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97-531 PDF 2005

S. HRG. 108–762

THE ADMINISTRATION’S PROPOSED FISCAL YEAR

2005 BUDGET FOR VETERANS’ PROGRAMS

HEARING

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

FEBRUARY 10, 2004

Printed for the use of the Committee on Veterans’ Affairs

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

(II)

COMMITTEE ON VETERANS’ AFFAIRS

ARLEN SPECTER, Pennsylvania, Chairman

BEN NIGHTHORSE CAMPBELL, Colorado

LARRY E. CRAIG, Idaho

KAY BAILEY HUTCHISON, Texas

JIM BUNNING, Kentucky

JOHN ENSIGN, Nevada

LINDSEY O. GRAHAM, South Carolina

LISA MURKOWSKI, Alaska

BOB GRAHAM, Florida

JOHN D. ROCKEFELLER IV, West Virginia

JAMES M. JEFFORDS, (I) Vermont

DANIEL K. AKAKA, Hawaii

PATTY MURRAY, Washington

ZELL MILLER, Georgia

E. BENJAMIN NELSON, Nebraska

WILLIAM F. TUERK, Staff Director and Chief Counsel

BRYANT HALL, Minority Staff Director and Chief Counsel

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CONTENTS

FEBRUARY 10, 2004

SENATORS

Page

Specter, Hon. Arlen, U.S. Senator from Pennsylvania ......................................... 1

Prepared statement .......................................................................................... 1

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, prepared statement ...................................................................................................................... 3

Graham, Hon. Bob, U.S. Senator from Florida ..................................................... 15

Prepared statement .......................................................................................... 16

Akaka, Hon. Daniel K., U.S. Senator from Hawaii .............................................. 21

Murray, Hon Patty, U.S. Senator from the State of Washington ........................ 22

Nelson, Hon. E. Benjamin, U.S. Senator from Nebraska ..................................... 24

Jeffords, Hon. James M., U.S. Senator from Vermont ......................................... 25

Rockefeller IV, Hon. John D., U.S. Senator from West Virginia ......................... 27

WITNESSES

Principi, Hon. Anthony, Secretary, U.S. Department of Veterans Affairs; accompanied by Robert H. Roswell, M.D., Under Secretary for Health; John

W. Nicholson, Under Secretary for Memorial Affairs; William H. Campbell,

Assistant Secretary for Management; D. Mark Catlett, Principal Deputy

Assistant Secretary for Management; and Robert Epley, Associate Deputy

Under Secretary of Benefits for Policy and Program Management ................. 3

Prepared statement .......................................................................................... 8

Gaytan, Peter S., Principal Deputy Director, Veterans Affairs and Rehabilitation, The American Legion .................................................................................. 39

Prepared statement .......................................................................................... 40

Fuller, Richard B., National Legislative Director, Paralyzed Veterans of

America ................................................................................................................. 53

Prepared statement .......................................................................................... 173

The Independent Budget .................................................................................. 54

Surratt, Rick, Deputy National Legislative Director, Disabled American Veterans ...................................................................................................................... 175

Prepared statement .......................................................................................... 176

Hayden, Paul A., Deputy Director, National Legislative Service, Veterans

of Foreign Wars of the United States ................................................................. 184

Prepared statement .......................................................................................... 185

Jones, Richard, National Legislative Director, AMVETS .................................... 188

Prepared statement .......................................................................................... 190

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THE ADMINISTRATION’S PROPOSED FISCAL

YEAR 2005 BUDGET FOR VETERANS’

PROGRAMS

TUESDAY, FEBRUARY 10, 2004

U.S. SENATE, COMMITTEE ON VETERANS’ AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 3 p.m., in room 418,

Russell Senate Office Building, Hon. Arlen Specter (chairman of

the committee) presiding.

Present: Senators Specter, Campbell, Graham, Rockefeller, Jeffords, Akaka, Murray, and Nelson.

OPENING STATEMENT OF HON. ARLEN SPECTER,

U.S. SENATOR FROM PENNSYLVANIA

Chairman SPECTER. Good morning, ladies and gentlemen. The

Veterans’ Affairs Committee will now proceed. We have a very distinguished panel of witnesses before us at the moment. My full

statement will be admitted to the record, without objection.

[The prepared statement of Chairman Specter follows:]

PREPARED STATEMENT OF ARLEN SPECTER, U.S. SENATOR FROM PENNSYLVANIA

Good afternoon, ladies and gentlemen. And good afternoon to you, Secretary

Principi. It is a pleasure to welcome you—and the veterans service organizations,

who are scheduled to testify after you—to this hearing.

The subject of today’s hearing is the Administration’s proposed VA budget for fiscal year 2005. We will hear testimony from Secretary Principi and the senior VA

officials who have accompanied him here today. And we will hear from the service

organizations who will voice the separate views of each organization, if they so

choose, and who—except for The American Legion—will also speak as advocates for

the ‘‘Independent Budget.’’ It is my hope that, armed with this testimony, the Committee will be in a position to render its collective judgment on a number of weighty

policy questions. Among them are these:

• What precisely is VA asking for this year in terms of added appropriations to

provide medical care benefits to currently-enrolled veterans?

• Will this amount be sufficient to get VA through the year—even assuming that

VA continues to bar new enrollments of so-called ‘‘Priority 8’’ veterans? Or will VA

need more, just to maintain current levels of services?

• What precisely will VA need in terms of added funding if, for example, the Congress declines to enact certain ‘‘policy proposals’’ requested by VA?

• And finally, what would it take for VA to be able to reopen enrollments to ‘‘Priority 8’’ veterans? That is a prospect that I, for one, have not given up on.

These are critical questions, questions that we raise this year at a critical time

while the Nation is at war.

We mourn the deaths of every service member who has fallen in Iraq and Afghanistan, and we assure the families of these brave men and women that their sacrifice—the ultimate sacrifice—will not be forgotten. But while we mourn those who

have fallen, we are also mindful of the fact that we have been relatively fortunate.

One year ago, we were prepared for the possibility that hundreds—even thousands

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or tens-of-thousands—might fall, particularly as our troops approached Baghdad.

That did not happen; we are, of course, fortunate that it did not.

But now we face a very difficult situation in Iraq. While our troops were greeted

with enthusiasm initially—how can any of us ever forget the scene in Baghdad

when the tyrant’s statue was pulled down by the Iraqis . . . with some small assistance from United States troops—they now face a very troubling situation. They are

viewed by at least some elements of the Iraqi population as enemy occupiers, and

they face the threat of enemy small arms fire, and terrorist bombings, daily. Our

men and women will overcome these obstacles to peace and stability in Iraq—but

not without a price. The Nation—and VA—must be prepared to bind up the bodily

and emotional wounds that will ensue as our troops fully stabilize Iraq. After we

have done that, the Nation—and VA—must be prepared to offer the readjustment

benefits that these veterans will have earned. For we cannot have and we will not

have—another generation of veterans, like Vietnam veterans, who were asked to

fend for themselves after their return from the battlefield.

I am concerned that this proposed budget may not suffice to meet these requirements. Rather, it seems barely adequate—if it is adequate at all—to meet the existing challenges that face VA. It will be my mission here to find out whether this

budget proposal is, at minimum, adequate. And if—as I expect—it is not adequate,

it will be my mission to find out what it will take for VA to maintain current services; what it will take to care for and provide services to the new young veterans

who will return from Iraq this year; what it will take to work through, and eliminate, clinical appointment waiting times; and what it will take to reopen the VA

healthcare system to so-called ‘‘low-priority’’ veterans. That is the budget number

I want to identify and secure for VA.

I know that the Secretary shares these goals. He surely is not a man who will

fail to meet the needs of the brave new veterans who are earning their benefits in

Iraq today. And he is not a man who will fail to meet the needs of veterans who

have earned their benefits in prior wars. He has proved that to me repeatedly—

most recently, on the Saturday that just passed when he visited with veterans in

Oil City, PA and Warren, PA. I think few Cabinet Members would have made such

a trip on the weekend through blizzard conditions. But I dare say that Secretary

Anthony J. Principi is not like most Cabinet Members. He is, in this Chairman’s

opinion, the most extraordinary man ever to serve as Secretary of Veterans’ Affairs.

So I will not be critical of him. I will just seek to learn what VA will need to accomplish the goals that he and I—and the President—share.

Mr. Secretary, I look forward to your testimony. And I look forward to continuing

to work with you in service to the Nation’s veterans.

Chairman SPECTER. I want to begin by recognizing our distinguished Secretary of Veterans Affairs, Anthony Principi, with special appreciation for his coming to Pennsylvania last Saturday to

announce the opening of veterans’ clinics in Will City, Pennsylvania, and Warren, Pennsylvania. It was a rare occurrence for a

cabinet officer to visit a city of that size, those sizes. We are very

grateful to the Secretary. The people of Pennsylvania, more importantly, were very grateful and I think it is a solid sign as to the

dedication that the Secretary and the Department have to aiding

the veterans of America.

I have said on many occasions, but never too often, my deep commitment to the veterans arises from the first veteran I knew, who

was my father, Harry Specter, who was a veteran of World War I,

who was promised a bonus, did not get his bonus, and perhaps in

this year’s appropriations bill we can deliver in a metaphorical

sense on my father’s bonus.

Senator Campbell, would you care to make an opening statement?

Senator CAMPBELL. No. I think with your permission I will just

submit for the record, Mr. Chairman. I have to leave in about half

an hour, so I would rather hear Secretary Principi, and welcome,

Mr. Secretary.

Chairman SPECTER. Thank you very much, Senator Campbell.

