 
and a Committee Print of S. 2694, the ``Veterans Choice of 
Representation and Benefits Enhancement Act of 2006.'' The 
Committee Print of S. 2694 contained provisions from S. 909, S. 
1252, S. 1537, S. 1759, S. 2121, S. 2416, S. 2433, S. 2634, S. 
2659, S. 2694, S. 2753, S. 2762, S. 3069, S. 3363, S. 3545, as 
well as original provisions.
    (19) On July 13, 2006, the Committee held a hearing on 
benefits-related matters titled ``Battling the Backlog Part II: 
Challenges Facing the U.S. Court of Appeals for Veterans 
Claims.'' The hearing provided Committee members with the 
opportunity to examine the dramatic increase in the number of 
cases received by the Court as well as the total number of 
cases pending at the Court. The Committee received testimony on 
measures that could be taken to help the Court address the high 
volume of cases as well as the backlog.
    (20) On July 20, 2006, the Committee held a hearing on 
technology-related issues as part of a follow-up to the joint 
hearing held on May 25, 2006. The hearing was titled ``VA Data 
Privacy Breach: Twenty-Six Million People Deserve Assurances of 
Future Security.'' The hearing reviewed a July 11, 2006 report 
issued by VA's Office of the Inspector General detailing VA's 
response to the loss of computer equipment and data as well as 
the OIG's recommendations for improving the response in the 
future.
    (21) On July 27, 2006, the Committee held a hearing to 
receive testimony and review the qualifications of Patrick W. 
Dunne, nominated by the President to serve as Assistant 
Secretary of Veterans Affairs (Policy and Planning) and Thomas 
E. Harvey, nominated by the President to be Assistant Secretary 
of Veterans Affairs (Congressional and Legislative Affairs).
    (22) On September 7, 2006, the Committee held a hearing on 
benefits related matters titled ``Wounded Warrior Insurance: A 
First Look at a New Benefit for Traumatically Injured 
Servicemembers.'' The hearing reviewed the operations of the 
Traumatic Injury Protection program to determine if it was 
meeting its intended purpose.
    (23) On September 20, 2006, the Committee held a hearing to 
receive the legislative presentation of the American Legion.
    (24) On September 26, 2006, the Committee held a hearing to 
receive testimony and review the qualifications of Robert T. 
Howard, nominated by the President to be Assistant of Veterans 
Affairs (Information and Technology).
    (25) On September 28, 2006, the Committee favorably 
reported the nomination of Robert T. Howard to be Assistant 
Secretary of Veterans Affairs (Information and Technology). Mr. 
Howard was confirmed by the Senate on September 30, 2006.

                            II. LEGISLATION


A. First session

    During the First Session of the 109th Congress, the 
Committee met in an open session twice (July 28, 2005 and 
September 15, 2005) to mark up and report bills to the Senate. 
The Committee reported a total of four bills, which 
incorporated provisions from nine separate bills. The reported 
legislation was as follows:
    1. S. 716, (Senate Report 109-180), a bill to enhance 
services provided by Vet Centers, to clarify and improve the 
provision of bereavement counseling by the Department of 
Veterans Affairs, and for other purposes. S. 716, as reported, 
passed the Senate by Unanimous Consent on November 22, 2005.
    2. Committee Print of S. 1182, (Senate Report 109-177), a 
bill to improve health care for veterans, and for other 
purposes, as amended to incorporate the following provisions:
    Sec. 2. To provide authority to VA to allow for the care 
for newborn children of women veterans receiving maternity care 
from VA.
    Sec. 3. To enhance VA's ability to pay for health care 
furnished to certain children of Vietnam veterans.
    Sec. 4. To make improvements to services provided to 
homeless veterans as well as to improve programs offered by 
non-government providers.
    Sec. 5. To allow VA to employ additional mental health 
providers.
    Sec. 6. Pay comparability for Chief Nursing Officer, Office 
of Nursing Services.
    Sec. 7. Repeal the current prohibition on VA's use of 
appropriated funds to conduct cost comparison studies.
    Sec. 8. To improve and expand the provision of mental 
health services by VA.
    Sec. 9. To improve the sharing of data sharing between VA 
and DoD.
    Sec. 10. To expand the National Guard Outreach Program 
originally begun by VA.
    Sec. 11. To expand the provision of tele-health services 
provided by VA to veterans in remote or rural areas.
    Sec. 12. To improve the reporting by VA to Congress on 
mental health programs.
    Sec. 13. To require VA to develop a strategic plan for 
long-term care.
    Sec. 14. To require VA to hire additional Blind 
Rehabilitation Outpatient Specialists.
    Sec. 15 . To extend a reporting requirement by VA.
    Sec. 16. To ensure health care and services can be provided 
to veterans affected by Hurricane Katrina.
    Sec. 17. To improve the reimbursement for certain veterans' 
outstanding emergency treatment expenses.
    S. 1182, as reported, passed by the Senate by Unanimous 
Consent on December 22, 2005.
    3. S. 1234 (Senate Report 109-138), a bill to increase the 
rates of compensation for veterans with service-connected 
disabilities and the rates of dependency and indemnity 
compensation for the survivors of certain disabled veterans. S. 
1234 was approved by the Senate, with an amendment, by 
Unanimous Consent on November 16, 2005. Subsequently, the House 
agreed to the bill as passed by the Senate thereby clearing the 
measure for presentation to the President of the United States. 
The President signed the bill, which became Public Law 109-111, 
on November 22, 2005.
    4. A Committee Print of S. 1235, (Senate Report 109-139) a 
bill to extend the availability of $400,000 in coverage under 
the Servicemembers' Group Life Insurance and Veterans' Group 
Life Insurance programs, and for other purposes, as amended to 
include the following provisions:

                       TITLE I--INSURANCE MATTERS

    Sec. 101. Increase in amounts provided under the 
Servicemembers' Group Life Insurance and Veterans' Group Life 
Insurance programs and notification requirements to spouses of 
servicemembers covered under such plans.
    Sec. 102. Treatment of stillborn children as insurable 
dependents under Servicemembers' Group Life Insurance program.

                       TITLE II--HOUSING MATTERS

    Sec. 201. Providing VA with more flexibility under the 
adjustable rate mortgages program.
    Sec. 202. Technical corrections to Veterans Benefits 
Improvement Act of 2004.
    Sec. 203. Permanent authority for housing loans for Native 
American veterans.

                        TITLE III--OTHER MATTERS

    Sec. 301. Requirement to submit an annual plan on outreach 
activities to veterans
    Sec. 302. Extension of reporting requirements on equitable 
relief cases.
    Sec. 303. Inclusion of additional diseases and conditions 
presumed to be associated with prisoner of war status.
    Sec. 304. Requirement to develop a policy and training on 
standardization of post traumatic stress disorder claims.
    S. 1235, as reported by the Committee was approved by the 
Senate by Unanimous Consent on September 28, 2005. The bill was 
subsequently approved by the House of Representatives on May 
22, 2006 with an amendment.
    On May 25, 2006, the Senate, by Unanimous Consent, agreed 
to the amendments proposed by the House of Representatives 
thereby clearing the measure for presentation to the President 
of the United States. The bill was signed by the President on 
June 15, 2006 and became Public Law 109-233 with the following 
provisions included:

                        TITLE I--HOUSING MATTERS

    Sec. 101. Adapted housing assistance for disabled veterans 
residing temporarily in housing owned by a family member.
    Sec. 102. Providing VA with more flexibility under the 
adjustable rate mortgages program.
    Sec. 103. Permanent authority to make direct housing loans 
to Native American veterans.
    Sec. 104. Extension of eligibility for direct loans for 
Native American veterans to a veteran who is the spouse of a 
Native American.
    Sec. 105. Technical corrections to the Veterans Benefits 
Improvement Act of 2004.

                      TITLE II--EMPLOYMENT MATTERS

    Sec: 201. Prescribing additional duties for the Assistant 
Secretary of Labor for Veterans' Employment and Training 
Service to raise awareness of skills of veterans and of the 
benefits of hiring veterans.
    Sec. 202. Modifications to the Advisory Committee on 
Veterans Employment and Training.
    Sec. 203. Reauthorization of appropriations for homeless 
veterans reintegration programs.

              TITLE III--LIFE AND HEALTH INSURANCE MATTERS

    Sec. 301. Duration of Service members' Group Life Insurance 
coverage for totally disabled veterans following separation 
from service.
    Sec. 302. Limitation on premium increases for reinstated 
health insurance of service members released from active 
military service.
    Sec. 303. Preservation of employer-sponsored health plan 
coverage for certain reserve component members who acquire 
TRICARE eligibility.

                        TITLE IV--OTHER MATTERS

    Sec. 401. Inclusion of additional diseases and conditions 
presumed to be associated with prisoner of war status.
    Sec. 402. Consolidation and revision of outreach 
authorities conducted by VA.
    Sec. 403. Extension of annual reporting requirement on 
equitable relief cases.

                     TITLE V--TECHNICAL AMENDMENTS

    Sec. 501. Technical and clarifying amendments to new 
traumatic injury protection coverage under Service members' 
Group Life Insurance.
    Sec. 502. Terminology amendments to revise references to 
certain veterans in provisions relating to eligibility for 
compensation or dependency and indemnity compensation.
    Sec. 503. Technical and clerical amendments.

B. Second session

    During the Second Session of the 109th Congress, the 
Committee met in open session one time (June 22, 2006) to 
report three bills to the Senate. The bills incorporated 
provisions from twelve different Senate bills pending before 
the Committee as well as several original provisions.
    The reported bills were as follows:
    1. S. 2562 (Senate Report 109-296), a bill to increase the 
rates of compensation for veterans with service-connected 
disabilities and the rates of dependency and indemnity 
compensation for the survivors of certain disabled veterans. 
The bill passed the Senate by Unanimous Consent with an 
amendment on September 21, 2006.
    The bill, as passed by the Senate, was passed by the House 
of Representatives by Unanimous Consent thereby clearing the 
measure for presentation to the President of the United States. 
The President signed the bill, which became Public Law 109-361, 
on October 16, 2006.
    2. A Committee Print of S. 2694 (Senate Report 109-297), a 
bill to remove certain limitations on attorney representation 
of claimants for veterans benefits in administrative 
proceedings before the Department of Veterans Affairs, and for 
other purposes, as amended to include the following provisions:

                   TITLE I--VETERANS' REPRESENTATION

    Sec. 101. To allow attorney representation in veterans 
benefits cases before VA.

                       TITLE II--MEMORIAL AFFAIRS

    Sec. 201. Eligibility of Indian tribal organizations for 
grants for the establishment of veterans' cemeteries on trust 
lands.
    Sec. 202. Removal of remains of Russell Wayne Wagner from 
Arlington National Cemetery.
    Sec. 203. Provision of government markers for marked graves 
of veterans at private cemeteries.

                      TITLE III--EDUCATION MATTERS

    Sec. 301. Expansion of education programs eligible for 
accelerated payment of educational assistance under the 
Montgomery GI Bill.
    Sec. 302. Accelerated payment of survivors' and dependents' 
educational assistance for certain programs of education.
    Sec. 303. Reimbursement of expenses for State approving 
agencies in the administration of educational benefits.
    Sec. 304. Modification of a requirement for reporting on 
educational assistance program.

                        TITLE IV--HEALTH MATTERS

    Sec. 401. Statutory establishment of Parkinson's Disease 
Research, Education, Clinical Centers, and Multiple Sclerosis 
Centers of Excellence.
    Sec. 402. Repeal of a term of office for the Under 
Secretary for Health and the Under Secretary for Benefits.
    Sec. 403. Modifications to existing State home authorities.
    Sec. 404. Establishment of the Office of Rural Health in 
the Veterans Health Administration.
    Sec. 405. Establishment of a pilot program to improve care-
giver assistance services in VA.

                 TITLE V--HOMELESS VETERANS ASSISTANCE

    Sec. 501. Reaffirmation of a national goal to end 
homelessness among veterans.
    Sec. 502. Sense of Congress on the response of the Federal 
Government to the needs of homeless veterans.
    Sec. 503. Authority to make grants for comprehensive 
service programs for homeless veterans.
    Sec. 504. Extension of treatment and rehabilitation for 
seriously mentally ill and homeless veterans.
    Sec. 505. Extension of authority for transfer of properties 
obtained through foreclosure of home mortgages.
    Sec. 506. Extension of funding for a grant program for 
homeless veterans with special needs.
    Sec. 507. Extension of funding for a homeless veteran 
service provider technical assistance grant program.
    Sec. 508. Adding an element to the annual report on 
assistance to homeless veterans.
    Sec. 509. Advisory Committee on Homeless Veterans.
    Sec. 510. Rental assistance vouchers for VA-supported 
housing program.
    Sec. 511. Financial assistance for supportive services for 
very low-income veteran families in permanent housing.