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[The prepared statement of Senator Campbell follows:]

PREPARED STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR

FROM COLORADO

Thank you, Mr. Chairman. I would like to welcome you, Mr. Secretary, and thank

you for appearing before the committee today. I am looking forward to your testimony which will give us a better picture of how the Administration is going to address the serious issues facing the VA at this time. And, I also want to welcome

the members of the VSO’s who are going to comment on the budget today. I will

be listening carefully to your testimony as you represent the opinions of veterans

throughout the nation.

Though I notice that the fiscal year 2005 budget calls for a small increase in discretionary health care funding for veterans, I continue to be concerned that we find

a way to take care of what will be an increasing number of elderly veterans. I think

we can all agree that one of our greatest national responsibilities is the welfare of

our nation’s veterans. It is critical that we find a balanced way to make good on

the promises to them.

I am also encouraged that the budget includes monies for construction under the

CARES (Capital Asset Realignment for Enhanced Services) initiative. I understand

that incorporating change into a huge Federal entity is difficult. But, changing from

institutional care to primary and community-based care has left the VA with vacant

and under-utilized buildings. Deciding how to use these facilities is difficult and disposing of such assets is a complex process. But, operating hundreds of unneeded

buildings can cost billions of dollars each year. I look forward to the draft report

of the CARES Commission which I understand is expected sometime this week.

Mr. Secretary, I appreciate your strong commitment to our veterans who have

service-connected injuries and illnesses and have always admired you for stepping

up to the plate to make the hard calls. However, the proposals to add co-pays and

user fees for those not suffering from a military-related disability, will affect many

veterans in my State of Colorado whose incomes are close to the cutoff for health

care services.

Speaking as a veteran, I believe we need to do all we can to serve those who have

so honorably served us all. And, knowing that our soldiers are putting their lives

on the line for us at this moment makes it even more important that we make veterans’ health care our No. 1 priority.

I will be listening to the veterans who are meeting with me this month and I am

looking forward to the testimony of the many veterans’ organizations that will be

testifying at the joint hearings during the next few weeks.

Mr. Secretary, again, I thank you for being here. I look forward to hearing details

of the budget proposal and how you plan to address these issues within the proposed budget. I look forward to working with you and the VSO’s to make sure that

our veterans receive the care they have been promised.

I thank the chair.

Chairman SPECTER. Then, Mr. Secretary, the floor is yours.

STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, U.S.

DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY

ROBERT H. ROSWELL, M.D., UNDER SECRETARY FOR

HEALTH; JOHN W. NICHOLSON, UNDER SECRETARY FOR MEMORIAL AFFAIRS; WILLIAM H. CAMPBELL, ASSISTANT SECRETARY FOR MANAGEMENT; D. MARK CATLETT, PRINCIPAL

DEPUTY ASSISTANT SECRETARY FOR MANAGEMENT; AND

ROBERT EPLEY, ASSOCIATE DEPUTY UNDER SECRETARY OF

BENEFITS FOR POLICY AND PROGRAM MANAGEMENT

Secretary PRINCIPI. Thank you, Mr. Chairman, Senator Campbell, and members and staff of the committee. It is always a pleasure to be before you. It was a great, great pleasure and a privilege

to be in Pennsylvania this past weekend and to be around so many

heroes of World War II and Korea and Vietnam who were in the

audience.

Eight-hundred-thousand more veterans will receive VA medical

care this year and next year if this bill is approved than in 2001,

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the year I took office as Secretary of Veterans Affairs, and these

veterans are the beneficiaries of a series of increased budgets requested by the President and made tangible through active and

successful advocacy by the members of this committee and throughout this body, and I thank you for your support for the Department

and the men and women we have the privilege to serve.

As the first chart shows—please show that first chart—our

health care budget with the enactment of the 2005 request have increased more than 40 percent, and on behalf of America’s veterans,

I thank the members of the committee again for following through

on your commitment to our nation’s citizen soldiers.

I believe that this is the golden age of VA health care, our quality of care never before so good, veterans’ access to VA care never

before this broad, and never before have we treated so many veterans at so many locations, and please show the second chart.

Since 2000, 2 years of the previous administration, my predecessor, through 2005, we will have treated one more million veterans than we did in the year 2000. And since the year 2000, and

again, our projections through the year 2005 will show that three

million more veterans have enrolled in the VA health care system,

unprecedented growth in the number of veterans who have come

to us for care and who have enrolled in the VA health care system,

a significant number who have not used the system but have enrolled in the event that they may need to come to us.

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For 2005, our total health care budget authority would increase

4.2 percent over 2004, and to be clear, that figure, that percentage,

includes our capital construction as well as our collections. We

have counted collections as part of the VA budget since 1998, when

the Congress made the decision to allow those resources to remain

in the VA health care system rather than going into the United

States Treasury as miscellaneous receipts. I believe that we will be

able to sustain the forward momentum we have achieved over the

last 3 years.

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If the President’s request is endorsed by Congress, we will have

the resources we need to meet our goal of scheduling non-urgent

primary care for 93 percent of veterans within 30 days and 99 percent within 90 days. Our goal is to totally eliminate our waiting list

within 90 days.

If the 2005 budget is approved, we will be able to provide timely

quality treatment to all the veterans we believe will come to us

seeking health care this year and next, and we will continue to

focus on the medical care needs of the men and women who were

disabled in uniform, our service-connected disabled veterans. I believe our highest priority needs to be for them. For the lower-income veterans, the poorest of the poor who have few other options

for health care in this country, and those who need our specialized

services—spinal cord injury, blind rehabilitation, they too have

been identified by Congress as the highest priority.

Compared to the current fiscal year, this budget request more

than doubles our appropriation request for construction of CARES

identified new and improved facilities. Would you please show the

construction chart, which is that one there.

This has been a big concern to all of us, I know to members of

the committee and certainly to me, the aging of our infrastructure,

the modernization that needs to take place. Using the authority

granted by Congress this past year, we will also apply up to $400

million of the 2004, this year’s medical care appropriation, to

CARES projects. These actions will enable us to commit approximately $1 billion more in 2004 and 2005 toward transforming VA’s

medical facilities into a 21st century health care system.

Mr. Chairman, members of the committee, I know that you have

a concern and share with me a goal of ensuring that we provide

high quality medical care for our young men and women returning

home from our overseas conflicts Enduring Freedom and Iraqi

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Freedom, and I am absolutely confident that this budget will enable us to meet our commitment to this new generation of freedom’s defenders.

The numbers are relatively small so far. Of the 83,000 service

members, including Guard and Reserve, who have separated from

the military and served in Iraqi Freedom conflict, roughly 12 percent have come to us for care, about 9,700 of those veterans. Of the

15,000 who have been discharged and served in Enduring Freedom,

Afghanistan, roughly 1,400 have come to us for care since they

have been discharged, and I expect those numbers will increase,

but they are relatively low compared to Persian Gulf I and, of

course, Vietnam and some of our other conflicts. But we need to be

prepared to take care of this new generation of men and women

who have fought.

We still have challenges. Of that, there is little doubt. We are responding to those challenges with policy initiatives. First, we emphasize our commitment to the highest priority veterans by asking

Congress to raise the income threshold to $16,500 from $9,800 for

exempting low-income veterans from pharmacy copayments, lifting

the burden of copayments from the poorest of our veteran population who seek care in the VA. We also ask that you eliminate all

copayments imposed on former POWs. We also proposed to eliminate hospice care copayments, hospice care provided in the home,

hospice care provided under contract. We ask for the authority to

reimburse our patients for the copayments that they must pay

their insurance companies when they seek emergency care in private sector hospitals.

At the same time, we ask Congress to approve both a modest increase in pharmacy copayments and an annual fee totaling less

than $21 per month, a very small portion of the cost of care, for

higher-income non-service-disabled veterans using our system. I

want to be very clear to our veterans that this is not an enrollment

fee. It would be an annual use fee collected only from veterans receiving care and could be paid on a monthly or annual basis, depending upon the needs of the veteran.

For many, many years, Congress has mandated such a fee for enlisted personnel—tech sergeants, staff sergeants, petty officers—

who spent at least 20 years in the military and retire and enroll

in the Department of Defense health care system, Tricare. They are

required to pay $254 a year to be enrolled in the DOD health care

system after serving 20 years on active duty, and we are just asking those who have no service-connected disabilities, do not stay in

the military and retire, and have higher incomes, usually higher

than what a petty officer or staff sergeant retires on, to pay a modest use fee.

We can meet some of our other challenges on our own. For example, I approved the recommendation of the Under Secretary of

Health, Dr. Roswell, to address regional funding imbalances by including all veterans, Category 7 and Category 8 veterans, using our

system and our resource allocation model.

In addition to improving access to health care, the President directed me to bring our benefits processing under control, and by

last year, thanks to the hard work of the people in VA, we were

able to reduce our inventory of rating-related claims, the time it

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takes a veteran to receive a decision for a disability claim or pension, down to 253,000 from a high of 432,000, and the percentage

of veterans waiting more than 6 months for a decision was down

to 18 percent from 48 percent. I don’t think this would have happened without the increase requested by the President and the decisions of this body in giving us additional people to handle the

claims workload. Our backlog has gone up recently due to a September 2003 court decision, but Congress has corrected that issue

and we are now back on track to achieve our goals.

I think it is very telling that the number of veterans receiving

service-connected disability compensation is projected to increase to

2.6 million from 2.3 million in 2001, and we see a sizable increase

in the funding, the mandatory funding for disability compensation.

In 2005, the President is asking for almost $2.8 billion in additional funding for disability compensation.

VA is not only health care and benefits, we also honor our veterans in their final rest. Advanced by the President’s budget request, we will continue the greatest expansion of the national cemetery system since the Civil War. One new cemetery has just been

opened. We will open five more new cemeteries over the next year,

and we have proposed to add six new cemeteries to the system by

the year 2009. This will increase our gravesites by 85 percent over

the current number within our 120 existing national cemeteries, so

this is indeed a major, major expansion of our national cemetery

system, and, of course, it is required because of the large number

of veterans, World War II and Korea, passing from us, some 1,800

a day. So we are very, very pleased with this expansion.

I am confident that the President’s request and the actions of the

Congress will allow us to continue to build on our record of commitment and success. I thank the committee for all you have done to

help us achieve our goals and I look forward to your questions.

Thank you.

Chairman SPECTER. Thank you very much, Mr. Secretary.

[The prepared statement of Secretary Principi follows:]

PREPARED STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, U.S. DEPARTMENT

OF VETERANS AFFAIRS

Mr. Chairman and members of the Committee, good morning. I am pleased to be

here today to present the President’s 2005 budget proposal for the Department of

Veterans Affairs (VA). The focal point of this budget is our firm commitment to continue to bring balance back to our health care system by focusing on veterans in

the highest statutory priority groups. The President’s 2005 budget request totals $67.7 billion (an increase of $5.6 bil- lion in budget authority): $35.6 billion for entitlement programs and $32.1 billion

for discretionary programs. Our request for discretionary funds represents an increase of $1.2 billion, or 3.8 percent, over the enacted level for 2004, and supports

my three highest priorities: • provide timely, high-quality health care to our core constituency—veterans with

service-connected disabilities, those with lower incomes, and veterans with special

health care needs; • improve the timeliness and accuracy of claims processing; and • ensure the burial needs of veterans and their eligible family members are met,

and maintain veterans’ cemeteries as national shrines.

The growth in discretionary resources will support a broad array of benefits and

services that VA provides to our Nation’s veterans. Including medical care collections, funding for the medical care program rises by $1.17 billion over the 2004 enacted level. As a principal component of our medical care budget, we are requesting

$524 million to begin implementing recommendations stemming from studies associated with the Capital Asset Realignment for Enhanced Services (CARES) program.

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We are presenting our budget request using a slightly modified new budget account structure that we proposed for the first time last year. This new structure

more clearly presents the full funding for each of the benefits and services we provide veterans. This will allow the Department and our stakeholders to more effectively evaluate the program results we achieve with the total resources associated

with each program. I am committed to providing Congress with the information and

tools it needs to be comfortable with enacting the change.

MEDICAL CARE

The President’s 2005 request includes total budgetary resources of $29.5 billion

(including $2.4 billion in collections) for the medical care program, an increase of

4.1 percent over the enacted level for 2004, and more than 40 percent above the

2001 level. With these resources, VA will be able to provide timely, high-quality

health care to nearly 5.2 million unique patients, a total 21 percent higher than the

number of patients we treated in 2001.

I have taken several steps during the last year to refocus VA’s health care system

on our highest priority veterans, particularly service-connected disabled veterans

who are the very reason this Department exists. For example, we recently issued

a directive that ensures veterans seeking care for service connected medical problems will receive priority access to our health care system. This new directive provides that all veterans requiring care for a service connected disability, regardless

of the extent of the injury or illness, must be scheduled for a primary care evaluation within 30 days of their request for care. If a VA facility is unable to schedule

an appointment within 30 days, it must arrange for care at another VA facility, at

a contract facility, or through a sharing agreement.

By highlighting our emphasis on our core constituency (Priority Levels 1–6), we

will increase our focus on the Congressionally identified highest priority veterans.

The number of patients within our core service population that we project will come

to VA for health care in 2005 will be nearly 3.7 million, or 12 percent higher than

in 2003. During 2005, 71 percent of those using VA’s health care system will be veterans with service-connected conditions, those with lower incomes, and veterans

with special health care needs. The comparable share in 2003 was 66 percent. In

addition, we devote 88 percent of our health care funding to meet the needs of these

veterans.

While part of our strategy for ensuring timely, high-quality care for our highest

priority veterans involves a request for additional resources, an equally important

component of this approach includes a series of proposed regulatory and legislative

changes that would require lower priority veterans to assume a small share of the

cost of their health care. These legislative proposals are consistent with recent Medicare reform that addresses the difference in the ability to pay for health care. We

are submitting these proposals for Congress’ reconsideration because we strongly believe they represent the best opportunity for VA to secure the necessary budgetary

resources to serve our core population. Among the most significant legislative

changes presented in this budget are to:

• assess an annual use fee of $250 for Priority 7 and 8 veterans; and

• increase co-payments for pharmacy benefits for Priority 7 and 8 veterans from

$7 to $15.

We will work with Congress to enact our legislative proposal to eliminate the

pharmacy co-payment for Priority 2–5 veterans, who have fewer means by which to

pay for these costs, by raising the income threshold from the pension level of $9,894

to the aid and attendance level of $16,509 (for a single veteran). This would allow

about 394,000 veterans within our core constituency to receive outpatient medications without having to make a co-payment.

The 2005 budget includes several other legislative and regulatory proposals that

are designed to expand health care benefits for the Nation’s veterans. Among the

most significant of these is a provision that would give the Department the authority to pay for insured veteran patients’ out-of-pocket expenses for urgent care services if emergency/urgent care is obtained outside of the VA health care system. This

proposal would ensure that veterans with life-threatening illnesses can seek and receive care at the closest possible medical facility. In addition, we are proposing to

eliminate the co-payment requirement for all hospice care provided in a VA setting

and all co-payments assessed to former prisoners of war. Currently, veterans are

charged a co-payment if hospice care cannot be provided in a VA nursing home bed

either because of clinical complexity or lack of availability of nursing home beds.

The President’s 2005 budget for VA’s medical care program also continues our effort to expand access to long-term care for veterans. This budget includes a legislative proposal to focus long-term care on non-institutional settings by expanding the

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1998 average daily census nursing home capacity requirement to include the following categories of extended care services—nursing homes, community residential

care programs, residential rehabilitation treatment programs, home care programs,

non-institutional extended care services under VA’s jurisdiction, and long-term care

beds for which the Department pays a per diem to states for services in State

homes. As part of this effort, we aim to significantly enhance access to non-institutional care programs that allow veterans to live and be cared for in the comfort and

familiar setting of their home surrounded by their family.

We are continuing our work with the Department of Health and Human Services

to implement the plan by which Priority 8 veterans aged 65 and older, who cannot

enroll in VA’s health care system, can gain access to the new ‘‘VA Advantage’’ program. This would allow these veterans to use their Medicare benefits to obtain care

from VA. In return, we would receive payments from a private health plan contracting with Medicare to cover the cost of the health care we provide.

In return for the resources we are requesting for the medical care program in

2005, we will continue to aggressively pursue my priority of providing timely and

accessible health care that sets a national standard of excellence for the health care

industry. During the last 3 years, we have significantly enhanced veterans’ access

to health care. We have opened 194 new community clinics, bringing the total to

676. Nearly 9 out of every 10 veterans now live within 30 minutes of a VA medical

facility. This expanded level of access has resulted in an increase in the number of

outpatient visits from 44 million in 2001 to 51 million in 2003, as well as a 26 percent rate of growth in the annual number of prescriptions filled to a total of 108

million last year. To further highlight the Department’s emphasis on the delivery

of timely, accessible health care, our standard of care for primary care is that 93

percent of appointments will be scheduled within 30 days of the desired date and

99 percent of all appointments will be scheduled within 90 days. For appointments

with specialists, the comparable performance goal is 90 percent within 30 days of

the desired date.

As I mentioned earlier Mr. Chairman, a key component of our overall access goals

is the assurance that veterans seeking care for service-connected medical problems

will receive priority access to health care. In addition, we have dramatically reduced

the number of veterans on the waiting list for primary care. We will eliminate the

6-month waiting list no later than April 2004.

VA’s health care system continues to be characterized by a coordinated continuum

of care and achievement of performance outcomes that improve services to veterans.

In fact, VA has exceeded the performance of private sector and Medicare providers

for all 18 key health care indicators, from diabetes care to cancer screening and immunizations. The Institute of Medicine has recognized the Department’s integrated

health care system, including our framework for using performance measures to improve quality, as one of the best in the nation. Additionally, VA’s quality score based

on a survey conducted by the Joint Commission on Accreditation of Healthcare Organizations exceeds the national average quality score (93 versus 91).

We will continue to use clinical practice guidelines to help ensure high-quality

health care, as they are directly linked with improved health outcomes. We expect

to show improvements in both of our principal measures of health care quality. The

clinical practice guidelines index will rise to 71 percent in 2005, while the prevention index will increase to 84 percent.

The 2005 budget includes additional management savings of $340 million that

will partially offset the need for additional funds to handle the increasing utilization

of health care resources, particularly among our highest priority veterans who require much more extensive care, on average, than lower priority veterans. We will

achieve these management savings through improved standardization policies in the

procurement of supplies, pharmaceuticals, and other capital purchases, as well as

in other operational efficiencies such as consolidations.

Our projection of medical care collections for 2005 is $2.4 billion. This total is 38

percent above our estimated collections for 2004 and is more than three times the

collections level from 2001. Approximately $407 million, or 61 percent, of the increase above 2004 is possible as a result of the proposed medical care policy initiatives. The Department continues to implement the series of aggressive steps identified in our revenue cycle improvement plan in order to maximize the health care

resources available for the medical care program. We are establishing industrybased performance and operational metrics, developing technological enhancements,

and integrating industry-proven business approaches, including the establishment of

centralized revenue operation centers. For example, during the last year we have

lowered the share of reimbursable claims receivable greater than 90 days old from

84 percent to 39 percent, and we have decreased the average time to produce a bill

from 117 days to 49 days. Further, the Department is implementing the Patient FiVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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nancial Services System in Veterans Integrated Service Network 10 (Ohio). This will

be a single billing system that we will use for both hospital costs as well as physician costs, and involves comprehensive implementation of standard business practices and information technology improvements.