                    TITLE VI--MISCELLANEOUS BENEFITS

    Sec. 601. Allowing VA home loans for residential 
cooperative housing units.
    Sec. 602. Increase in supplemental insurance for totally 
disabled veterans.
    Sec. 603. Reauthorization of use of certain information 
from other agencies.
    Sec. 604. Clarification of correctional facilities covered 
by certain provisions of law.
    S. 2694, as reported, passed the Senate by Unanimous 
Consent on August 3, 2006.
    3. S. 3421 (Senate Report 109-328), a bill to authorize 
major medical facility construction projects and major medical 
facility leases for the Department of Veterans Affairs for 
fiscal years 2006 and 2007. The bill, as reported, included the 
following provisions:
    Sec. 1. Authorization of Fiscal Year 2006 major medical 
facility construction projects in New Orleans LA, Biloxi MS, 
and Denver CO.
    Sec. 2. Extension of authorization for major medical 
facility construction projects authorized under Capital Asset 
Realignment for Enhanced Services initiative.
    Sec. 3. Authorization of fiscal year 2006 major medical 
facility leases in Baltimore MD, Evansville IL, and Smith 
County TX.
    Sec. 4. Authorization of fiscal year 2007 major medical 
facility leases in Austin TX, Lowell MA, Grand Rapids MI, Las 
Vegas NV, and Parma OH.
    Sec. 5. Authorization of total appropriations to carry out 
major medical facility construction and leasing.
    S. 3421 passed the Senate by Unanimous Consent on September 
26, 2006 with a substitute amendment (SA 5074) to the bill 
which included the following provisions:
    Sec. 1. Authorization of Fiscal Year 2006 major medical 
facility construction projects in New Orleans LA, Biloxi MS, 
and Denver CO.
    Sec. 2. Extension of authorization for major medical 
facility construction projects authorized under Capital Asset 
Realignment for Enhanced Services initiative.
    Sec. 3. Authorization for fiscal year 2007 major medical 
facility construction projects in American Lake WA, Columbia 
MO, Fayetteville AR, Milwaukee WI, and St. Louis MO.
    Sec. 4. Authorization of fiscal year 2006 major medical 
facility leases in Baltimore, MD, Evansville IL, and Smith 
County TX.
    Sec. 5. Authorization of fiscal year 2007 major medical 
facility leases in Austin TX, Lowell MA, Grand Rapids MI, Las 
Vegas NV, and Parma OH.
    Sec. 6. Authorization of total appropriations to carry out 
major medical facility construction and leasing.
    Sec. 7. Increase in the threshold for determination of a 
major medical facility project.
    Sec. 8. Expansion of eligibility for survivors' and 
dependents educational assistance program.
    S. 3421 was subsequently passed by the House of 
Representatives with an amendment on December 8, 2006. On 
December 9, 2006, the Senate, by Unanimous Consent, agreed to 
the amendments proposed by the House thereby clearing the bill 
for presentation to the President of the United States. The 
President signed the bill, Public Law 109-461 on December 22, 
2006. P.L. 109-461 includes the following provisions:

                TITLE I--ATTORNEY REPRESENTATION MATTERS

    Sec. 101. Agent or attorney representation in veterans 
benefits cases before VA.

                        TITLE II--HEALTH MATTERS

    Sec. 201. Additional mental health providers.
    Sec. 202. Pay comparability for the Chief Nursing Officer, 
Office of Nursing Services.
    Sec. 203. Improvement and expansion of mental health 
services in VA.
    Sec. 204. Permitting the disclosure of certain medical 
records for the purpose of facilitating organ transplantation 
in the United States.
    Sec. 205. Requiring the expansion of telehealth services to 
VA patients.
    Sec. 206. Requiring the publication by VA of a strategic 
plan for long-term care.
    Sec. 207. Expanding the number of facilities that must 
provide blind rehabilitation outpatient specialists.
    Sec. 208. Extension of certain compliance reports from VA 
to Congress.
    Sec. 209. Statutory establishment of Parkinson's Disease 
research, education, and clinical centers and multiple 
sclerosis centers of excellence.
    Sec. 210. Repeal of a term of office for the Under 
Secretary for Health and the Under Secretary for Benefits.
    Sec. 211. Modifications to certain State home authorities.
    Sec. 212. Creating an Office of Rural Health in the 
Veterans Health Administration.
    Sec. 213. Requiring an outreach program to veterans in 
rural areas.
    Sec. 214. Establishment of a pilot program to improve care-
giver assistance services.
    Sec. 215. Expansion of the outreach activities of Vet 
Centers.
    Sec. 216. Clarification and enhancement of bereavement 
counseling providing by VA.
    Sec. 217. Increase in the funding authorization for the Vet 
Center program.

                      TITLE III--EDUCATION MATTERS

    Sec. 301. Expansion of eligibility for Survivors' and 
Dependents' Educational Assistance Program.
    Sec. 302. Restoration of lost entitlement for individuals 
who discontinue a program of education because of being ordered 
to full-time National Guard duty.
    Sec. 303. Exception for institutions offering Government-
sponsored, non-accredited courses to the requirement of 
refunding unused tuition.
    Sec. 304. Extension of work-study allowance.
    Sec. 305. Deadline and extension of requirement for report 
on educational assistance program.
    Sec. 306. Report on improvement in administration of 
educational assistance benefits.
    Sec. 307. Technical amendments relating to education laws.

        TITLE IV--NATIONAL CEMETERY AND MEMORIAL AFFAIRS MATTERS

    Sec. 401. Provision of Government memorial headstones or 
markers and memorial inscriptions for deceased dependent 
children of veterans whose remains are unavailable for burial.
    Sec. 402. Provision of Government markers for marked graves 
of veterans at private cemeteries.
    Sec. 403. Eligibility of Indian tribal organizations for 
grants for the establishment of veterans cemeteries on trust 
lands.
    Sec. 404. Removal of remains of Russell Wayne Wagner from 
Arlington National Cemetery.

              TITLE V--HOUSING AND SMALL BUSINESS MATTERS

    Sec. 501. To allow VA's home loan program to be used by 
those purchasing residential cooperative housing units.
    Sec. 502. VA goals for participation by small businesses 
owned and controlled by veterans in procurement contracts.
    Sec. 503. VA contracting priority for veteran-owned small 
businesses.

               TITLE VI--EMPLOYMENT AND TRAINING MATTERS

    Sec. 601. Training of new disabled veterans' outreach 
program specialists and local veterans' employment 
representatives.
    Sec. 602. Rules for part-time employment for disabled 
veterans' outreach program specialists and local veterans' 
employment representatives.
    Sec. 603. Performance incentive awards for employment 
service offices.
    Sec. 604. Demonstration project on credentialing and 
licensing of veterans.
    Sec. 605. DoL implementation of regulations for priority of 
service.

                TITLE VII--HOMELESS VETERANS ASSISTANCE

    Sec. 701. Reaffirmation of a national goal to end 
homelessness among veterans.
    Sec. 702. Sense of Congress on the response of the Federal 
Government to the needs of homeless veterans.
    Sec. 703. Authority to make grants for comprehensive 
service programs for homeless veterans.
    Sec. 704. Extension of treatment and rehabilitation for 
seriously mentally ill and homeless veterans.
    Sec. 705. Extension of authority for transfer of properties 
obtained through foreclosure of home mortgages.
    Sec. 706. Extension of funding for grant program for 
homeless veterans with special needs.
    Sec. 707. Extension of funding for homeless veteran service 
provider technical assistance program.
    Sec. 708. Additional element in annual report on assistance 
to homeless veterans.
    Sec. 709. Advisory Committee on Homeless Veterans.
    Sec. 710. Rental assistance vouchers for VA-supported 
housing program.

                    TITLE VIII--CONSTRUCTION MATTERS

Subtitle A--Construction and Lease Authorities

    Sec. 801. Authorization of fiscal year 2006 major medical 
facility projects.
    Sec. 802. Extension of authorization for certain major 
medical facility construction projects previously authorized in 
connection with Capital Asset Realignment for Enhanced Services 
initiative.
    Sec. 803. Authorization of fiscal year 2007 major medical 
facility projects.
    Sec. 804. Authorization of advance planning and design for 
a major medical facility in Charleston, South Carolina.
    Sec. 805. Authorization of fiscal year 2006 major medical 
facility leases.
    Sec. 806. Authorization of fiscal year 2007 major medical 
facility leases.
    Sec. 807. Authorization of appropriations.

Subtitle B--Facilities Administration

    Sec. 811. Creation of the position of Director of 
Construction and Facilities Management in VA.
    Sec. 812. Increase in threshold for major medical facility 
projects.
    Sec. 813. Land conveyance, city of Fort Thomas, Kentucky.

Subtitle C--Reports on Medical Facility Improvements

    Sec. 821. Report on options for medical facility 
improvements in San Juan, Puerto Rico.
    Sec. 822. Requirement for business plans for enhanced 
access to outpatient care in certain rural areas.
    Sec. 823. Report on option for construction of VA Medical 
Center in Okaloosa County, Florida.

                 TITLE IX--INFORMATION SECURITY MATTERS

    Sec. 902. VA information security programs and 
requirements.
    Sec. 903. Information security education assistance 
programs.

                         TITLE X--OTHER MATTERS

    Sec. 1001. Notice to congressional veterans committees of 
certain transfers of funds.
    Sec. 1002. Clarification of correctional facilities covered 
by certain provisions of law.
    Sec. 1003. Extension of authority for health care for 
participation in DOD chemical and biological warfare testing.
    Sec. 1004. Technical and clerical amendments.
    Sec. 1005. Codification of cost-of-living adjustment 
provided in Public Law 109-361.
    Sec. 1006. Coordination of provisions with Veterans 
Programs Extension Act of 2006.
    In addition, two bills passed by the House of 
Representatives and referred to the Committee were discharged 
from the Committee and subsequently passed by the Senate.
    1. H.R. 1691, a bill designating the Department of Veterans 
Affairs outpatient clinic in Appleton, Wisconsin as the ``John 
H. Bradley Department of Veterans Affairs Outpatient Clinic'' 
was passed by the House of Representatives on November 2, 2005. 
The bill was discharged from the Committee by Unanimous Consent 
on March 13, 2006, and passed the Senate, by Unanimous Consent 
on that same day. It was presented to the President of the 
United States and was subsequently signed into law by the 
President as Public Law 109-206 on March 23, 2006.
    2. H.R. 3829, a bill designating the VA Medical Center in 
Muskogee, Oklahoma, as the ``Jack C. Montgomery Department of 
Veterans Affairs Medical Center'' was passed by the House of 
Representatives on May 9, 2006. The bill was discharged from 
the Committee by Unanimous Consent on May 26, 2006 and passed 
the Senate by Unanimous Consent that same day. It was presented 
to the President of the United States who subsequently signed 
the bill into law as Public Law 109-231 on June 15, 2005.

                            III. NOMINATIONS


A. First session

    During the First Session of the 109th Congress, the 
Committee met in open session four times to consider nine 
nominations. The Committee reported all nine nominees to the 
Senate with favorable recommendation. The following outlines 
the Committee's actions with respect to those nominees as well 
as the subsequent disposition of the nominations by the Senate.
    1. R. James Nicholson, nominated for the position of 
Secretary of Veterans Affairs by the President of the United 
States on January 4, 2005. The Committee favorably reported the 
nominee to the Senate on January 24, 2005. The nominee was 
subsequently confirmed by the Senate on January 26, 2005.
    2. Jonathan B. Perlin, M.D., Ph.D., nominated for the 
position of Under Secretary for Health of the Department of 
Veterans Affairs by the President of the United States on 
February 18, 2005. The Committee favorably reported the nominee 
to the Senate on April 26, 2005. The nominee was confirmed by 
the Senate on April 28, 2005.
    3. James Phillip Terry, nominated for the position of 
Chairman of the Board of Veterans Appeals by the President of 
the United States on May 9, 2005. The Committee favorably 
reported the nominee to the Senate on July 28, 2005. He was 
subsequently confirmed by the Senate on July 29, 2005.
    4. Charles S. Ciccolella, nominated for the position of 
Assistant Secretary of Labor for the Veterans' Employment and 
Training Service of the Department of Labor, by the President 
of the United States on May 17, 2005. The Committee favorably 
reported the nominee to the Senate on July 28, 2005. He was 
subsequently confirmed by the Senate on July 29, 2005.
    5. William F. Tuerk, nominated for the position of Under 
Secretary for Memorial Affairs of the Department of Veterans 
Affairs by the President of the United States on July 29, 2005. 
The Committee favorably reported the nominee to the Senate on 
October 18, 2005. He was subsequently confirmed by the Senate 
on October 26, 2005.
    6. Robert J. Henke, nominated for the position of Assistant 
Secretary of Veterans Affairs for Management by the President 
of the United States on July 29, 2005. The Committee favorably 
reported the nominee to the Senate on October 18, 2005. He was 
subsequently confirmed by the Senate on October 26, 2005.
    7. John M. Molino, nominated for the position of Assistant 
Secretary for Veterans Affairs for Policy and Planning on 
September 6, 2005. The Committee favorably reported the nominee 
to the Senate on October 18, 2005. The President subsequently 
withdrew the nomination on December 13, 2005.
    8. Lisette M. Mondello, nominated for the position of 
Assistant Secretary of Veterans Affairs for Public and 
Intergovernmental Affairs by the President of the United States 
on September 6, 2005. The Committee favorably reported the 
nominee to the Senate on October 18, 2005. She was subsequently 
confirmed by the Senate on October 26, 2005.
    9. George J. Opfer, nominated for the position of Inspector 
General of the Department of Veterans Affairs by the President 
of the United States on September 6, 2005. The Committee 
favorably reported the nominee to the Senate on October 18, 
2005. He was subsequently confirmed by the Senate on November 
10, 2005.