As you know Mr. Chairman, one of the President’s management initiatives calls

for VA and the Department of Defense (DoD) to enhance the coordination of the delivery of benefits and service to veterans. To address this Presidential initiative, our

two Departments established a high-level Joint Executive Council to develop and

implement significant collaborative efforts. We are focusing on three major systemwide issues: (1) facilitating electronic sharing of enrollment and eligibility information for services and benefits; (2) establishing an electronic patient health record

system that will allow rapid exchange of patient information between the two organizations by the end of 2005; and (3) increasing the number of shared medical care

facilities and staff. The sharing of DoD enrollment and eligibility data will reduce

the burden on veterans to provide duplicative information when making the transition to VA for care or benefits. Shared medical information is extremely important

to ensure that veterans receive safe and proper care. VA and DoD are working together to share facilities and staff in order to provide needed services to all patients

in the most efficient and effective manner.

CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

The 2005 budget includes $524 million of capital funding to move forward with

the Capital Asset Realignment for Enhanced Services (CARES) initiative, a figure

more than double the amount requested for CARES for 2004. This is a multiyear

program to update VA’s infrastructure to meet the needs of veterans in the 21st century and to keep our Department on the cutting edge of medicine. CARES will assess veterans’ health care needs across the country, identify delivery options to meet

those needs in the future, and guide the realignment and allocation of capital assets

so that we can optimize health care delivery in terms of both quality and access.

The resources we are requesting for this program will be used to implement the various recommendations within the National CARES plan by funding advance planning, design development, and construction costs for capital initiatives.

Mr. Chairman, the independent commission that is reviewing our draft CARES

plan will be delivering their report to me soon. The commission had originally intended to complete their work by the end of November, but due to the intense interest in this project and the overwhelming volume of information they are faced with

examining, their report has been delayed a few months. I look forward to reviewing

the commission’s analysis and recommendations. We will thoroughly evaluate their

report and seriously consider their recommendations before making our final realignment decisions and preparing for the next phase of the CARES program.

MEDICAL AND PROSTHETIC RESEARCH

The President’s 2005 budget includes total resources of $1.7 billion to support

VA’s medical and prosthetic research program. This request is comprised of $770

million in appropriated funds, $670 million in funding from other Federal agencies

such as DoD and the National Institutes of Health, as well as $230 million from

universities and other private institutions. Our budget includes an initiative to assess pharmaceutical companies for the indirect administrative costs associated with

the clinical drug trials we conduct for these organizations.

This $1.7 billion will support nearly 2,900 high-priority research projects to expand knowledge in areas critical to veterans’ health care needs—Gulf War illnesses,

aging, diabetes, heart disease, mental illness, Parkinson’s disease, spinal cord injury, prostate cancer, depression, environmental hazards, women’s health care concerns, and rehabilitation programs.

VETERANS’ BENEFITS

The Department’s 2005 budget request includes $36 billion for the entitlement

costs associated with all benefits administered by the Veterans Benefits Administration (VBA). Included in this total, is an additional $2.740 billion for disability compensation payments to veterans and their survivors for disabilities or diseases incurred or aggravated while on active duty. Recipients of these compensation benefits

will have increased from 2.3 million in 2001 to over 2.6 million in 2005. The budget

includes another $1.19 billion for the management of these programs: disability

compensation; pensions; education; vocational rehabilitation and employment; housing; and life insurance. This is an increase of $26 million, or 2.2 percent, over the

enacted level for 2004.

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We have made excellent progress in addressing the Presidential priority of improving the timeliness and accuracy of claims processing. Not only have we hired

and trained more than 1,800 new employees in the last 3 years to directly address

our claims processing backlog, but the productivity of our staff has increased dramatically as well. Between 2001 and 2003, the average number of claims we completed per month grew by 70 percent, from 40,000 to 68,000. Last year the inventory

of rating-related compensation and pension claims peaked at 432,000. By the end

of 2003, we had reduced this backlog of pending claims to just over 250,000, a drop

of over 40 percent. We have experienced an increase in the backlog during the last

few months, due in large part to the impact of the court decision (PVA v Secretary

of Veterans Affairs) that interpreted the Veterans Claims Assistance Act of 2000 as

requiring VA to wait a full year before denying a claim. However, this rise in the

number of pending claims will be temporary, and we expect the backlog to be back

down to about the 250,000 level by the end of 2004. We thank the Committee for

the legislation that eliminated the mandatory 1-year waiting period.

In 2002 it took an average of 223 days to process a claim. Today, it takes about

150 days. We are on track to reach an average processing time of 100 days by the

end of 2004 and expect to maintain this timeliness standard in 2005. One of the

main reasons we will be able to meet and then sustain this improved timeliness

level is that we have reduced the proportion of claims pending over 6 months from

48 percent to just 19 percent during the last 3 years.

To assist in achieving this ambitious goal, VA established benefits delivery at discharge programs at 136 military installations around the country. This initiative

makes it more convenient for separating servicemembers to apply for and receive

the benefits they have earned, and helps ensure claims are processed more rapidly.

Also, the Department has assigned VA rating specialists and physicians to military

bases where servicemembers can have their claims processed before they leave active duty military service.

We expect to see an increase in claims resulting from the return of our brave servicemen and women who fought to protect the principles of freedom in Operation Enduring Freedom and Operation Iraqi Freedom. We propose to use $72 million of the

funds available from the war supplemental during 2004 to address the challenges

resulting from an increasing claims processing workload in order to assist us in

reaching our timeliness goal of 100 days by the end of 2004. We propose to use the

remaining $28 million in 2005 to help sustain this timeliness standard.

At the same time that we are improving timeliness, we will be increasing the accuracy of our claims processing. The 2005 performance goal for the national accuracy rate for compensation claims is 88 percent, well above the 2001 accuracy level

of 80 percent.

This budget request includes additional staff and resources for new and ongoing

information technology projects to support improved claims processing. We are requesting $2 million for the Virtual VA project, the ultimate goal of which is to replace the current paper-based claims folder with electronic images and data that can

be accessed and transferred electronically through a web-based solution. The 2005

funding will maintain Virtual VA at the three Pension Maintenance Centers. We

are seeking $3.4 million for the Compensation and Pension Evaluation Redesign, a

project that will result in a more consistent claims examination process. In addition,

we are requesting $2.6 million in 2005 for the Training and Performance Support

Systems, a multi-year initiative to implement five comprehensive training and performance support systems for positions critical to the processing of claims.

The Veterans Service Network (VETSNET) development is nearing completion

and is scheduled to begin deployment in April 2004. This system offers numerous

improvements over the legacy Benefits Delivery Network (BON) that it is replacing

(e.g., correction of material weaknesses and implementation of comprehensive

claims processing within a modern corporate environment). Sufficient platform capacity is required to successfully deploy VETSNET and to ensure the continued and

uninterrupted payment of approximately $24 billion annually in benefits to around

3.4 million deserving veterans and their beneficiaries. Therefore, $5 million in funding is requested to procure the capacity required. This platform capacity will ensure

successful deployment and operation of VETSNET throughout VBA’s Regional Offices and in a modern corporate environment that integrates all components of

claims processing (e.g., establishing the claim, rating the claim, preparing the claim

award, and paying the claim award). Without sufficient platform capacity, the Veterans Benefits Administration will be unable to operate this critical new system.

In support of the education program, the budget proposes $5.2 million for continuing the development of the Education Expert System. These resources will be

used to expand upon an existing prototype expert system and will enable us to automate a greater portion of the education claims process and expand enrollment cerVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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tification. This initiative will contribute toward achievement of our 2005 performance goals for the average time it takes to process claims for original and supplemental education benefits of 25 days and 13 days, respectively.

VA is requesting $9.6 million for the One-VA Telephone Access project, an initiative that will support all of VBA’s benefits programs. This initiative will result in

the development of a Virtual Information Center that forms a single telecommunications network among several regional offices. This technology will allow us to answer calls at any place and at any time without complex call routing devices.

In order to make the delivery of VA benefits and services more convenient for veterans and more efficient for the Department, we are requesting $1.5 million for the

collocation and relocation of some regional offices. Some of this will involve housing

regional office operations in existing VA medical facilities. In addition, we are examining the possibility of collocations using enhanced-use authority, which entails an

agreement with a private developer to construct a facility on Department-owned

grounds and then leasing all or part of it back to VA. At the end of these long-term

lease agreements, the land and all improvements revert to VA ownership.

In recognition of the fact that the home loan program is primarily a benefit that

assists veterans in making the transition from active duty life to veteran status, the

2005 budget includes a legislative proposal to phase in an initiative to limit eligibility for this program to one-time use. Under our proposal, one-time use of the loan

program would apply to any person who becomes a veteran after the date this proposed legislation becomes law. Those who are already veterans, or who will achieve

veteran status prior to enactment of the proposed law, would retain their eligibility

to use the home loan benefit as many times as they need to for a period of 5 years

after the law takes effect. Once that 5-year period has passed, they would no longer

be able to use this benefit more than once. This legislative proposal does not change

eligibility for active duty personnel who would retain the ability to use this benefit

as many times as they need it. VA home loans are important for first-time buyers

because they require no down payment-making them riskier than other loans. After

the first use, home equity can be used to obtain more favorable terms from conventional loans, or through the Federal Housing Administration. Therefore, limiting

this benefit to its original intent of one-time use after leaving the military will lower

loan volume and risk, save money over the long-term, and coordinate Federal programs.

BURIAL

The President’s 2005 budget includes $455 million for the burial program, of

which $181 million is for mandatory funding for VA burial benefits and payments

and $274 million is for discretionary funding, including operating and capital costs

for the National Cemetery Administration and the State Cemetery Grant program.

The increase in discretionary funding is $9 million, or 3.4 percent, over the enacted

level for 2004, and includes operating funds for the five new cemeteries opening in

2005.