B. Second session

    During the Second Session of the 109th Congress, the 
Committee met in open session two times to consider three 
nominations. The Committee reported four nominations to the 
Senate, three of which were confirmed. The following outlines 
the Committee's actions with respect to those nominees as well 
as the subsequent disposition of the nominations by the Senate.
    1. Daniel L. Cooper, nominated for a second four-year term 
for the position of Under Secretary for Benefits, Department of 
Veterans Affairs by the President of the United States on March 
3, 2006. The Committee favorably reported the nomination to the 
Senate on June 22, 2006. He was subsequently confirmed by the 
Senate on June 29, 2006.
    2. Thomas E. Harvey, nominated for the position of 
Assistant Secretary of Veterans Affairs for Congressional 
Affairs by the President of the United States on June 26, 2006. 
The Committee favorably reported the nomination to the Senate 
on July 27, 2006. No additional action was taken by the Senate 
during the 109th Congress.
    3. Patrick W. Dunne, nominated for the position of 
Assistant Secretary of Veterans Affairs for Policy and Planning 
by the President of the United States on May 24, 2006. The 
Committee favorably reported the nomination to the Senate on 
July 27, 2006. He was subsequently confirmed by the Senate on 
August 3, 2006.
    4. Robert Howard, nominated for the position of Assistant 
Secretary of Veterans Affairs for Information Technology by the 
President of the United States on September 5, 2006. The 
Committee favorably reported the nomination to the Senate on 
September 27, 2006. He was subsequently confirmed by the Senate 
on September 29, 2006.

                    IV. BUDGET FOR VETERANS PROGRAMS


First session

    On February 18, 2005, pursuant to the requirements of 
section 301(d) of the Congressional Budget Act of 1974, the 
Chairman of the Committee submitted a letter to the Budget 
Committee reflecting his views and estimates on the President's 
proposed budget for Fiscal Year 2006. The Minority members of 
the Committee submitted a separate letter. Both letters are 
reprinted in their entirety below.

                                                 February 23, 2005.
Hon. Judd Gregg, Chairman,
Hon. Kent Conrad, Ranking Member,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Judd and Kent: This letter is to provide views and 
estimates on the Administration's proposed fiscal year 2006 
budget for Function 700 (Veterans' Benefits and Services) 
programs. I, as Chairman of the Committee on Veterans' Affairs, 
submit this letter pursuant to Section 301(d) of the 
Congressional Budget Act of 1974 on behalf of the Committee's 
Republican members. This year, the Committee's Ranking Member 
will comment separately.

                               I. Summary

    The President requests total VA appropriations in fiscal 
year 2006, including collections, of $70.394 billion, $36.955 
billion for mandatory programs and $33.439 for all 
discretionary programs. With respect to discretionary programs, 
this letter recommends an additional $244 million in funding 
above the President's requested increase of $753 million. Thus, 
for total discretionary spending, the total recommended 
increase above the fiscal year 2005 funding level is $997 
million, which increase is comprised of $538 million in 
increased general revenue appropriations and $459 million in 
increased medical care collections. All of the recommended 
increases over the President's request would be devoted to 
increasing services within the Department of Veterans Affairs 
(hereinafter, ``VA'') medical care ``business line.'' I do not 
recommend increases beyond those requested by the President for 
nonmedical care discretionary spending or for mandatory account 
spending.

                             II. Discussion


A. VA Medical care

    For fiscal year 2006, the Administration requests $30.792 
billion, including collections, to fund its medical care 
business line, an increase of $524 million over the fiscal year 
2005 enacted level. The Administration's proposed budget 
anticipates the need for an additional $1.399 billion to defray 
added expenses attributable to inflation, employee pay raises, 
and other ``unavoidable'' cost increases. In addition, the 
Administration projects that, despite its proposal to maintain 
the current moratorium on the enrollment of additional 
``Priority 8'' veterans for VA health care services, VA will 
require an additional $549 million to meet anticipated 
increases in ``workload''--i.e., increased costs attributable 
to the care of newly-enrolled ``priority'' veteran-patients. 
Further, the Administration proposes increased funding for 
certain medical care services to meet anticipated increases in 
demand and other care enhancements. Finally, the Administration 
proposes a series of ``policy proposals'' by which it would 
save funds relative to the fiscal year 2005 baseline and also 
increase funds to be made available to provide medical care 
services.
    I support VA's ongoing efforts to find new efficiencies. I 
am particularly pleased that VA intends to extend the 
successful strategies it has employed to economize in the 
procurement of medications to the medical supplies arena. I 
also anticipate that the physician pay reforms enacted last 
year as Public Law 108-445 will lead to increased VA 
efficiencies as the agency is able to bring more specialized 
medical capabilities ``in-house.''
    VA is to be commended, as well, for its determination to 
increase the collection of funds owed to VA under existing 
authorities, particularly by its patients' health insurance 
carriers. Clearly, when VA provides care for nonservice-
connected illnesses and injuries to the insured, those 
patients' insurance carriers ought to reimburse VA for care for 
which the carrier would otherwise have been liable. VA needs to 
do better in collecting what these third party payers owe.
    On the subject of VA's proposed medical care enhancements, 
I strongly endorse the majority of them. It is increasingly 
apparent that the current generation of returning warriors--
warriors who have no ``rear echelon'' refuge from battle--will 
sustain more, and deeper, psychological wounds than their 
predecessors. It is also plain that they will, more than 
predecessor generations, suffer losses of extremities due, 
ironically, to advances in battlefield medicine. It is reported 
that advances in triage and ``handoff' care have significantly 
improved the survival rates of this generation of service 
member. As a consequence, many who would not have survived in 
prior wars are returning home without limbs. VA must be 
prepared for increased demand for mental health and prosthetics 
and sensory aid services. Indeed, one must question whether 
VA's request for $200 million in additional funding for these 
priorities will suffice. I accept the agency's determination, 
however, and strongly endorse VA's increased funding request 
for these vital services.
    I also endorse the Administration's requests for additional 
funding for homeless veterans' services, and its proposal for 
simplified reimbursement of the emergency care costs borne by 
veterans who are required to seek care at non-VA facilities. VA 
recently learned that many veterans suffering heart attacks 
had, to their great detriment, avoided close-by emergency care 
from community facilities to seek care at more distant VA 
facilities. VA now directs such patients to secure needed care 
from the nearest health care facility, which is often a 
community provider. VA must back that directive with a policy 
that minimizes the administrative and financial burdens on VA 
patients who follow it. As a Senator who represents a largely-
rural State, where constituents are often hundreds of miles 
distant from the nearest VA medical center, I am particularly 
pleased to endorse this proposal.
    I cannot, at this time, urge the Budget Committee to build 
its budget projections with the assumption that $75 million in 
increased discretionary funding will be necessary to implement 
the physician pay reforms referenced above. Costs to be 
sustained by VA during the initial phase-in period of these 
reforms--reforms that will not be implemented before January 1, 
2006--must be absorbed within current funding levels.
    Turning now to the Administration's ``policy proposals,'' 
it needs to be said initially with great emphasis that the 
Committee would surely seek to avoid consideration of any of 
these proposals were such a course, as in prior years, 
possible. All would prefer--again, as in prior years--to 
identify the gap between the VA funding request and the 
agency's needs and endorse increased general revenue 
appropriations to bridge that gap. But that is not possible 
this year. Whatever might be desired, it is clear that recent 
VA medical care funding increases cannot be sustained. Thus, 
the Congress--like the Administration--must face difficult 
choices. It is in this context that the Administration's policy 
proposals are reluctantly considered.
    Two of those proposals are unacceptable. As will be 
discussed below, VA proposes to focus its attention on the 
institutional long-term care needs of service-connected 
veterans only. For VA to propose, in conjunction with that 
proposal, severe restrictions in per diem support for State 
homes is, in my estimation, an unsound idea. State homes may, 
increasingly, have to assume responsibility for the 
institutional care of, for example, poor veterans whom VA would 
decline to treat. Thus, while a one-year moratorium on new 
State home construction grants might be acceptable while VA's 
shift in focus goes into effect, I cannot endorse a cutting of 
per diem assistance to State homes to which needy veterans will 
increasingly turn for care.
    Nor do I conclude that it is necessary at this time for the 
Committee to endorse a proposal to increase prescription drug 
copayments. In the first place, Congress did not set VA 
copayment rates at the current $7 per prescription per 30-day 
supply level; VA did. It is VA's role, not Congress', to set--
and to adjust--that rate. See 38 U.S.C. Sec. 1722A(b). And to 
the extent that VA has concluded that it is compelled by the 
``cannot-exceed-VA-cost'' restriction of 38 U.S.C. 
Sec. 1722A(a)(2) to charge a single $7 copayment for all drugs, 
VA needs to justify that position. In the interim, further 
consideration of VA's drug copayment proposal can be deferred.
    As for the other policy proposals advanced by the 
Administration, this letter interposes no objections at this 
time. As is noted above, it likely does make sense for VA to 
suspend for one year State home construction grants. It could 
even be suggested that a suspension beyond that time period 
might be appropriate if the Committee were to endorse the 
Administration's proposal that State home per diem grants be 
limited to support the care of service-connected veterans only. 
But this letter does not endorse that proposal. As a 
consequence, an extended moratorium on such grants is also not 
endorsed. To the contrary, it may well be the case that, in the 
future, VA must increase such grant support as the States 
assume the long-term care responsibilities now eschewed by VA. 
Before that could happen, however, the Congress and the State 
homes would, as the VA has done, need to assess the proper role 
of the State homes so that the Congress might define the 
appropriate scope and extent of VA-subsidized construction.
    Finally, turning to VA's proposed $250 ``enrollment fee,'' 
it is not clear that VA--which has explicit legal authority to 
deny enrollment to all, or some, members of the statutorily-
established veteran priority groups, see 38 U.S.C. 
Sec. 1705(b)--lacks legal authority now to condition enrollment 
by members of those same priority groups or subgroups on the 
payment of such a contribution. In any case, the Committee 
fully appreciates the concerns raised by veterans service 
organization witnesses at the Committee's hearing on February 
15, 2005. And, as is made plain by the Committee's refusal to 
endorse such a proposal when it was previously advanced, the 
Committee would not reconsider the issue lightly. But we are 
faced this year with an influx of new, highest-priority, combat 
veterans at a time of flattening appropriations support. VA 
must garner supplemental funding from some source, and there 
are no easy options. Thus, this letter does not object to the 
Administration's proposal that non-service-connected, non-poor, 
veterans make a modest contribution of $250 per year to defray 
the cost of their, and their fellow veterans', care.
    To those who might take issue with the contention that the 
Administration-requested contribution is, in fact, a modest 
one, it might be noted that military retirees who receive 
TRICARE are required to contribute annually to the cost of 
their care. More significantly, those who also participate in 
Medicare are required to pay Medicare Part B premiums which, in 
2005, amounts to $78.20 per month (or $938.40 per year). 
Military retirees, of course, have typically served for 20 
years or more. VA beneficiaries, by contrast, generally will 
have served for a much shorter period. ``Ordinary veterans'' 
are not less worthy than veterans who are also classified as 
military retirees. But equally, ``ordinary veterans'' are not 
more worthy as a class than military retirees. For them to be 
asked to make a contribution for care that is far less than 
that asked of veterans who served in uniform for 20 years or 
more does not seem unfair or inappropriate. To the contrary, 
equity might very well compel that such a contribution be 
requested. When one takes into account that the funds to be so 
generated will be devoted to care for higher priority veterans 
in a time of fiscal austerity, the case becomes more 
compelling.

B. Other discretionary accounts

    The Administration's proposals for funding of VA's other 
discretionary accounts are restrained and responsible. In 
summary, the Administration asks for relatively modest 
increases in construction and National Cemetery Administration 
funding. Its requested increase in General Operating Expense 
funding is less modest, but the Committee shares VA's interest 
in assuring that improvements in VA's claims' adjudication 
productivity be consolidated. Thus, I support the 
Administration's requests. But I do not recommend that they be 
bettered.

                            III. Conclusion

    I thank the Budget Committee for its attention to these 
views and estimates, and I look forward to working with the 
Budget Committee to ensure that our Nation's veterans are 
provided with ample resources in fiscal year 2006.
            Sincerely,
                                            Larry E. Craig,
                                                          Chairman.
                                ------                                

                                                 February 18, 2005.
Hon. Judd Gregg, Chairman,
Hon. Kent Conrad, Ranking Member,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Chairman Gregg and Senator Conrad: Pursuant to Section 
301(d) of the Congressional Budget Act of 1974, the Democratic 
Members and Senator Jeffords of the Committee on Veterans' 
Affairs (hereafter the ``Undersigned Members'') hereby report 
to the Committee on the Budget their views and estimates on the 
fiscal year 2006 (hereafter, ``FY06'') budget for Function 700 
(Veterans' Benefits and Services) and for Function 500 
(Education, Training, Employment, and Social Services) programs 
within the Committee's jurisdiction. This letter responds to 
the Committee's obligation to provide recommendations on 
veterans' programs within its jurisdiction, albeit from the 
perspective of the Undersigned Members.

                               I. Summary

    The Department of Veterans Affairs (VA) requires, at a 
minimum, $2.85 billion in additional funding in FY06 to support 
its medical care operations. Our requested medical care 
increase is $2.7 billion over the President's request. An 
increase of at least that amount will allow VA to maintain 
current services, obviate the need for legislation to suppress 
demand, and move forward with the President's suggested new 
initiatives.
    As you both are undoubtedly aware, the Administration's 
proposed budget includes a number of legislative and policy 
proposals designed to generate additional savings and revenue. 
The Undersigned Members of the Committee unanimously reject 
four of the legislative proposals--the increase in prescription 
drug copayments from $7 to $15 for ``middle-income'' veterans; 
the annual enrollment fee of $250 for ``middle-income'' 
veterans; the exclusion of per diem reimbursements to State 
Veterans Homes for non-service connected veterans; and the 
elimination of the mandatory census requirements for long-term 
care capacity. Subtracting the ``savings'' generated from these 
new fees and proposals brings the President's request to an 
additional $116.4 million for health care costs.
    With respect to benefits, we support the Administration's 
requests for mandatory and discretionary account programs.

                   II. Discretionary Account Spending


A. Proposed medical care Spending

    VA requires a significant increase in funding above the 
President's request to better address the needs of an aging 
population while meeting the needs of younger veterans 
returning from Operations Iraqi and Enduring Freedom (OIF/OEF). 
VA also must be able to maintain services and quality, keep 
clinical waiting times down, and avoid cuts to programs and 
staff. Accordingly, while we agree with the Administration on 
the level of funding required to support VA health care, we 
differ on the amount that needs to come from actual 
appropriated dollars relative to the amount that can be 
collected from insurance carriers and garnered directly from 
veterans in the form of new fees, increased copayments, and 
cuts to existing services.
    Prescription Drug Copayment Increase for Priority 7 and 8 
Veterans: The Undersigned Members of the Committee oppose the 
President's increase to this copayment from $7 to $15, for a 
projected savings of $202 million from increased revenue and 
decreased enrollment of these categories of veterans. In large 
measure, Priority 7 and 8 veterans--earning as little as 
$25,842--cannot afford to pay more than double for needed 
prescription drug medications.
    $250 Enrollment Fee for Priority 7 and 8 Veterans: The 
Undersigned Members of the Committee oppose the President's new 
enrollment fee of $250, for a projected savings of $454 million 
from increased revenue and decreased enrollment of these 
categories of veterans. Again, this proposal is targeted at 
``middle-income'' veterans, and we believe it is an 
unacceptable financing mechanism.
    Limitation of Per Diem Reimbursements to State Extended 
Care Facilities: The Undersigned Members of the Committee 
oppose ``prioritization'' of the per diem payments VA makes to 
State Veterans Homes (SVH) for the purposes of caring for 
veterans. The President proposes to restrict eligibility for 
the per diem to only service connected veterans (Priorities 1-
3). If this change is enacted, nearly 80 percent of SVH 
residents will be excluded. According to VA's average daily 
census for long-term care, there are more than 19,000 
individuals in these nursing homes this year. The proposed FY06 
budget would reduce that number to just over 7,000 and would 
correspondingly reduce Federal support by $293 million.\1\ The 
viability of SVH is in jeopardy, as is VA's overall capacity to 
provide a continuous residence for veterans in need of long-
term care, especially for veterans in rural areas. It is our 
view that eligibility for per diem payments to SVH should 
remain intact.
---------------------------------------------------------------------------
    \1\ The current rate of Federal funding for State Veterans nursing 
homes is $59.36 per day.
---------------------------------------------------------------------------
    Elimination of Mandatory Census Requirements for Long-Term 
Care: The Undersigned Members of the Committee oppose the 
President's proposed elimination of the long-term care bed 
census requirements mandated by Public Law 106-117.\2\ VA has 
fought these requirements since their enactment and has 
continually tried to erode its own institutional long-term care 
services. It is our view that VA's non-institutional capacity 
remains too weak to compensate for such a loss to its 
institutional capacity.\3\ This is especially true in light of 
the restrictions the Administration is seeking to place on 
reimbursements to State Veterans Homes, where much of the 
capacity gap has been filled in the past.
---------------------------------------------------------------------------
    \2\ P.L. 106-117 required VA to maintain an average daily census of 
13,391.
    \3\ GAO found that the type and capacity of noninstitutional long-
term care services varied widely from region to region, nationwide. As 
such, veterans' access to these services is limited by facility 
restrictions and service gaps. Additionally, GAO found inconsistencies 
in the eligibility criteria set forth by different VA facilities. VA 
Long-Term Care: Veterans' Access to Noninstitutional Care Is Limited by 
Service Gaps and Facility Restrictions, May 22, 2003.
---------------------------------------------------------------------------
    In addition to the $116 million requested by the President, 
the Undersigned Members of the Committee note that there are 
additional revenue streams and savings. While we expect VA to 
continue to be diligent in its efforts to improve upon third-
party collections, we do not accept the total amount proposed 
in the budget, as it assumes additional revenue from the 
increase in the prescription drug copayment and enrollment fee. 
Therefore, the expected collections for VA would be $424 
million less than VA's projected collections of $2.59 billion.
    Similarly, the President's budget proposes savings of $590 
million in management efficiencies. The Undersigned Members of 
the Committee acknowledge that VA should continue to make 
progress in this area. It is our understanding that these 
management efficiencies will include measures such as 
standardization of medical equipment and supplies, improvements 
in contract negotiation, and ``clinical efficiencies'' in 
scheduling and performance of certain medical care services. We 
want to ensure that care and services are not jeopardized in 
the name of efficiency. Witnesses at the Committee's February 
15, 2005, budget hearing testified that management efficiencies 
at this level translate into reductions in health care staff 
and services. Our overall views on medical care are described 
below.
            1. Current services (+$1.399 billion)
    Payroll inflation, increases in the costs of goods, and 
other ``uncontrollables'' dictate funding increases of at least 
$1.399 billion in FY06 simply to maintain the level of current 
services. VA's medical care payroll costs will increase by $859 
million in FY06 due to non-optional cost-of-living and within-
grade salary and wage adjustments, as well as increases in 
government-paid Social Security, health insurance, retirement, 
and other benefits. The cost of inflation and rate changes for 
goods and services (inc1uding pharmaceuticals) dictates an 
additional $540 million in funding in FY06.
            2. Rescinding the ban on Priority 8 veterans (+$578 
                    million)
    VA has seen a substantial increase in enrollment, 
especially in the number of ``middle-income'' veterans those 
whose financial means are above the HUD geographical low-income 
threshold for their respective counties. There are about 2.06 
million currently enrolled Priority 8 veterans. On January 17, 
2003, the Administration halted enrollment for Priority 8 
veterans.
    The Administration's request for FY06 assumes the 
enrollment ban on Priority 8 veterans will continue. The 
Undersigned Members of the Committee estimate that new 
resources of $578 million are needed to restore access for 
these veterans.\4\ We believe veterans needing VA care should 
not be prohibited from enrolling in the system. Indeed, 
adequate appropriated funding should be provided to VA so that 
all veterans have access to VA services. Additionally, many of 
these veterans bring health care coverage with them and 
continue to pay copayments for care and drugs, so, in effect, 
they actually bring revenue into the system, offsetting the 
cost of their care.
---------------------------------------------------------------------------
    \4\ 192,260 Priority 8 veterans have been turned away thus far, at 
an average per patient cost of $3,011.
---------------------------------------------------------------------------
            3. New workload (+$527 million)
    We support the President's estimated cost for new enrollees 
for FY06, but it is important to note that this amount inc1udes 
the proposals to deter veterans from the system, such as the 
drug copayment increase and enrollment fee. Therefore, the 
Undersigned Members of the Committee expect new workload to 
actually be slightly higher if these proposals are rejected, as 
we are recommending.
    We would also like to address the issue of returning 
service members. VA has maintained that any potential workload 
from OIF/OEF will be negligible relative to the overall number 
of new enrollees each year. We would like to point out that any 
influx of veterans into the system requires a corresponding 
increase in support.
            4. New initiatives (+$337.6 million)
    The Undersigned Members of the Committee accept the 
President's proposed ``new initiatives.'' These include minimal 
additions in the following areas: $100 million for mental 
health; $100 million for prosthetics; $75 million to support 
the new physician pay structure enacted by Congress last year; 
$19 million for homeless veterans care; $13 million for the 
DoD-VA sharing incentive fund; $30 million to eliminate the 
first party offsets \5\; $49 thousand to exempt former 
Prisoners of War from extended care copayments; and $5 thousand 
to exempt veterans from paying copayments associated with 
hospice care.
---------------------------------------------------------------------------
    \5\ Third party payments for care are currently reduced by 
offsetting veterans' copayment liabilities.
---------------------------------------------------------------------------
    While we support each of these initiatives, we believe that 
more can and should be done, especially in the areas of mental 
health care and prosthetics. Both of these are and will 
continue to be in high demand, not only from the existing 
veterans population but from returning OIF/OEF servicemembers. 
The Special Committee on Post-Traumatic Stress Disorder 
reported in 2004 that, ``VA does not have sufficient mental 
health capacity to meet the needs of new combat veterans while 
still providing for veterans of past wars.'' \6\ In addition, 
many new veterans have suffered from the loss of limbs as a 
result of the nature of the warfare in which they are engaging.
---------------------------------------------------------------------------
    \6\ Department of Veterans Affairs Under Secretary for Health's 
Special Committee on Post-traumatic Stress Disorder, Fourth Annual 
Report of the Department of Veterans Affairs: Under Secretary for 
Health's Special Committee on Post-traumatic Stress Disorder: 2004.
---------------------------------------------------------------------------
    Our overall views on medical spending are summarized in the 
chart below:

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

------------------------------------------------------------------------
Current Services:
    Salary and wage adjustments and         $859 million
     increases in benefits.
    Inflation and rate changes for goods    $540 million
     and services.
                                           -----------------------------
        Subtotal Current Services.........  $1.399 billion

Restoring Enrollment to Priority 8          $578 million
 Veterans.
Administration's Estimate for New Workload  $527 million
New Initiatives:
    Mental Health.........................  $100 million
    Prosthetics Increases.................  $100 million
    Physician Pay.........................  $75 million
    Homeless Veterans.....................  $19 million
    DOD-VA Sharing........................  $13 million
    First Party Offset....................  $30 million
    Former POW Copayments.................  $49 thousand
    Copayment Exemption for Hospice.......  $5 thousand
                                           -----------------------------
        Subtotal New Initiatives..........  $337.6 million
                                           =============================
            Total New Funding Needed......  $2.842 billion
------------------------------------------------------------------------

B. Medical and prosthetic research program

    The Administration proposes to cut direct research funding 
by $9 million. The Undersigned Members of the Committee 
strongly oppose this cut, as it would result in the direct loss 
of nearly 270 full-time employees (FTE) and 173 projects in 
valuable areas such as traumatic injury, cancer, aging, mental 
illness, and heart-disease research. Imperiling the research 
program also hurts VA's ability to recruit and retain excellent 
physician researchers and could, therefore, adversely impact 
the quality of health care.
    Since its inception, the VA research program has made 
landmark contributions to the welfare of veterans and the 
nation as a whole, illustrating the unique importance of 
keeping it adequately funded. Past VA research projects have 
resulted in the first successful kidney transplant performed in 
the U.S., as well as the development of the cardiac pacemaker, 
a vaccine for hepatitis, and the CAT and MRI scans.
    Both the Independent Budget and the Friends of VA Medical 
Care and Health Research recommend a funding level of $460 
million, which is $58 million above the current level.