This budget request includes $926 thousand to complete the activation of new national cemeteries in the areas of Detroit, MI and Sacramento, CA. These are the

last two of the six locations identified in the May 2000 report to Congress as the

areas most in need of a national cemetery. The other four cemeteries will serve veterans in the areas of Atlanta, GA, South Florida, Pittsburgh, PA, and Fort Sill, OK.

With the opening of new national cemeteries and State veterans cemeteries, the

percentage of veterans served by a burial option within 75 miles of their residence

will rise to 83 percent in 2005. The comparable share was less than 73 percent in

2001.

The $81 million in construction funding for the burial program in 2005 includes

resources for Phase 1 development of the Sacramento National Cemetery (CA) as

well as expansion and improvements at the Florida National Cemetery (Bushnell,

FL) and Rock Island National Cemetery (IL). The request includes advanced planning funds for site selection and preliminary activities for six new national cemeteries to serve veterans in the following areas: Bakersfield, CA; Birmingham, AL;

Columbia/Greenville, SC; Jacksonville, FL; Sarasota County, FL; and southeastern

Pennsylvania. Completion of these new cemeteries will represent an 85 percent expansion of the number of gravesites available in the national cemetery system since

2001, almost doubling the number of gravesites during this time period. In addition,

the budget includes $32 million for the State Cemetery Grant program.

In return for the resources we are requesting for the burial program, we expect

to achieve extremely high levels of performance in 2005 and to continue our noble

work to maintain the appearance of national cemeteries as shrines dedicated to honoring the service and sacrifice of veterans. Our performance goal for the percent of

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survey respondents who rate the quality of service provided by the national cemeteries as excellent is 96 percent, and our goal for the percent of survey respondents

who rate national cemetery appearance as excellent is 98 percent. In addition, we

will continue to place emphasis on the timeliness of marking graves. Our performance goal for the percent of graves in national cemeteries marked within 60 days

of interment is 82 percent in 2005, a figure dramatically above the 2002 performance level of 49 percent.

MANAGEMENT IMPROVEMENTS

Mr. Chairman, we have made excellent progress during the last year in implementing the President’s Management Agenda. Our progress in the financial, electronic government, budget and performance, and DoD/VA coordination areas is currently rated ‘‘green.’’ Our human capital score is ‘‘yellow’’ due only to some very

short-term delays. However, VA’s competitive sourcing rating is ‘‘red’’ because existing legislation precludes us from using necessary resources to conduct cost comparisons of competing jobs such as laundry, food and sanitation service. The Administration will work with Congress to develop legislation to advance this effort that would

free up additional resources to be used to provide direct medical services to veterans. We will continue to take the steps necessary to achieve the ultimate goals

the President established for each of the focus areas.

We have several management improvement initiatives underway that will lead to

greater efficiency and will be accomplished largely through centralization of several

of our major business processes. We are currently realigning our finance, acquisition, and capital asset management functions into business offices across the Department. There will be one business office in each of the 21 Veterans Integrated

Service Networks and a single office for the National Cemetery Administration. For

the Veterans Benefits Administration, the majority of the field functions will be centralized into product lines. In addition, we are establishing an Office of Business

Oversight in our Office of Management that will provide much stronger oversight

of these functions by our Chief Financial Officer, will improve operations through

more specialization, and will achieve efficiencies in staffing. The realignment of

these business functions will reduce and standardize field business activities into a

more manageable size, limit the number of sites to be reviewed, provide for more

consistent interpretation of policies and procedures, and promote implementation of

performance metrics and data collection related to these business functions. As a result of the realignment, we will significantly strengthen compliance and consistency

with finance, acquisition, and capital asset policies and procedures.

We continue to make excellent progress in implementing the recommendations of

our Procurement Reform Task Force, as 43 of the 65 recommendations have been

completed. By the end of 2004, we expect to implement all of the remaining recommendations. These procurement reforms will optimize the performance of VA’s

acquisition system and processes by improving efficiency and accountability. We expect to realize savings of about $250 million by the end of 2004 as a result of these

improvement initiatives. This figure will rise after we have completed all 65 recommendations.

During 2005 VA will continue developing our enterprise architecture that will ensure that all new information technology (IT) projects are aligned with the President’s E-government initiatives as well as the Department’s strategic objectives. The

enterprise architecture will help eliminate redundant systems throughout VA, improve IT accountability and cost containment, leverage secure and technologically

sound solutions that have been implemented, and ensure that our IT assets are

built upon widely accepted industry standards and best practices in order to improve delivery of benefits and services to veterans. One of our primary focus areas

in IT will be cyber security. We will concentrate on securing the enterprise architecture and providing continuous protection to all VA systems and networks. This will

require purchases of both hardware and software to address existing vulnerabilities.

We are continuing the development and implementation of our CoreFLS project

to replace VA’s existing core financial management and logistics systems with an

integrated, commercial off-the-shelf package. CoreFLS will help us address and correct management and financial weaknesses in the areas of effective integration of

financial transactions from Department systems, necessary financial support for

credit reform initiatives, and improved automated analytical and reconciliation

tools. We have conducted initial tests at selected sites and are still on schedule for

full implementation during 2006.

The Department has developed a comprehensive human capital management plan

and has started implementing some of the strategies outlined in this plan. In addition, we are implementing a redesigned performance appraisal system to better enVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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sure that all employees’ performance plans are linked with VA’s mission, goals, and

objectives.

CLOSING

Mr. Chairman, VA has achieved numerous successes during the last 3 years that

have significantly improved service to our country’s veterans. We have enhanced

veterans’ access to our health care services that set the national standard with regard to quality; improved the timeliness of health care delivery; expanded programs

for veterans with special health care needs; dramatically lowered the time it takes

to process veterans’ claims for benefits; and expanded access to our national cemetery system. The President’s 2005 budget will provide VA with the resources necessary to continue to improve our delivery of benefits and services, particularly for

veterans with service-connected conditions, those with lower incomes, and veterans

with special health care needs.

That concludes my formal remarks. My staff and I would be pleased to answer

any questions.

Chairman SPECTER. I turn now to our distinguished ranking

member, Senator Graham, for an opening statement.

Senator GRAHAM. Thank you very much, Mr. Chairman. I have

a statement that I would like to file for the record.

Chairman SPECTER. Without objection, it will be made a part of

the record in full.

STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR

FROM FLORIDA

Senator GRAHAM. I would like to summarize some of the issues

that I raise in that opening statement. I am concerned about the

resource commitment that this budget makes, which has been calculated as a 1.8 percent increase for medical care and calls for the

reduction in other areas, such as 540 staff responsible for processing veterans’ claims. I am also concerned about the question of

the additional pressures that are being placed upon the VA medical

system.

For an example, there will be a significant number of those

American men and women who have been wounded in Afghanistan

or Iraq who will return to the United States, separate from the

military, and then be statutorily entitled to 2 years of medical care

provided by VA. I am concerned as to whether we are prepared to

meet that challenge.

I am also concerned about the reliance on annual user fees on

higher-income veterans,—those with income of as little as $24,000

a year. Also, the doubling of copayments for prescription drugs is

a matter of concern at a time when we are trying to expand coverage of prescription drugs in the Medicare program. I will ask

some questions about the consistency here.

In my State, we have had difficulty with delays in veterans being

able to get access to health care providers. There is a standard

being suggested that enrolled veterans would be seen within 30

days for primary care. Does this budget provide the resources necessary to achieve that goal?

At the Gainesville VA Hospital, there are several hundred veterans who have been waiting well beyond 30 days for their initial

visit and there are 600 veterans who have waited more than a year

for services like audiology at the Fort Myers clinic. How will this

budget impact on those delays?

Mr. Principi, not to just focus on some of the areas of concern,

I want to commend you and the VA for the professionals that you

16

have been able to bring in and retain within the VA system. I recently spent time at the VA hospital in Miami and at the outpatient clinic in Ocala, and I was very impressed with the quality

of providers and the level of not just satisfaction, but enthusiasm,

of those veterans who had received care from those professionals.

Mr. Chairman, I have other points that are made in the statement that will be in the record, but at this point, I would defer to

other members of the committee and then to questions.

Chairman SPECTER. Thank you very much, Senator Graham.

[The prepared statement of Senator Graham follows:]

PREPARED STATEMENT OF BOB GRAHAM, U.S. SENATOR FROM FLORIDA

I join Senator Specter in welcoming our witnesses to today’s hearing and I look

forward to working with the Chairman, Members of this Committee, Secretary

Principi, and the veterans service organizations to meet the needs of the men and

women who have served our nation.

Today, we begin the long process of ensuring that the fiscal year 2005 budget allows VA to provide veterans with the care and benefits they have earned. To say

that the proposed budget is tough is an understatement. The request includes only

a 1.8 percent increase for medical care, and it calls for cutting 540 staff that process

veterans benefits.

This budget, unfortunately, reflects the priorities of this Administration and, if

enacted, will have devastating effects on the men and women who have served this

country with honor. The Administration has said the proposed VA budget will ‘‘provide the best possible health care and benefits to our veterans.’’

I would disagree, and I believe we will hear similar sentiments from our witnesses

on the second panel. As we shape VA’s budget for the next year, we must move beyond hopeful rhetoric and political gamesmanship and take an honest assessment

of the needs of veterans. We must then match this assessment with real dollars.

When you take away the new and higher fees that are to be paid directly by veterans and the theoretical management efficiencies, the Administration has asked for

an appropriation that fails to cover half of the expected inflationary increases. I take

issue with a budget that relies on an annual user fee levied upon so-called ‘‘higher

income’’ veterans—especially when ‘‘higher income’’ can mean as little as $24,000

a year.

It is insulting to laud this budget, but continue to bar veterans from VA health

care. It is unfair to double the prescription drug co-payments for other veterans.