C. Construction

    We are pleased to see that there is $41 million for land 
acquisition funding for projects authorized in the 108th 
Congress. These projects are in various stages of environmental 
assessment and site identification. The new cemeteries will be 
located in Bakersfield, CA; Birmingham, AL; Columbia/
Greenville, SC; Jacksonville, FL; Southeastern, PA; and 
Sarasota, FL.
    Additionally, we note that there is $32 million for the 
State Veterans Cemetery Grant Program. This program is a 
popular alternative for States with small veterans populations; 
it provides a way for those States to honor and commemorate the 
service of their veterans. Additionally, these grants play a 
critical role in the National Cemetery Administration's target 
of providing 90 percent of veterans with reasonable access to 
burial options.
    We support VA's requested funding for major medical 
construction of $539.8 million, for the Capital Asset 
Realignment for Enhanced Services (CARES) process. The 
Undersigned Members of the Committee understand that VA is 
trying to build a ``capital asset'' account to finance the 
changes to its infrastructure that have been recommended as a 
result of CARES. However, we strongly oppose any further 
transferring of funds from VHA for the purposes of 
supplementing this CARES account. Health care dollars should 
remain available for the veterans who need VA's care.
    The proposed budget also includes a decrease for minor 
construction funding. The Undersigned Members of the Committee 
do not support this proposal. It is our view that the minor 
construction account is valuable because smaller-scale upgrades 
and improvements can be made with relative ease in comparison 
to the major construction process, which requires Congressional 
authorization. In the current climate, it is vital to areas 
that have less representation in Congress to have access to the 
minor construction funds. Additionally, the President's budget 
would remove seismic improvements from the minor construction 
account. We believe it is necessary to continue funding of 
small-scale seismic upgrades where necessary.

D. General Operating Expenses

    We support the one-year increase of 112 compensation FTE. 
We are cautiously optimistic that this will be sufficient to 
rate the projected 3 percent increase in claims timely and 
accurately. The Veterans Benefits Administration anticipates a 
rating receipt jump from 794,248 in 2005 to 818,076 in 2006. VA 
has stated that it will look for solutions if workload rises 
higher than the 3 percent estimated. We are hopeful that VA can 
manage an increased workload from Benefit Delivery at Discharge 
claims, possible legislation, or court decisions but would urge 
caution as we have seen in the past that VA does not always 
absorb changes in law and new business processes well.
    Both the education and housing programs saw staffing cuts 
(14 FTE in education and 205 FTE in housing). Housing is one of 
the better run VA programs, so we are hopeful that this loss in 
FTE reflects a management success story. The average days to 
complete an original education claim and supplemental education 
claim are low. We will monitor the workload and days to 
complete a claim. If VA can maintain these low numbers, then we 
will not sound the alarm.

E. Vocational rehabilitation

    We support the provision in the budget that includes $4.4 
million to establish job resource labs in each regional office. 
This addition comes on the heels of the Department's April 2004 
Vocational Rehabilitation and Employment Task Force report that 
contained recommendations on how to improve service to disabled 
veterans.

                    III. Mandatory Account Spending

    We support the budget request of $37.4 billion for 
entitlement programs, which reflects an increase of $2.2 
billion in mandatory funds for benefits payments above the FY05 
level of $35.2 billion. This increase in mandatory funds 
provides for a 2.3 percent cost of living adjustment in 2006. A 
2.3 percent increase is the expected increase estimated in the 
Consumer Price Index. Other than the cost-of-living increase, 
there were no other legislative proposals for this mandatory 
account in the President's budget.

                              IV. Closing

    We thank the Budget Committee for its attention to the 
Undersigned Members' views and estimates of the 
Administration's fiscal year 2006 budget, and we look forward 
to working with the Committee in crafting a budget for VA that 
truly meets the needs of our nation's veterans.
            Sincerely,
                                   Daniel K. Akaka,
                                           Ranking Member.
                                           John D. Rockefeller IV.
                                           Patty Murray.
                                           Barack Obama.
                                           Ken Salazar.
                                           James M. Jeffords.

    On March 17, 2005 the House of Representatives passed H. 
Con. Res. 95, the fiscal year 2006 Congressional Budget 
Resolution. On April 4, 2005 the Senate passed H. Con. Res. 95 
as amended by a substitute amendment containing the text of S. 
Con. Res. 18, the Senate-prepared version of the Congressional 
Budget Resolution.
    Subsequently, a Conference Committee was convened to 
reconcile the differences between the House and Senate versions 
of the Budget Resolution. On April 28, 2005, both the House and 
Senate passed the Conference Report to accompany H. Con. Res. 
95.

Second session

    On March 2, 2006, pursuant to the requirements of section 
301(d) of the Congressional Budget Act of 1974, the Chairman of 
the Committee submitted a letter to the Budget Committee 
reflecting his views and estimates on the President's proposed 
budget for Fiscal Year 2007. The Minority members of the 
Committee submitted a separate letter. Both letters are 
reprinted in their entirety below.

                                                     March 2, 2006.
Hon. Judd Gregg, Chairman.
Hon. Kent Conrad, Ranking Member.
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Judd and Kent: Pursuant to Section 301(d) of the 
Congressional Budget Act of 1974, I, as Chairman of the 
Committee on Veterans' Affairs (hereinafter, ``Committee''), 
submit this report to the Committee on the Budget on the 
proposed fiscal year 2007 (hereinafter, ``FY07'') budget for 
Function 700 (Veterans' Benefits and Services) programs.
    Your staff requested that Congressional Budget Office 
(hereinafter, ``CBO'') estimates be used in presenting this 
report. There were difficulties that precluded me from doing 
so. I was informed that CBO's revised estimate of the 
President's FY07 budget request would not be available before 
your requested deadline for submission of this report. Those 
revised estimates are essential in that they reflect the impact 
of key policy proposals included in the President's budget. 
Without those estimates, I would have to present a portion of 
this report using CBO numbers and another portion using the 
Administration's numbers. To avoid that confusion, this letter 
will use only the Administration's numbers. Once CBO's revised 
estimates are available, my staff can then make the appropriate 
adjustments upon your request.

                                Summary

    Function 700 is comprised of budget authority and outlays 
associated with four entities under the jurisdiction of the 
Committee: the Department of Veterans Affairs; the Department 
of Labor's Veterans' Employment and Training Service; the 
American Battle Monuments Commission; and the United States 
Court of Appeals for Veterans Claims.
     The President requests total VA appropriations in 
FY07, including collections, of $79.892 billion, $41.362 
billion for mandatory programs and $38.530 billion for 
discretionary programs. The $38.530 billion request for 
discretionary programs is comprised of $2.833 billion in 
expected medical care collections and $35.697 billion in 
general revenue appropriations. I do not recommend increases 
beyond those requested by the President for either mandatory or 
discretionary programs. Furthermore, I agree with the President 
that discretionary spending from general revenue appropriations 
be limited to $35.697 billion.
     The President requests $224.9 million for the 
Department of Labor's Veterans' Employment and Training Service 
programs and services. At this time, I will not object to that 
level of funding.
     The United States Court of Appeals for Veterans 
Claims requests $19.79 million. At this time, I will not object 
to that level of funding.
     The President requests $40.738 million for the 
American Battle Monuments Commission. I have no objection to 
that level of funding.

                               Discussion


                         I. MANDATORY PROGRAMS

    Within Function 700, only VA programs contain mandatory 
account appropriations. The President's request for FY07 is 
$41.362 billion in appropriations and $42.050 billion in total 
mandatory budget authority.
    Since fiscal year 1996, VA mandatory account spending has 
nearly doubled. The bulk of the accelerated spending is 
attributable to growth in the Compensation and Pension 
(hereinafter, ``C&P'') account. The C&P account funds 
disability compensation payments for veterans with service-
connected disabilities; compensation payments to surviving 
spouses and dependents of veterans who die as a result of 
service-related conditions; pension payments to disabled or 
elderly wartime veterans; pension payments to needy spouses of 
wartime veterans; and payment of certain burial-related 
expenses.
    The primary drivers of C&P account growth are the total 
number of veterans in receipt of disability compensation and 
the average amount of compensation payment per veteran. VA 
estimates that 2.87 million veterans will be in receipt of 
disability compensation in FY07, a 10% increase in just two 
years and a 24% increase since fiscal year 2001. As a point of 
comparison, overall growth in the compensation roles was 5% 
between fiscal years 1991 and 2001.
    VA projects that average compensation payments to veterans 
will continue to increase due to a variety of factors: (1) More 
veterans filing disability claims (primarily Gulf War era and 
Vietnam-era veterans); (2) More veterans filing and being 
granted service-connection for multiple disabilities (the 
number of veterans filing for at least eight or more 
disabilities has doubled in five years); (3) Increases in 
average disability ratings (as veterans age, their disabilities 
worsen and they may be granted increased disability ratings); 
(4) Increases in Individual Unemployability and Post-Traumatic 
Stress Disorder (hereinafter, ``PTSD'') claims; (5) Cost-of-
living adjustments; and (6) More military retirees filing for 
disability compensation spurred by new laws allowing partial 
concurrent receipt of military retired pay and VA disability 
pay (according to VA's budget, 45% of the nation's 1.8 million 
military retirees are now receiving VA disability 
compensation).
    CBO estimates a lower rate of growth for C&P spending than 
does the Administration. The key difference between the 
Administration and CBO's estimates is the lower accession rate 
of veterans being added to the disability compensation roles. 
Whereas VA projects 10% growth in the caseload from fiscal 
years 2005 to 2007, CBO projects only 5% growth. A focus of the 
Committee this year will be to understand the factors that have 
driven the growth in both the disability compensation roles and 
actual expenditures, and the implications this growth may have 
on future budget submissions.

                       II. DISCRETIONARY PROGRAMS

A. VA medical care

    The President requests $34.295 billion for medical care in 
FY07. The President's request is comprised of a combination of 
general revenue appropriation ($31.462 billion) and medical 
care collections ($2.833 billion). I support both the 
President's total medical care request and the sources from 
which he proposes to obtain requested dollars.
    Before I provide my views on the President's request for 
medical care, I feel it is necessary to explain what ``medical 
care'' is in order to ensure accuracy. There is no longer a 
single VA ``medical care'' appropriation account as in prior 
years. Beginning with fiscal year 2004 appropriations, Congress 
divided the medical care account into three separate health-
related accounts: medical services (including amounts 
transferred to medical services from medical collections), 
medical administration, and medical facilities. It is the sum 
of these three accounts I refer to when using the term 
``medical care.''
    VA is a national leader in the delivery of high-quality 
health care. Its reputation has driven demand for its services 
from veterans across the country. Of VA's 7.6 million 
enrollees, roughly 5.3 million will use VA's system in FY07, an 
increase in the number of users since fiscal year 2001 of over 
one million. Couple the demand for VA care with an aging 
population, and veterans with complex care needs arising from 
service-related injuries, and it is not surprising that there 
is tension between demand for health services and available 
resources.
    Assuming enactment of the President's request, VA medical 
care will have increased by 69% since fiscal year 2001. If the 
President's increase for FY07 is any barometer for out-year 
increases, and assuming current enrollment eligibility policy 
continues, VA's medical care budget will need to double nearly 
every six years. Additionally, the President's request assumes 
that VA's patient base will remain relatively stable in FY07. 
Should VA's estimates on frequency of health care use per 
patient be too low, or should a higher number of enrolled 
patients actually use the system, resource demands will be 
greater than those assumed in the President's request. That 
said, VA's submission of quarterly reports (now a requirement 
of law) on its finances, workload, and performance measures 
will serve as an additional check to ensure its budget, when 
executed, is sufficient.
    For the fifth year in a row the President has proposed to 
finance a portion of his medical care budget by enacting 
revenue-generating policy proposals. The first of his FY07 
proposals is to levy an annual $250 enrollment fee on Priority 
7 and 8 veterans; the second is to charge priority 7 and 8 
veterans $15 for a 30-day supply of prescription medication; 
and the third is to cease waiving indebtedness of 1st party co-
payments under certain circumstances. If these proposals (or 
other proposals with similar effect) are not enacted, an 
additional $795 million in general revenue appropriation would 
be needed (assuming there is no change in enrollment 
eligibility policy).
    During a time of high deficits and restrained spending in 
every account unrelated to national security, the President's 
proposal to shift a small portion of the cost of funding record 
growth in VA's budget onto lower priority veterans is 
reasonable. I have no objection to the proposals he has chosen, 
but I am not necessarily wed to them. Should there be another 
combination of fee proposals that results in an avoided 
appropriation of $795 million, I will take them under 
consideration. But my bottom line is this: I recommend the 
Budget Committee support the President's requested level of 
medical care spending, both in the amount of general revenue 
appropriation requested ($31.462 billion) and in the amount of 
medical collections assumed ($2.833 billion).
    The President's budget for medical care contains numerous 
other funding initiatives that I support and which are vital to 
veterans, particularly the 2% of VA's patient population who 
participated in Operations Iraqi Freedom or Enduring Freedom 
(hereinafter, ``OIF/OEF''). Assumed in the request are 
increases for prosthetic and sensory aids, treatment of serious 
mental illness, treatment of PTSD, and other programs to 
support Gulf War and OIF/OEF veterans. Care for returnees of 
the Global War on Terror must remain VA's highest priority.
    One area of particular focus of mine and the Committee is 
VA's homeless veterans programs. The President requests an 
additional $44 million in funding for treatment costs 
associated with homeless veterans and an additional $20 million 
for other programs to assist homeless veterans. In particular, 
I commend the request for a 16% increase in Homeless Grant and 
Per Diem funding. In the coming year I am committed to 
reviewing this and other specialized homeless programs to 
ensure that they are providing the necessary services to help 
homeless veterans resume self-sufficient and independent lives.