And it is nothing short of hypocrisy to deliberately reduce demand for health care

services and then to count that as savings.

I am relieved to hear that waiting times for care will disappear in early fiscal year

2004, but am mystified as to how this will occur. Does this mean that all enrolled

veterans will be seen within 30 days for primary care? Or does this mean that veterans will not have to wait to be assigned an appointment, but will quickly get an

appointment that is scheduled up to a year later? Will the hundreds of veterans who

must wait more than a year to see a doctor at the Gainesville VA Hospital or the

600 veterans waiting more than a year for audiology care at the Ft. Myers clinic

be seen promptly? VA’s committed professionals are already struggling to handle the

increased patient load, and for the next fiscal year they will be doing it without a

corresponding increase in resources.

It is not only the VA health care system that stands to suffer under this budget.

The Administration proposes a cut, for the second year in a row, in the number of

staff who process VA benefits, including those who decide veterans’ disability claims.

I commend the progress that VA professionals have made in reducing the staggering

backlog of claims over the past year, but I fear that these cuts will erode the gains

VBA has made. In addition, this budget request does not account for recent changes

to the system. Specifically, last year’s concurrent receipt legislation will allow military retirees that are more than 50 percent disabled to receive both their disability

pay and pension payments.

However, this new benefit may bring a rush of claimants into the system who believe they are eligible, creating an additional backlog. The Administration’s budget

does not account for additional claims that service members returning from Iraq and

Afghanistan will file during the next 2 years.

In addition, the Administration has failed to consider the health care needs of

these returning service members, re-directing $100 million intended for their care.

Even without these demands, veterans are currently forced to wait 189 days for VA

17

to make a determination of eligibility for benefits. With the proposed funding level,

I have trouble believing VA will be able to meet, much less sustain, the ambitious

target of 100 days for processing new claims.

As we begin discussing next year’s budget proposal, there will be talk of fiscal discipline. It is true that the deficit is a serious problem we must tackle, but we must

make choices. Should we choose to make a permanent tax cut our nation’s priority?

Or should we fulfill our commitment to those who have served our Nation honorably? We cannot send the signal to our men and women in uniform that we will

not care for them upon their return. I fear the Administration’s budget proposal

may send that signal.

Chairman SPECTER. We will now proceed with our customary approach of 5-minute rounds of questions on the early bird principle

of order of arrival.

Mr. Secretary, I commend you for the candid testimony which

you gave to the House last week as reported in CQ that you asked

for a $1.4 billion addition, which was denied by the Office of Management and Budget. I think that kind of candor is really necessary. I know the custom in many quarters is to not be candid,

but we understand the budget constraints. We know about the deficit. We understand the problems with the economy and the very

heavy costs of the wars, the ones against terrorism, Al Qaeda, and

the other in Iraq. That kind of candor is very impressive.

We have noted your request for copayments and we will consider

them carefully, but in a spirit of candor from this side of the table,

they are very, very difficult. When you start making evaluations of

ability to pay, that is very hard. And in an era where we are calling on our servicemen and women to do so much and recruiting depends in significant manner on what is happening to veterans who

have been discharged as well, we take that into account before we

make our own budgetary considerations.

There has been a good deal of talk about Medicare subvention,

where the veterans’ budget would be supplemented by the care you

give which could have been, perhaps should have been, borne by

Medicare. You have a new program called VA Advantage. Would

you describe that new approach and what you anticipate from that

by way of increased revenues?

Secretary PRINCIPI. Yes, Mr. Chairman. Secretary Thompson and

I over the past year have worked to develop a program, a concept,

wherein veterans who are in Category 8, because of this dramatic

increase in workload and the Congress directs that I make an annual enrollment decision, have not been able to enroll in the VA

health care system would be able to come to the VA for care under

this VA Advantage program and we would be reimbursed from

Medicare.

Over the past 6 to 8 months, we have been working very closely

with the folks at HHS and CMS to work through the many, many

legalistic and regulatory issues on getting reimbursed from Medicare, but I am hopeful by the end of this year those veterans can

come to the VA for health care and VA would get reimbursed by

the Medicare Trust Fund. I am not sure we have a projection on

how much we would receive, but the cost of their care would be

covered in full by Medicare. So it is the first time that we have

been able to develop a program with Medicare and I am hopeful

that we can work through the many regulatory issues that Medicare has so that we can implement this program as soon as possible.

18

Chairman SPECTER. That would certainly be a big boost to the

VA budget if that can be accomplished.

We have also looked to supplementing the VA income by proceeds of those who are insured. Would you give us a brief summary

as to what you anticipate in that respect?

Secretary PRINCIPI. Well, again, starting in 1998, the Congress

authorized the VA to keep the revenues from third-party payments,

payments from insurance companies. Rather than those dollars

going into the Treasury as miscellaneous receipts and then coming

back to the VA indirectly in increased appropriation, Congress said,

you keep them there and you count them as new resources in addition to your appropriation. President Clinton started that, rightfully so, and it has been that way—it has been programmed that

way since.

We are making great progress in doing better collecting from insurance companies. We still have some difficulty with HMOs, and,

of course, Medicare is off the table, the largest insurance company

in the nation, so to speak. But this year, we project to collect—or

for 2005, a little over one billion dollars in revenues. That is used

to enhance our medical care appropriation and expand the reach of

health care, buy more pharmaceuticals, more outpatient visits,

more inpatient visits.

So it is a great program. We just need to do better in our accounts in collecting those dollars from insurance companies. We are

improving, but we still have a ways to go.

Chairman SPECTER. Your answer ended just with the expiration

of my time so I will not ask you another question and I will yield

now to Senator Graham.

Senator GRAHAM. Thank you.

Chairman SPECTER. He is the one exception to the early bird

rule, the Ranking Member.

Senator GRAHAM. Thank you, Mr. Chairman.

I would like to ask in this round about the responsibility of the

VA to provide medical care for combatants who have separated

from the service. During the 2003 consideration of the VA’s budget,

I proposed an amendment to add $375 million to meet the health

care needs of returning service members. This amount was based

on a formula taking the percentage of veterans who sought VA

health care and benefits following the first Gulf War, multiplying

that by the VA’s average per patient cost today, and the result of

that is $375 million.

In conference with the House, that amount was reduced to $100

million. It is now my understanding that the Administration believes that the right number is not $375 million or $100 million,

but is zero, and intends to redirect the full amount from health

care to the Veterans Benefit Administration.

Mr. Secretary, is that policy correct, and if so, what is the basis

of the Administration’s determination that there will be no budgetary cost in terms of providing benefits as statutorily required to

returning servicemen and women?

Secretary PRINCIPI. Senator Graham, I applaud you and I ap- plaud the Congress for adding that $100 million. But the law in the

appropriation, or the language of the appropriation bills says for an

additional amount for costs associated with processing claims of

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veterans who may have incurred injuries with service in the Persian Gulf, war combat arena, $100 million. It did give me the authority to use the dollars for health care, as well, and the reason

that I have elected to use the $100 million for veterans’ benefits

and veterans’ claims is because in 2004, the President’s request

and the Congress’s actions increased our health care budget by

11.5 percent. I think that is probably a record. We received close

to $3 billion in 2004, 4 months, 5 months late, but nonetheless a

very dramatic increase.

Senator, I am absolutely confident that this increase that you

have given us in 2004 is more than adequate to ensure that we

take care of the health care needs of veterans coming back from

Iraq and Afghanistan. Otherwise, that money would be there, believe me.

At the same time that we received this dramatic increase in

health care spending in 2004, for our Benefits Administration, the

processing of claims, I think there was zero increase. We really are

struggling in the Veterans’ Benefits Administration to ensure that

these claims that veterans who are coming back wounded, filing for

disability compensation, are processed in a timely manner and that

was the basis for the decision.

The law said veterans’ benefits, and I could move money over to

health care if I need it. I found that I didn’t need to do so, Senator.

The $100 million is very important and that is how we have applied it.

Senator GRAHAM. Are you saying $100 million to process benefit

claims is going to be focused exclusively on combatants returning

from Afghanistan or Iraq?

Secretary PRINCIPI. No, sir. I am trying to use that money to—

you know, obviously, by improving our timeliness, by having the

right equipment, the right people on board—we are giving them a

very, very high priority, but it is going to help us improve our benefit delivery process in general. So no, I would not make the statement, be misleading and say all $100 million is going to be for the

veterans returning from Iraq and Afghanistan who are filing disability claims. There are not that many claims. But in general, this

whole system needed the resources. But——

Senator GRAHAM. That 11 percent increase that you stated was

given to veterans’ medical benefits, what was that on a per capita

basis? For each VA patient, how much additional resources did the

11 percent allow?

Secretary PRINCIPI. Rounded, about $500 per patient.

Senator GRAHAM. What is that as a percentage?

Secretary PRINCIPI. Eleven percent increase in funding for our

medical care, of which we have—how many users—4.8 million

users of our health care system, so that almost $3 billion increase

that you gave us this year is very, very significant, Senator.

Senator GRAHAM. I would like to return to this. My round is now

over. That will give you something to look forward to.

[Laughter.]

Chairman SPECTER. Thank you, Senator Graham.

Senator Campbell.

Senator CAMPBELL. Thank you, Mr. Chairman.

20

Mr. Secretary, as I understand your testimony, the waiting time

that a veteran has to wait to get in to see a doctor is going down.

I think that is really terrific. The backlog, from your testimony, is

going to continue going down. I am sure that is good news to all

the veterans.

The last 3 years, we have put in more money from Congress than

the President requested in his budget, and even at that, we hear

every year from the veterans’ associations it is not enough, and

more than likely after you have testified today, when the VSO’s

testify, we are going to hear the same thing, that we are not putting enough resources into it.