B. Medical research

    The President's budget proposes a $13 million reduction in 
the Medical and Prosthetic Research account in FY07. VA 
projects that $399 million in appropriations will be leveraged 
with other federal (and to a lesser degree, non-federal) 
resources to yield an overall increase in allocations for 
research. However, this may be an unrealistic assessment given 
that the Administration's budget does not move to increase 
funding for the National Institutes of Health, the Centers for 
Disease Control and Prevention, and other agencies associated 
with biomedical research.
    One research priority that VA has identified for the coming 
fiscal year focuses on returning OIF/OEF veterans. Many of 
these veterans have sustained traumatic brain or spinal cord 
injuries, often in conjunction with sensory loss and loss of 
limbs. It is essential that research be conducted to guide 
treatment and rehabilitation for these individuals with 
polytraumatic injuries. Now in particular, VA must invest in 
research to guide evidence-based treatments for the future. In 
pursuit of this goal, I propose that VA's Medical and 
Prosthetic Research be increased by $30 million over the 
Administration's budget and $17 million over the fiscal year 
2006 level.

C. Information technology

    The President requests $1.257 billion for information 
technology (hereinafter, ``IT'') under a separate IT account as 
directed in Public Law 109-114. This amount is intended to 
facilitate VA's transition to full implementation of the 
Federated IT Management System by VA's June 2008 target date.
    The Committee held a hearing in October 2005 to examine 
VA's plan to re-organize its IT management system. The 
Committee will continue to closely monitor this process to 
ensure that this new accounting system maintains the proper 
balance between budget control in the Office of the Chief 
Information Officer and operational flexibility vested with the 
individual VA administrations.

D. General operating expenses

    The President requests $ 1.635 billion in general operating 
expenses in FY07, $1.322 billion for the Veterans Benefits 
Administration (hereinafter, ``VBA'') and $313 million for 
General Administration. Included in the total is $154 million 
in appropriations that will be transferred to the General 
Operating Expense account for administration of VA's housing 
programs.
            Veterans Benefits Administration
    Including transferred appropriations for administration of 
VBA's housing programs, $1.322 billion is requested for VBA. 
This funding request will support a staffing increase of 173 
Full Time Equivalent employees (hereinafter, ``FTE'') over 
fiscal year 2006. The budget request provides a blueprint of 
how FTE for each of VBA's programs is expected to be alIocated. 
It is a blueprint only; actual FTE will be alIocated according 
to workload demands as they arise.
            (a) Compensation and Pension Service
    The President requests funding to support 9,445 FTE to 
administer VBA's compensation and pension claims workload. That 
FTE level would represent the largest staffing level for the 
Compensation and Pension (hereinafter, ``C&P'') Service in over 
two decades. It is important to note that, with the exception 
of some routine pension claims work, there is no distinction 
between the employees who develop and adjudicate disability 
compensation claims and disability pension claims. Therefore, 
for any ``apples to apples'' comparison of staffing levels over 
the years, combining FTE totals for these two programs is 
necessary.
    Workload within the C&P Service can be broken down into one 
of two categories, the first involving claims or actions which 
require a disability rating decision (or ``rating-related'' 
action), and the second involving claims or actions where no 
such decision is needed. The claims involving a disability 
determination are, without question, the most complicated and 
time-consuming aspect of VBA's work. Decisions involving 
disability determinations can mean critical financial 
assistance for veterans whose earnings are impaired by 
disability, and can provide the basis for a host of ancillary 
benefits. Therefore, timely and accurate decisions on 
disability claims are essential.
    The disability and pension claims workload has been 
steadily increasing since fiscal year 2000, a year in which VBA 
received the fewest claims (579,000) of any of the last ten 
years. In the five years preceding fiscal year 2000, the number 
of claims filed averaged 688,000. In fiscal year 2006, VA 
expects it will receive just over 910,000 claims, a 57% 
increase since fiscal year 2000, and 33% above the fiscal years 
1995 to 1999 average. The number of claims received does not 
present a full picture of the work required to adjudicate each 
claim. As previously mentioned, the number of claims filed with 
at least eight or more claimed disabilities has doubled in five 
years; Congress has mandated additional procedural 
requirements; and claimed disabilities are more complex than in 
prior years.
    Among the 910,000 claims VBA expects to receive in fiscal 
year 2006, 98,000 are anticipated in response to specialized 
outreach to veterans in six states, as directed by section 228 
of Public Law 109-114. The Congressionally-mandated outreach 
was premised on the fact that veterans residing in those six 
states receive the lowest average annual disability payments 
when compared to other states, and the assumption that 
deficiencies in VA's decision-making on their claims was to 
blame. Prior to the enactment of the mandated outreach 
provision, there was little to no public analysis about the 
validity of the provision's premise or the policy and workload 
implications that it would have. VA expects the influx of the 
98,000 claims to have a nationwide impact on performance. There 
is an expected 20% increase in the claims backlog; claims will 
remain pending at regional offices awaiting a decision by an 
extra 28 days, on average; and the time it takes to process 
claims will slacken by an average of 20 days. I will work with 
the Administration and the sponsors of the provision mandating 
this outreach (which has yet to occur) to see if there is 
common ground that can be reached that rests on a sounder 
policy footing and that does not delay claims filed by veterans 
in states other than the six targeted for special outreach.
    For FY07, VA expects it will receive roughly 828,000 
claims, 43% more than were filed in fiscal year 2000 and 20% 
more than the five year, pre-2000 average. As previously 
mentioned, the President requests resources to support a C&P 
FTE level of 9,445. Assuming the President's request is 
enacted, C&P FTE will have increased by 36% since fiscal year 
1997; for direct staffing only, i.e., field staff who perform 
the day-to-day claims work, FTE will have increased by 52% 
since 1997. The staffing levels proposed by the President for 
FY07 are necessary to continue VBA's progress to reduce the 
claims backlog and improve the accuracy and timeliness of its 
decisions.
            (b) Education Service
    The President requests funding to support 930 FTE for the 
Education Service. This funding level would allow an increase 
of 46 FTE over the estimated fiscal year 2006 FTE level, 
including an additional 34 direct FTE. During fiscal years 2001 
to 2003, the timeliness of VA's decisions on original education 
claims and supplemental education claims improved remarkably. 
Since fiscal year 2004, however, there has been a deterioration 
of that improvement. With an expected increase in FTE during 
fiscal year 2006 and the requested increase for FY07, the 
Education Service should be able to regain that lost ground and 
approach its strategic targets for timeliness.
            (c) Vocational Rehabilitation and Employment service
    The President requests $149.342 million for the Vocational 
Rehabilitation and Employment (VR&E) program. This funding 
level would support an increase of 130 FTE over the estimated 
FTE level for FY06. Currently, the VR&E program is implementing 
a new Five-Track Employment Model, consistent with 
recommendations made by the 2004 Vocational Rehabilitation and 
Employment Task Force. The additional FTE in FY07 will allow 
VR&E to further implement that new model by utilizing an 
increased number of Employment Coordinators and contracting 
specialists.
            (d) Loan guaranty service
    One of the little-heralded success stories in all of 
government is VA's loan guaranty service. It provides an 
example of how leveraging technology, streamlining operations, 
and reliance on private sector partners can help make a 
government-run program more efficient and effective. In the 
last decade alone, FTE devoted to VA's housing program has been 
slashed--from 2,254 FTE in fiscal year 1997 to 971 FTE proposed 
in the upcoming fiscal year. Despite these FTE losses, service 
to veterans has improved.
    The President proposes FY07 funding to support 971 FTE, a 
reduction of 17 over fiscal year 2006. While there is no reason 
to expect degraded performance with yet another loss of FTE 
proposed, I will closely monitor performance. In particular, I 
will watch the default rate on VA-guaranteed loans and whether 
staffing is sufficient to intercede on behalf of veteran 
borrowers.
            (e) Insurance Service
    For FY07, the President proposes funding to support 503 FTE 
for VA's Insurance Service, a 15 FTE increase over fiscal year 
2006.
    VA's Insurance Service is a perennial leader in timely, 
accurate, and professional service to beneficiaries of its 
insurance programs. The American Customer Satisfaction Index 
scored the Insurance Service well above all of its private 
sector competitors in customer satisfaction. I expect with the 
resources requested in this budget that the Insurance Service 
will maintain its usual outstanding performance.
            General administration
    For FY07, the President's budget recommends a $313 million 
appropriation for the administration of the offices of the 
Secretary, six Assistant Secretaries, two Appellate Boards, and 
the Office of General Counsel. I support this level of funding.
    The funding level proposed for the Board of Veterans' 
Appeals (hereinafter, ``BVA'') would support 444 FTE. From 
fiscal year 2004 to 2005, the BVA's appeals resolution time 
increased substantially, from 529 days to 622 days, and the BVA 
cycle time also increased. With an expected increase in FTE 
during FY06 and the requested funding to maintain an increased 
staffing level during FY07, the BVA should be able to improve 
its performance and approach its strategic target for cycle 
time. Because BVA supports one of VA's primary missions of 
providing veterans with timely and accurate disability claims 
decisions, the Committee will closely monitor its performance.

E. Major construction

    The President requests $399 million for major construction 
projects in FY07. Included in that request is $307 million to 
continue funding projects related to VA's Capital Asset 
Realignment for Enhanced Services (CARES). Assuming this amount 
is enacted, total CARES-related funding will stand at $3 
billion to date.
    VA has already begun several major projects for which 
completion costs are not reflected in the budget request. 
However, the Committee will need to authorize all CARES-related 
construction that occurs after September 30, 2006, even if 
construction is already underway. The Committee will soon 
receive a list from VA detailing all CARES projects requiring 
Congressional authorization.

F. Minor construction

    The President requests $198 million for minor construction. 
This account supports critical upkeep of VA's facilities all 
across the United States. With over 150 hospitals currently in 
operation, this funding level would support just over $1 
million for each hospital's minor construction needs. I believe 
this request is too low. I support an increase above the 
President's request of $19 million for a total FY07 funding 
level of $217 million. As I will describe below, I recommend 
that this funding come from recommended reductions in the State 
Extended Care Facility grant program.

G. State Extended Care Facility grants

    The President requests $85 million in FY07 for State 
Extended Care Facility grants. There are two main purposes of 
this grant funding. The first is to help states build or 
acquire new nursing home facilities. The second is to help 
states maintain the highest life and safety code standards in 
existing facilities.
    I support a funding level for this grant program sufficient 
to fulfill the Federal government's commitment to states with 
already-established nursing facilities that are in need of life 
and safety upgrades. However, I believe a suspension of grant 
funding for the purpose of establishing new nursing facilities 
is, at this time, in order.
    Long-term care services in America are rapidly moving from 
institutional settings, such as state home beds, to home and 
community-based programs that care for needy individuals in 
their own towns close to their families and loved ones. VA's 
own long-term care program is moving in that direction.
    Today, there are approximately 20,000 institutional beds in 
the State Home system. In fiscal year 2006, VA will pay a per 
diem of $63.40 for each veteran who occupies one of those beds. 
As a result, this year alone, VA will spend $557 million on per 
diem payments which are drawn directly from the medical 
services portion of individual VA hospital budgets. Each 
additional construction project brings hundreds of new beds on 
line that will also have to be supported with VA per diem 
payments in subsequent years. This, in turn, drives the medical 
services funding needs even higher and contributes to the 
accelerated growth of VA's overall budget.
    For this reason, and because I believe VA and the states 
must focus more attention, not less, on community-based 
services, I recommend a FY07 funding level of $36 million. My 
recommendation will support every life and safety grant project 
VA has identified as needing full funding in FY07. Again, I 
reiterate, I recommend that the budget support funding in this 
account that addresses facilities in need of life and safety 
upgrades only.
    There is a $49 million difference between my recommended 
funding level and the President's. I propose that $30 million 
of that difference be devoted to augmenting the Medical and 
Prosthetic Research account bringing its FY07 total to $429 
million (see page 4). I recommend that the remaining $19 
million be transferred to the Minor Construction account, 
bringing its FY07 total up to $217 million (see page 8).

H. State cemetery grants

    The President requests $32 million for the state cemetery 
grant program. According to VA officials, the $32 million in 
annual appropriation for this program has been sufficient to 
cover nearly all approved applications from states for cemetery 
expansion, construction, or improvement. Unfunded projects are 
first in line for funding in subsequent fiscal years. 
Therefore, at this time, the $32 million funding level is 
sufficient.

I. Inspector General

    The President requests $69.5 million in FY07 for the VA 
Office of the Inspector General (hereinafter, ``IG''). That 
funding level would result in a reduction of 27 FTE over fiscal 
year 2006 levels.
    Ordinarily, a staffing reduction in the Inspector General's 
office might raise concerns given that it is tasked with 
guarding against waste, fraud, and abuse in one of the Federal 
government's largest agencies. However, VA IG funding has 
increased by 126% since 1998, and the current fiscal year 
represents the highest FTE level on record for the IG in at 
least a decade. Viewed in this context, a 27 FTE reduction is 
less troublesome than would otherwise be the case.

J. National Cemetery Administration

    The President proposes an appropriation of $160.733 miIlion 
for the National Cemetery Administration (hereinafter, 
``NCA''). This funding level will support operational expenses 
related to 107,300 total expected interments at NCA cemeteries 
and the maintenance of over 2.8 miIlion graves.
    Through a combination of funding in this account and funds 
from minor construction, the President proposes $28 million for 
the National Shrine Commitment, an initiative to address nearly 
$280 miIlion worth of one-time cemetery repair projects 
identified in a 2002, Congressionally-mandated report. Assuming 
continued funding of $28 miIlion annually for Shrine Commitment 
repairs, alI repairs stand to be completed by 2012 according to 
VA officials.

K. The Veterans' Employment and Training Service

    The President requests $224.887 miIlion to fund the 
Department of Labor's Veterans' Employment and Training Service 
(hereinafter, ``VETS''), a 1.3% increase over the amount 
appropriated for fiscal year 2006. Nearly 72% of the requested 
funds--$161.218 miIlion--will be used to fund two employment 
programs for veterans: The Disabled Veterans' Outreach Program 
and the Local Veterans' Employment Representative program. In 
February 2006, the Committee held a hearing to examine the 
effectiveness of those programs. In sum, the Committee learned 
that there are no reliable data demonstrating that these 
programs are effective in helping veterans find quality jobs. 
In addition, statistics suggest that these programs are not 
targeting services to those veterans most in need, such as 
recently-separated veterans. During this session, the Committee 
will continue to examine whether veterans would benefit from 
fundamental changes in how these funds are used, especially 
since VA's Vocational Rehabilitation and Employment program 
targets a similar cohort of veterans for employment assistance. 
However, at this time, I support the Administration's funding 
request for VETS because it is restrained and responsible. I do 
not recommend funding beyond the requested level.

L. The United States Court of Appeals for Veterans Claims

    For FY07, the United States Court of Appeals for Veterans 
Claims (hereinafter, ``Court'') requests $19.790 miIlion, of 
which $1.260 miIlion will be available for the purpose of 
providing pro bono representation. The Court's request includes 
$900,000 to continue two special initiatives: The 
implementation of an electronic case-filing system and the 
study and planning stages for a Veterans Courthouse and Justice 
Center.
    Since fiscal year 1998, the Court's budget has more than 
doubled. I recently expressed to the Court my concern that, 
despite increases in its budget and the size of each judge's 
staff over the last several years, productivity has not 
improved. In fact, the Court currently has approximately 5,200 
cases pending and over 20% of those have been pending for more 
than one year. I have been assured by the Chief Judge that the 
Court is in the process of assessing other measures that may 
help to improve case management and reduce the backlog. 
Accordingly, at this time, I will not object to the Court's 
funding request. However, while the appropriations process 
unfolds, I will continue to examine whether the current 
staffing levels are the most appropriate and cost-effective 
means of dealing with the Court's increasing workload.

M. The American Battle Monuments Commission

    The President requests $40.738 million for the American 
Battle Monuments Commission (hereinafter, ``ABMC''). This 
amount is comprised of $35.838 million to fund salaries and 
expenses and $4.9 million to offset losses stemming from 
currency fluctuations in European and Mediterranean regions 
where ABMC cemeteries are located. The President's request will 
support an additional 13 FTE to begin operational staffing of 
the Normandy Interpretive Center upon its completion in June 
2007. I support the President's request.
            Sincerely,
                                            Larry E. Craig,
                                                          Chairman.
                                ------                                

                                                     March 2, 2006.
Hon. Judd Gregg, Chairman,
Hon. Kent Conrad, Ranking Member,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Chairman Gregg and Senator Conrad: Pursuant to Section 
301(d) of the Congressional Budget Act of 1974, the Democratic 
Members and Senator Jeffords of the Committee on Veterans' 
Affairs (hereinafter the ``Undersigned Members'') hereby report 
to the Committee on the Budget their views and estimates on the 
fiscal year 2007 (hereinafter, ``FY07'') budget for Function 
700 (Veterans'' Benefits and Services) and for Function 500 
(Education, Training, Employment, and Social Services) programs 
within the Committee's jurisdiction. This letter responds to 
the Committee's obligation to provide recommendations on 
veterans' programs within its jurisdiction, albeit from the 
perspective of the Undersigned Members.

                               I. Summary

    The Department of Veterans Affairs (VA) requires, at a 
minimum, $3.45 billion in additional funding in FY07 to support 
its medical care operations. Our requested medical services 
increase is $1.49 billion over the Administration's request.
    Once again, the Administration's proposed budget includes a 
number of legislative proposals designed to generate additional 
savings and revenue. The Undersigned Members unanimously reject 
each of the legislative proposals--the increase in prescription 
drug copayments from $8 to $15 for ``middle-income'' veterans; 
the annual enrollment fee of $250 for ``middle-income'' 
veterans; and eliminating the practice of offsetting VA first-
party copayment debts with collections from insurance 
companies.
    With respect to benefits, we disagree with the amount 
requested for staff at the Veterans Benefits Administration for 
compensation and pension, and at the Board of Veterans' 
Appeals. We also recommend additional funding for the 
Department of Labor's Veterans' Employment and Training 
Service. In addition, we believe it is time to provide non-
service connected pension for Filipino veterans who served 
alongside American troops during World War II.
    The projections for discretionary account spending in the 
outyears are disturbing. The VA health care system would be 
decimated should the Administration's budget for future years 
become a reality. It is our view that veterans, who have 
sacrificed for this country, are carrying a disproportionate 
share of the burden to balance the Federal budget. We believe 
that the Government can be fiscally responsible and reduce the 
Federal deficit and debt, and still fulfill our commitment to 
our Nation's veterans. The cost of war must include the costs 
of caring for servicemembers when they return home.

                   II. Discretionary Account Spending


A. Proposed medical services

    While we generally agree with the Administration on the 
level of funding required to support VA health care, we differ 
on the amount that needs to come from actual appropriated 
dollars, relative to the amount that can be garnered directly 
from veterans in the form of new fees and increased copayments, 
or ``saved'' by the use of less than concrete efficiencies.
    Prescription Drug Copayment Increase for Priority 7 and 8 
Veterans: The Undersigned Members oppose the Administration's 
increase to this copayment from $8 to $15, for a projected 
savings of $355 million from increased revenue and decreased 
enrollment of these categories of veterans. In large measure, 
Priority 7 and 8 veterans--earning as little as $26,902--cannot 
afford to pay almost double for needed prescription drugs.
    $250 Enrollment Fee for Priority 7 and 8 Veterans: The 
Undersigned Members oppose the Administration's new enrollment 
fee of $250, for a projected savings of $410 million from 
increased revenue and decreased enrollment of these categories 
of veterans. Again, this proposal is targeted at ``middle-
income'' veterans, and we believe it is an unacceptable 
financing mechanism.
    Offset of First-Party Debt: The Undersigned Members of the 
Committee oppose a change in law which would eliminate the 
practice of offsetting or reducing VA first-party copayment 
debts with recoveries from insurance companies. Presumably, 
many of these veterans were drawn to VA because of low-cost 
prescription drugs. Yet, in most cases, acquiring these drugs 
requires visits to a specialty care provider. The vast majority 
of these veterans are elderly and on a fixed income. They are 
not ``high-income'' by any local economic standard but are 
certainly over the ``means test'' threshold. While the current 
primary care copayment of $15 is in line with most private 
insurance companies, VA's specialty care copayment is $50 per 
visit. The amount is high enough to be an instant disincentive 
to seeking medical care in VA. VA estimates this change would 
yield $31 million in increased collections.
    Efficiencies: The Administration is estimating cumulative 
efficiencies of $1.1 billion in FY07, which results in an 
additional $138 million in efficiencies for the medical 
services account. At the request of the Committee's Ranking 
Member, the General Accounting Office performed an audit of 
VA's management efficiency savings claimed for FYs 03-06. GAO 
reported VA lacked a methodology for making these assumptions 
and found that the Department could not support its own 
estimates. VA has termed these efficiencies as ``clinical'' 
rather than ``management'' this year, but regardless of their 
classification, they should not be used to offset increased 
appropriations until such time as they are verifiable.
            1. Current services (+$892 million)
    Payroll inflation, increases in the costs of goods, and 
other ``uncontrollables'' dictate funding increases of at least 
$892 million in FY07 simply to maintain the level of current 
services. VA's medical care payroll costs will increase by $458 
million in FY07 due to non-optional cost-of-living and within-
grade salary and wage adjustments, as well as increases in 
government-paid Social Security, health insurance, retirement, 
and other benefits. The cost of inflation and rate changes for 
goods and services (including pharmaceuticals) dictates the 
need for an additional $434 million in funding in FY07.
    We are concerned that the Administration has not adequately 
budgeted for enough physicians and nurses to meet the increased 
demand for veterans seeking VA medical care in FY07. The number 
of physicians, Registered Nurses, Licensed Practical Nurses, 
Licensed Vocational Nurses, and Nursing Assistants in the 
Medical Services account has remained nearly flat since the 
FY05 budget submission. Although the FY07 budget shows a net 
increase of 100 Physicians (12,337 to 12,437), there has been 
no increase in the number of Registered Nurses, Licensed 
Practical Nurses, Licensed Vocational Nurses, and Nursing 
Assistants. VA should make the establishment of a national 
nurse staffing standard a high priority and budget funds 
accordingly to accelerate the completion.
            2. Rescinding the ban on priority 8 veterans (+$706 
                    million)
    VA has seen a substantial increase in enrollment, 
especially in the number of ``middle-income'' veterans--those 
whose financial means are above the HUD geographical low-income 
threshold for their respective counties. In January 2003, the 
Administration halted enrollment for Priority 8 veterans.
    The Administration's request for FY07 assumes the 
enrollment ban on Priority 8 veterans will continue. The 
Undersigned Members estimate that new resources of $706 million 
are needed to restore access for these veterans.\7\ We believe 
veterans needing VA care should not be prohibited from 
enrolling in the system. Indeed, adequate appropriated funding 
should be provided to VA so that all veterans have access to VA 
services. Additionally, many of these veterans bring health 
care coverage with them and continue to pay copayments for care 
and drugs, so, in effect, they actually bring revenue into the 
system, offsetting the cost of their care. We can think of no 
other health care system which discourages insured patients 
from seeking care.
---------------------------------------------------------------------------
    \7\ 241,876 Priority 8 veterans have been turned away thus far, at 
an average per user cost of $2,921.
---------------------------------------------------------------------------
    The Undersigned Members believe it is important to note 
that this cost estimate would be reduced if the ban was 
actually rescinded, due to the fact that the Priority 8 
veterans who would come into the system would bring their 
third-party insurance with them, in addition to paying 
copayments for their care and prescription drugs. Both of these 
factors would generate revenue that would offset VA's 
obligations.
            3. Demand changes (+$1.726 billion)
    In large measure, we support the Administration's estimated 
cost for demand and case mix changes for all veterans' 
priorities ($1.495 billion). It is abundantly clear that 
veterans are relying heavily upon VA for pharmaceuticals. In 
addition, older veterans present for care with debilitating and 
chronic conditions requiring a higher--and more expensive--
level of care.
    We would also like to address the issue of returning 
servicemembers, as we believe the Administration is once again 
underestimating demand. VA has estimated that any potential 
workload from OIF/OEF will be negligible relative to the 
overall number of new enrollees each year. Such veterans cost 
VA $232 million to treat in FY05, and ultimately required an 
increase of that same amount in FY06 for a total funding level 
of $464 million.
    We believe that VA should keep their level of funding for 
treating these veterans in FY07 consistent with the current 
fiscal year, as these returning servicemembers are entitled to 
a two-year ``automatic'' window of eligibility for VA care upon 
their separation from service (Public Law 105-368). As such, we 
recommend a total funding level of $696 million for treating 
OIF/OEF veterans under current law, for an increase of $231.7 
million over FY06.
            4. New initiatives (+$123 million)
    The Undersigned Members of the Committee accept the 
Administration's proposed new initiatives. While we support 
each of these initiatives, we believe that more can and should 
be done--especially in the areas of readjustment counseling and 
rehabilitative care. The first is critically important for 
returning OIF/OEF servicemembers; the second is a lifeline for 
veterans of all ages.
    Vet Centers. As the War on Terrorism continues, the number 
of veterans seeking readjustment counseling and related mental 
health services through Vet Centers will continue to grow. 
Experts predict that as many as 30 percent of those returning 
servicemembers may need some kind of mental health treatment--
from basic readjustment counseling to care for debilitating 
PTSD. Furthermore, a recent study published in the Journal of 
the American Medical Association reported that 35 percent of 
Iraq veterans received mental health care during their first 
year home. Despite increases in the number of veterans coming 
for care to Vet Centers, the budget for the program has 
remained relatively stagnant. We note that legislation to 
authorize $180 million in funding for Vet Centers passed the 
full Senate last December. We therefore recommend that Vet 
Centers receive a funding increase of $81 million above FY06 to 
meet that end.
    Rehabilitation. The Administration is projecting a decrease 
in the average daily census for its residential rehabilitation 
care program. We believe that the rate of spending for this 
account should maintain the same rate of growth as in previous 
years. Rehabilitative care programs offer a full range of 
rehabilitation services in a supportive environment, with 
minimal medical care. We recommend an increase of $42 million 
for this program.
    Our overall views on medical spending are summarized in the 
chart below:

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

------------------------------------------------------------------------
Current Services:
    Salary and wage adjustments and         $458 million
     increases in benefits.
    Inflation and rate changes for goods    434 million
     and services.
                                           -----------------------------
        Subtotal Current Services.........  892 million
Restoring Enrollment to Priority 8          706 million
 Veterans.
Demand:
    Administration's Estimate for Demand..  1.495 billion
    OEF/OIF Workload......................  231 million
                                           -----------------------------
        Subtotal Demand...................  1.726 billion
New Initiatives:
    Vet Centers (Readjustment Counseling).  81 million
    Rehabilitative Care...................  42 million
                                           -----------------------------
        Subtotal New Initiatives..........  123 million
                                           =============================
            Total New Funding Needed for    3.45 billion
             FY07.
------------------------------------------------------------------------

B. Proposed discretionary spending for FY08-FY11

    The Administration's proposed budget for discretionary 
spending in the near term lays out a financial path which would 
devastate VA health care. The cuts over five years would total 
$10.3 billion, inc1uding $789 million in FY08; $2.33 billion in 
FY09; $4.033 biIlion in FY10; and $4.94 billion in FY11.
    We are fully cognizant that the proposed budget contains 
assumptions about future years. Nevertheless, we view the 
current strategy as one which gives in the first year and cuts 
heavily thereafter. Veterans groups know and understand that a 
frozen appropriation coupled with cuts in other programs will 
translate into a reduction of services and benefits. Any budget 
resolution must reverse these cuts in the future years.