I guess with a $450 billion deficit or maybe more, who knows

what it is going to be by the end of the year, it is going to be a

real tug-of-war around here to get money. I, like many of the people on this committee, happen to really try to prioritize veterans’

health, being a veteran myself. But I, like Senator Graham and

maybe some of the other members, am a little concerned about

these user fees, too.

I guess I would like you to clarify a little bit, when you talked

about the veterans who are better off, how is that going to be determined? Is there going to be some kind of a threshold by which

they would have to pay a higher user fee? Who is going to determine that?

Secretary PRINCIPI. Yes. Congress established seven priority

groups when open enrollment went into effect in 1998, and then

about a year or two ago added an eighth priority group. The Priority Group 7s and 8s are veterans who have no military disabilities and have—they are not high incomes, but they have higher incomes. I believe it is around—Category 7 is about $25,000 for a single veteran, higher if you are married with dependents.

The copayment—these fees would only be assessed against the

Category 7 and 8 veterans. We are proposing to eliminate copays,

on the other hand, for the poorer veterans. Today, if you have an

income above $9,800, you start paying copays. We are asking Congress to say, raise that level to $16,500.

So yes, indeed, I believe it is reasonable to ask the higher-income

non-disabled to pay a little bit, a very small proportion of their care

and the poorer veterans to be alleviated of that burden.

Senator CAMPBELL. I understand that. It may be a little more

complicated on determining some of the things that were military

related. I guess the most common, of course, is smoking and the

long-term effects. I remember when I was in the service, we got cigarette rations. Even though I didn’t smoke, I still got cigarette rations. We were encouraged to smoke. What happens to a veteran

who is encouraged as a youngster to smoke and years later he develops cancer? Is there a possibility that somehow he would be

forced to pay higher user fees because he didn’t develop the cancer

until after he got out, even though the roots of it began when he

was in the service?

Secretary PRINCIPI. If he is service-connected disabled for cancer,

he would not pay any copays or user fees. This would only be those

who come to the VA health care system or enroll in the VA health

care system and have no military-related disabilities.

21

Senator CAMPBELL. OK. Maybe I phrased my question very poorly. How do you determine whether it was a military disability when

the cancer didn’t appear until after he was out sometime?

Dr. ROSWELL. Senator Campbell, if I may, that is why I think our efforts to work on disability claims are so important and the $100

million that Senator Graham spoke about. As the Secretary alluded, over 300 additional veterans are now receiving service-connected compensation this year, which I think is a direct reflection

on how we are able to reach out to veterans, to help them file disability claims for illnesses such as lung cancer, which can be service connected, for example, for veterans who served in Vietnam,

and help them file those claims so that they receive disability compensation. They, in turn, not only receive that compensation, but

they then receive priority health care.

Senator CAMPBELL. I think I have no further questions, Mr.

Chairman.

Chairman SPECTER. Thank you very much, Senator Campbell.

Senator Akaka.

STATEMENT OF HON. DANIEL K. AKAKA, U.S SENATOR

FROM HAWAII

Senator AKAKA. Thank you very much, Mr. Chairman.

I would like to add my welcome to Secretary Principi and our

other witnesses here. I want to express my appreciation to you for

all you have done. I know it is so difficult to carry on the programs

we want with the kind of revenue and appropriations that you receive.

I have two questions I would like to ask. Secretary Principi, as

the chairman mentioned about Priority 8, I am also concerned

about that. Last year, as you know, I signed a joint letter objecting

to your decision to end the eligibility for enrollment of Priority 8

veterans in the VA health care program. I am still concerned about

that. After hearing the fiscal year 2005 budget, I see that Priority

8 veterans are still barred from enrolling in the VA health care system and I also see that prescription drug copayments are increasing for middle-income veterans.

I realize, as you mentioned, that Priority 8 veterans are considered high-paid veterans. My question to you is, what would be the

impact in your budget if Priority 8 veterans could enroll—could enroll—into the VA health care system, as well as the impact on the

budget if the increases in copayments were not implemented?

Secretary PRINCIPI. Yes, Senator. If I just very briefly, historically, as you know, in 1998, we went from approximately three million eligible for comprehensive VA health care to 25 million, a very,

very dramatic jump in eligibility. That, coupled with the opening—

my predecessor and I have continued to open community-based outpatient clinics. We now have almost 700, a great pharmaceutical

benefit, and high quality. We have seen this enormous, enormous

increase in demand for health care, so much so that consistent with

the law, I have to make an annual enrollment decision based upon

resources made available in the Appropriation Act.

It was only because we had a growing number of veterans on

waiting lists, as Senator Graham talked about in Florida, it was

close to over 300,000 waiting more than 6 months for care, that I

22

made that decision, because we were enrolling veterans and had no

expectation of providing them with timely care.

To reopen the door to Category 8s—and I continually look at it

to see if we can do it—in 2005 would be $590 million. Of course,

enrolling veterans has an impact not only in the year that we do

so, but as they become older and perhaps sicker, that the number

increases. So it does have a rather significant, financial impact.

Senator AKAKA. I am also concerned about VA’s ability to meet

its production goal of processing new claims in 100 days. It appears

to me that VA’s 2005 budget does not include an anticipated increase in claims by service members returning from service in Iraq

or Afghanistan. Additionally, the VA’s budget request assumes a

1.5 percent increase in Federal pay. However, the Federal pay increase is expected to be 3.5 percent.

Given these factors, Mr. Secretary, I am very concerned that the

VA will need to cut other resources which will result in additional

time processing new claims and will compromise health care service to veterans. Given this background, I would like to hear your

thoughts regarding these.

Secretary PRINCIPI. It is very challenging. I set those goals of

never having more than 250,000 claims in our inventory, which

would allow us to process claims in 100 days. I felt that veterans

having to wait years to get a decision on a claim is just unconscionable, and that is why I set those goals and put in place new processes, and with the support of the President, with the support of

the Congress, we added some 1,300 new rating specialists to the

VA and we have been able to dramatically bring down the backlog,

and also hundreds of millions of dollars that you gave us for information technology enhancements to improve our productivity.

I think the combination of these things, now that these 1,300

people are trained and being very productive, that we will be able

to achieve these goals. But it is going to be challenging, Senator,

you are absolutely right, and that is why, as Senator Graham said,

I have used some of that money for claims processing.

Chairman SPECTER. Senator Akaka, we have eight members here

and a second panel of five witnesses.

Senator AKAKA. Thank you very much.

Chairman SPECTER. Thank you, Senator Akaka.

Senator Murray.

STATEMENT OF HON. PATTY MURRAY, U.S SENATOR

FROM WASHINGTON

Senator MURRAY. Thank you very much, Mr. Chairman, for holding this very timely hearing, and Mr. Secretary, thank you for

being here and all the work you do on behalf of veterans and especially for your willingness to request an additional $1.2 billion for

the VA budget. I was disappointed that the President didn’t follow

through on that, but I appreciate your putting it out there.

I have a lot of very serious reservations about the President’s

budget. I think with the new generation of veterans coming home

that are going to be reliant upon the VA for health care and services, we really have an obligation to take care of them and I think

this budget request we have seen really falls short.

23

I agree with the comments about the new fees on veterans. I

think it is highly unlikely that Congress is going to approve that

and the health care is going to be far short of what we need. I am

very concerned about the major medical construction dollars in

here, $180 million, and I understand the administration is going to

transfer $400 million from health care to construction, which will

make our construction account about $600 million. If that is accurate, that is far short of what the CARES initiative plans were to

spend. I think we have all been assured more than once that the

CARES process was—that we would accept significant changes

based on new construction and service delivery, and if that falls

short, it is going to leave a lot of us really feeling like we were not

told the whole story and our veterans are not going to be served.

I want to ask you about that, but before I do, I want to bring

up a separate issue and that is on the Department of Labor rule

that is eliminating overtime compensation that will affect some veterans. I think you are aware that the proposed rule could very well

undermine many of our young people who enlist in the military because it is going to change the definition of professional employees.

It basically will mean veterans working in professional fields will

now be classified as professional employees and lose their overtime.

I wanted to know if you had made comments on that, and as the

nation’s leading advocate for veterans, if you intend to express your

opposition to the Department of Labor on that issue.

Secretary PRINCIPI. I guess I am not as knowledgeable about it

as I should, Senator. To say that veterans would lose income by

being designated a professional employee, which is based upon education, experience, and I would hope that being designated a professional would somehow provide more upward mobility and more

increase in compensation and benefits. But I guess we could debate

that.

I would just, if I can, just take a quick second to say that, yes,

I have always tried to be honest with the Congress, and having

grown up here, about what I requested. Every year, every Department goes through a very difficult negotiating process with OMB

and we achieve a requested level of spending that the President

makes to Congress.

I just want to be clear that I believe that the budget we requested, coupled with—I believe we are going to have $800 million

or somewhere in that neighborhood that we will be able to carry

over into 2005—will allow us to achieve our goals, to take care of

the very veterans we are all concerned about as well as, very importantly, the men and women who served in combat in Iraq and

Afghanistan.

But on the Department of Labor issue, I think that is one I need

to study.

Senator MURRAY. Mr. Secretary, I have actually sent you a letter

dated February 9 on that, and if you could take a look at that and

respond, I would really appreciate it.

Let me also tell you, I am very concerned about the new generation of veterans that we are creating today. About 40 percent of the

U.S. armed forces in Iraq and Afghanistan, as you know, are activated Guard and Reservists. Those men and women are going to

have a very different priority from the regular troops. They are

24

older. They are more likely to have families. They are in a hurry

to get back to their jobs and their community and their own life.

I am concerned that we could lose track of many of those people

when we return home, and I don’t think we want them to fall

through the cracks.

What is the VA prepared to do in order to capture those veterans

and make sure we don’t lose them?

Secretary PRINCIPI. You are so right. It is far different than it

was during the Vietnam War, what we are asking our Reservists

and Guardsmen and women to do today.