C. Medical and prosthetic research

    The Administration's proposed FY07 budget for the direct 
costs of VA research is $399 million, representing a $13 
million cut from the current year level of $412 million. This 
sum is insufficient to sustain current research initiatives or 
to provide the program growth necessary to attract and retain 
quality clinical staff; rather, it would result in the direct 
loss of 96 projects and 286 FTE. We believe that an additional 
$35.7 million to the Administration's proposal is required to 
sustain the current VA research and development program 
commitments and cover inflationary cost increases associated 
with these commitments. This will ensure that VA is able to 
continue addressing the special needs of our country's 
veterans, and enable VA to continue to recruit and retain the 
highest quality physicians. Therefore, we recommend a total 
funding level of at least $434.7 million to maintain current 
services and avoid any personnel or project cuts.

D. Grants for State Extended Care Facilities (SECF)

    The Administration is proposing a funding level of $85 
million in FY07 for the SECF Grant program, the exact same 
amount that VA estimates it will spend on the program in the 
current fiscal year. The Undersigned Members believe that this 
program should receive a slightly higher level of funding, as 
it is a cost-effective and successful long-term care program.
    SECF's provide long-term care services to over 27,000 
veterans in 119 locations across 47 States and Puerto Rico. 
Construction matching grants are awarded both for new 
construction in States with the highest needs as defined by 
P.L. 106-117, and for repair, renovation, or expansion of 
existing State Homes. Federal construction grants fund up to 
65% of the cost of construction, with States contributing at 
least 35% of the total cost. In FY06, the Administration 
proposed zeroing-out the funding for the construction grant 
program from $104.3 million in FY05. Congress rejected this 
proposal, although the final appropriation level was reduced by 
$19.3 million to $85 million.
    With construction costs rising, and at least $237 million 
in pending SECF construction grant requests already approved by 
States, the Undersigned Members recommend that FY07 funding for 
SECF Construction Grants be increased from the FY05 baseline to 
account for inflation costs (current annual CPI index of 4%, 
accounting for $4.2 million of the increase), then by $19.3 
million to restore the cut in FY06; for a total FY07 funding 
request of $127.8 million. This amounts to a net $23.8 million 
increase above the Administration's FY07 request of $85 
million.

E. Compensation and Pension Service

    VA anticipates an end-of-fiscal year 2007 pending workload 
of 396,834 receipts. Despite this projected inventory, the 
Administration's budget would cut direct compensation staff by 
149. We do not believe that VA can manage this increased 
workload without additional staff.
    VA has stated that caseload from the Vietnam and Gulf War 
eras is increasing rapidly and that this trend is expected to 
continue through the budget year.
    Additionally, the best indicator of new claims activity is 
the size of the active duty force. Over 616,000 veterans of the 
Gulf War era are in receipt of benefits from VA. More than one 
million servicemembers have deployed in support of Operations 
Enduring and Iraqi Freedom. Therefore, we can expect a large 
number of new claims as a result of these ongoing conflicts. 
These new veterans deserve to have their claims rated timely 
and accurately.
    We recommend an additional 200 FTE for direct compensation 
work. This number would help to reduce the expected end-of-
fiscal year 2007 backlog. We ask for an additional $17.1 
million to accomplish this goal.

F. Vocational rehabilitation and employment

    We support the provision in the budget that increases 
staffing by 130 FTE over the FY 2006 level for VR&E to fully 
implement the Employment Coordinator position for the Job 
Resource Labs.
    The additional FTE will aid in the implementation of the 
Five-Track Employment Model, which was suggested in the 
Department's April 2004 Vocational Rehabilitation and 
Employment Task Force report.
    Additionally, VR&E's workload is expected to increase 2.5 
percent in 2007 as a result of the VBA-wide effort to increase 
outreach activities to separating servicemembers. VR&E expects 
more veterans to utilize their services as the number of 
wounded veterans from Operations Enduring and Iraqi Freedom 
increases. We will monitor staffing needs at VR&E to ensure 
that our disabled veterans are receiving the assistance 
necessary to enable them to become employable and maintain that 
employment, or achieve, to the maximum extent practicable, 
independent living.

G. Insurance

    VA's insurance division is continually recognized for its 
excellent, professional service provided to veterans, active 
duty servicemembers, and their beneficiaries. We support the 
Administration's request for this division.

H. Housing

    Housing is one of the best-run VA divisions. VA helps 
veterans and active duty personnel purchase and retain homes in 
recognition of their service.
    However, we take note of the decrease of 17 FTE and will 
monitor whether Housing is able to continue its high standard 
of service given that VA expects more eligibles to take 
advantage of the loan guaranty as interest rates continue to 
rise. Additionally, VA anticipates defaults and foreclosures to 
increase consistent with the high volume of loans guaranteed in 
2002 and 2003.
    We applaud VA's efforts to assist veterans with foreclosure 
avoidance. We look forward to obtaining statistics on active 
duty military personnel and veterans who could not have 
purchased homes but for VA assistance.

I. Board of Veterans' Appeals

    The Board of Veterans' Appeals (BVA) is responsible for 
making final Departmental decisions on behalf of the Secretary 
for the thousands of claims for veterans' benefits presented 
for appellate review.
    There is a glaring problem with BVA's appeal resolution 
time despite its decrease from 622 days in 2005 to 600 days in 
2007. The numbers are not expected to improve to the strategic 
target of 365 days (from receipt of the Notice of Disagreement 
to rendering of final decision) in the near future. While the 
Administration's request of $55,309,000 would support 444 FTE, 
we recommend BVA be provided with 25 more employees at 
$2,875,000 above the Administration's budget to reduce the 
backlog at BVA and decrease the average days pending.

J. Education

    We support the Administration's request of $90.1 million in 
discretionary funding for educational assistance administered 
by VA. The proposal calls for an increase of 46 FTE over the 
fiscal year 2006 level for a total of 930 FTE for fiscal year 
2007. Education claims rose by 35 percent between fiscal year 
2002 and 2004. We believe the additional FTE will increase the 
timeliness of education claims' processing.

K. Office of the Inspector General

    The work of the VA Office of Inspector General (OIG) has 
made significant contributions to management effectiveness 
throughout VA. Its independent oversight of VA's programs and 
activities has resulted in a return on investment over the last 
3 years of $128 for every $1 spent. Given the diverse and 
complex nature of VA's significant and important mission, the 
VA could effectively utilize $10 million over the 
Administration's request to improve service to our Nation's 
veterans. We recommend that $4.3 million be used to support 20 
additional FTE in the Fugitive Felon Program, and $5.7 million 
be utilized to support 51 FTE that would expand OIG oversight.
    In the Fugitive Felon Program to date, using about 17 FTE, 
the VA GIG identified $218.2 million in estimated erroneous 
payments, $237.3 million in estimated cost avoidance, and 1159 
arrests--including 73 VA employees. We estimate that the 
additional $4.3 million and 20 FTE could result in cost 
avoidance reaching $209.6 million and 1100 arrests per year, as 
law enforcement agencies issue an estimated 2 million new 
felony warrants a year.
    These 51 FTE would support additional auditors, health care 
inspectors, and criminal investigators to focus on enhanced 
quality and safety of health care including issues of 
credentialing and privileging, identity theft to obtain medical 
care, and drug diversion; and systemic audits to improve 
financial management controls, information technology security, 
claims processing timeliness and accuracy, and procurement 
practices.

L. Department of Labor, Veterans' Employment and Training

    VA estimates that one in three homeless Americans has 
served their country in the Armed Services.
    Congress established the Homeless Veterans' Reintegration 
Program (HVRP) in 1987 amid concerns that the number of 
homeless veterans has risen steadily since the Vietnam War. 
HVRP provides competitive grants to community-based 
organizations to offer outreach, job placement, and supportive 
services to homeless veterans. Homelessness presents a high 
barrier to employment, and homeless reintegration programs help 
break down that barrier with specialized support unavailable 
through other programs. HVRP also offers specialized support to 
compliment its employment services for many veterans who have 
been turned away from other programs because of substance abuse 
and post-traumatic stress disorder.
    The Department of Labor estimates that 16,250 homeless 
veterans will be served through HVRP at its fiscal year 2006 
appropriated level of $21.78 million, nearly the same amount 
requested in the fiscal year 2007 request. This figure 
represents just 4 percent of the overall homeless veteran 
population, which VA estimates to be more than 400,000 over the 
course of a year. While the fiscal year 2006 appropriation was 
the most received by HVRP in any fiscal year, it funds the 
program at only 44 percent of the authorized level. An 
appropriation at the authorized level of $50 million would 
enable HVRP grantees to reach an estimated 36,820 homeless 
veterans. Therefore, we request an additional $28 million for 
HVRP.
    We additionally recognize that VETS would benefit from an 
additional $12 million for Veterans Workforce Investment Grants 
(VWIP) and the National Veterans' Training Institute (NVTI). 
Give the unemployment rate for young veterans, VWIP should 
continue to expand its efforts to target recently separated 
veterans. Those involved in the delivery of services to 
veterans must be adequately trained. We expect that with 
additional funding, NVTI will develop new courses based on the 
Jobs for Veterans Act.

                    III. Mandatory Account Spending

    We support the budget request of $42.1 billion for 
entitlement programs, and request an additional $106 million 
for non-service connected pension for Filipinos who served 
alongside U.S. servicemembers during World War II.
    This Administration's requested increase in mandatory funds 
provides for a 2.6 percent cost of living adjustment in 2006. A 
2.6 percent increase is the expected increase estimated in the 
Consumer Price Index and is the same increase expected for 
Social Security benefits. Other than the cost-of-living 
increase, there were no other legislative proposals for this 
mandatory account in the President's budget.

                              IV. Closing

    We thank the Budget Committee for its attention to the 
Undersigned Members' views and estimates of the 
Administration's fiscal year 2007 budget, and we look forward 
to working with the Committee in crafting a budget for VA that 
truly meets the needs of our nation's veterans.
            Sincerely,
                                   Daniel K. Akaka,
                                           Ranking Member.
                                           John D. Rockefeller IV.
                                           Patty Murray.
                                           Barack Obama.
                                           Ken Salazar.
                                           James M. Jeffords.

    On May 18, 2006 the House of Representatives passed H. Con. 
Res. 376, the House-prepared fiscal year 2007 Congressional 
Budget Resolution. On March 16, 2006 the Senate passed S. Con. 
Res. 83 as amended, the Senate-prepared version of the 
Congressional Budget Resolution. The two chambers never 
reconciled the differences between the two Resolutions prior to 
the adjournment of the 109th Congress.
                     COMMITTEE ON VETERANS' AFFAIRS

  LARRY E. CRAIG, Idaho, Chairman

DANIEL K. AKAKA, Hawaii              ARLEN SPECTER, Pennsylvania
JOHN ROCKEFELLER IV, West Virginia   KAY BAILEY HUTCHISON, Texas
JAMES M. JEFFORDS, Vermont           LINDSEY O. GRAHAM, South Carolina
PATTY MURRAY, Washington             RICHARD BURR, North Carolina
BARACK OBAMA, Illinois               JOHN ENSIGN, Nevada
KEN SALAZAR, Colorado                JOHN THUNE, South Dakota
                                     JOHNNY ISAKSON, Georgia

    Lupe Wissel, Staff Director
Bill Brew, Minority Staff Director

                                  
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