We are truly outreaching to them. We have engaged in some over

3,000 of them in TAP programs, Transition Assistance Programs

for members of the armed forces. We have engaged in another

2,000 briefings. We have outreached to some 46,000 Reservists and

Guardsmen and women around the country to just make sure they

understand what their benefits are, that when they are called up

to active duty, they are veterans and they are eligible and entitled

to the veterans’ benefits program. They are entitled to VA health

care.

So absolutely, we have an important responsibility to outreach to

them and I can assure you we are going to continue to do so.

Senator MURRAY. Good, and I would like to work with you on

that. I think it is really important. Thank you.

Dr. ROSWELL. Let me just add that we——

Chairman SPECTER. Senator Murray, your time has expired.

Senator MURRAY. If Dr. Roswell could just respond to the last

question in 2 seconds.

Dr. ROSWELL. I was just going to add that we have actually

printed a million brochures specifically for Reserve and Guard and

have distributed those through all of the Reserve and Guard units.

We have opened our readjustment counseling service to the Reserve and National Guard. The Secretary is planning to send letters to all 90,000 people who have been separated thus far, and we

have unprecedented cooperation with DOD to make sure that we

know everyone who is being discharged, whether they are on active

duty, in the Reserves, or in the National Guard.

Chairman SPECTER. Thank you, Senator Murray.

Senator Nelson.

STATEMENT OF HON. E. BENJAMIN NELSON, U.S. SENATOR

FROM NEBRASKA

Senator NELSON. Thank you, Mr. Chairman, and may I add my

appreciation, Mr. Secretary, for the continuing good work that you

do for our veterans. I suspect after all the praise that you have received from all of us today, you have to be sitting there wondering

how we can have so many critical things to say and/or to ask of

the care for veterans, but I think it is a common thought that we

have. You are trying to do a better job. We want to see a better

job done, and I hope we can work together to do that.

When Nebraska was moved into a new VISN just some time ago,

we were all told that the services wouldn’t change for veterans in

Nebraska. I remember somebody from your staff saying that one of

the reasons they were having headquarters in Minneapolis was because there were more qualified people there and I took issue with

25

that, being from Nebraska. My staff tells me that a change has occurred, that veterans requiring cardiac surgery are now being required to go to Minneapolis for the care. If it is emergency care,

surgery, they will be treated in Nebraska.

Once again, I want to point out that we have excellent cardiac

surgeons in Nebraska and this isn’t consistent with what we had

hoped would happen, where veterans would be treated as close to

home as possible. It is not a matter of trying to patronize Nebraska

as much as it is to take care of veterans as close to home as possible. I would hope that you would look into that to see what you

can find out.

We were also told that, well, Nebraska would become the hub for

some other services. But I am not sure that unless there is a particular reason why the care can’t be provided in a location that we

would try to create hubs for care, and yet I am one who is as

hawkish on the budget as can be. I know you want to save every

dollar that you can. But we all have to come up short of shortchanging the veterans in the process.

Secretary PRINCIPI. I made a commitment to you that Nebraska

would not get shortchanged. I will ensure that that commitment is

adhered to. Next week, I happen to be meeting, along with Dr.

Roswell, the network director that has Nebraska. I will certainly

ask these questions, and——

Senator NELSON. We were told part of the reason is because, and

I don’t want to overplay my time, the chairman is quite sharp

when you do that, but it is because they can provide the care in

the veterans’ hospital there and it has to be outsourced in Nebraska. But it would seem like we could work out a contractual relationship that would even out the cost if it is a cost factor because

it needs to be about the care providing at the closest possible——

Secretary PRINCIPI. I am sure there are a number of factors, and

certainly going in for cardiac surgery, open heart, we certainly

want to go and make sure the outcomes are good. I mean, that is

most important. Sometimes it is a little inconvenient to go to one

of those major cardiac care medical centers, and, of course, cost is

an issue, but I will certainly look into it and I will get back to you

personally to make sure that there are reasons or that there will

be a change, so we can discuss it further.

Senator NELSON. As always, I appreciate the ability and the opportunity to work with you. Thank you very much. Thank you, Mr.

Chairman.

Chairman SPECTER. Thank you very much, Senator Nelson.

Senator Jeffords.

STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR

FROM VERMONT

Senator JEFFORDS. Mr. Secretary, I would like to thank you for

coming today and thank you for your leadership over the past few

years on behalf of veterans. Your job is not an easy one and I appreciate all you have done for increased funding for the VA over

the objections from those who don’t want to see any more money

spent on veterans. I believe we have an obligation to care for those

who have carried the flag and I would like to see that we continue

26

to hold that banner high. We must not let the banner sag or fall

by merely meeting the minimal obligations.

I have a two part question about benefits. First, how does the VA

plan to notify newly discharged veterans of their benefits? Second,

in anticipation of the increase in claims submitted by these new

veterans, please tell me what VA’s current plan is in processing

veterans’ initial claims.

Secretary PRINCIPI. We are taking as many steps as possible to

outreach to veterans being discharged. Of course, we have the TAP

programs. As I indicated, we have done over 3,000 Transition Assistance Programs for military personnel. Well over 100,000 have

attended those briefings. We engage in other briefings for military

personnel, Guard and Reservists. We have health fairs. Some

700,000 veterans attended health fairs this past year. We have brochures that we mail out. I am sending a letter to all of the recently

discharged servicemen and women coming back from Iran and Afghanistan.

We now have staff on 136 military bases. You know, in the past,

you had to wait until you were discharged and then you would

have to find your way to a regional office, maybe 4 or 5 hours’

drive. Today, at 136 military bases, you can walk across the street

from your barracks. You can fill out a claim for disability compensation or whatever it might be, have an exam right there across

the street from your barracks, and when you get your discharge papers, you get your disability compensation or you get your GI bill

benefit right away. I mean, I think this is what we have to do for

our customers, the men and women who served in uniform, bringing the benefit structure to military bases.

We have full-time staff now for the first time in history at Walter

Reed and Bethesda to make sure the wounded who are coming

back, when they go home on convalescent leave or discharged, they

are already enrolled in a VA hospital near their home and they

have been given the claims information so that they can get their

disability compensation.

I am sure there is more that we can do. I just don’t want to see

anybody fall through the cracks, and this is especially meaningful

to me, because I had two sons serve in Iraq at the same time. So

I just feel very strongly, personally and professionally. We are not

perfect. We don’t, of course, ever have all the resources you need.

I am not saying we do, but I think the President, this Congress has

treated us very generously and we need to continually strive to do

better.

Senator JEFFORDS. I appreciate that answer. As you know, many

of us here represent rural States. In the past, the VA has made an

effort to open community-based outreach clinics to get access to the

VA for more vets. But in the last 2 years, the VA has had a policy

of not opening any more clinics. Is there any chance that this policy

will change? I believe these clinics perform a very useful service for

veterans and would like to know your answer.

Secretary PRINCIPI. I applaud my predecessor for transitioning

the VA from a hospital-centric system to a patient-focused health

care system and I have continued that process. I think I have

opened probably or directed that we open 170, 190 outpatient clinVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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ics over the past 3 years and I will continue to open outpatient clinics.

Of course, we have to balance outpatient clinics and inpatient

hospitals because we have an inpatient mission as well as an outpatient mission, but we need to continually bring health care closer

to the veteran’s home so that they don’t have to drive long distances to get outpatient care in a VA medical center. They can get

it in a community-based outpatient clinic.

I think it is a great program, Senator. We have tried to balance

it and watch it and maybe there has been a slowing down, but we

will continue to do so.

Senator JEFFORDS. Thank you. I thoroughly appreciate what you

are doing. Thank you.

Secretary PRINCIPI. Thank you, Senator Jeffords.

Chairman SPECTER. Thank you very much, Senator Jeffords.

Senator Rockefeller.

STATEMENT OF HON. JOHN D. ROCKEFELLER IV,

U.S. SENATOR FROM WEST VIRGINIA

Senator ROCKEFELLER. Thank you, Mr. Chairman.

I want to say what others have said and I want to say it with

as much or even more feeling, and that is that when you came in

here to be confirmed, I remember I asked you the question, if you

came up against something which really bothered you, would you

go face to face with the President, and he was on ‘‘Meet the Press,’’

so you didn’t have time. Before that, you did, in a sense, go face

to face with the President because you went face to face with the

budget officials and asked for $1.2 billion more for VA health care,

which represents a real act of courage and you did it publicly.

I really commend you for that. It is a gutsy thing to do. This is

an administration which wants people to be in line, and when

somebody isn’t in line, they don’t like it, but you decided that you

were going to put the veterans ahead of this. I really congratulate

you for that, Secretary Principi, and I think you understand that

I mean it when I say that.

As Ben Nelson said, Senator Nelson, we praise you and then we

ask for things, but that is because you are under a budget. This

is a national budget. It is not a free health care system, so everything is always in competition with something else. If you come

from States like mine, you have to fight. That is what we have always done. We have always fought uphill. Arlen Specter knows

something about that in the western part of his State, and we have

to do that.

Now, in the CARES Commission, which hasn’t come out, but

they are going to and they are going to suggest cutting some beds,

I am told, from the Beckley VA facility. On the other hand, you

have recognized, and, in fact, due to your leadership, you have recognized that there are some hospitals that because of certain situations need to be declared critical care hospitals, critical access hospitals.

My understanding is that CARES as a commission does not recognize such designations, wherein we have a quandary because I

need to fight very hard for what is the most isolated part of my

State. I am not sure how we can do this or if we can do it together

28

or if it can be done, but I am going to try in every way that I know

how. I can’t do less than that, because, frankly, the majority of our

veterans come from that part, the coal fields, the steepest mountains, the poorest counties of West Virginia, which is 1 of 50 States.

So I ask your attention for that. I don’t necessarily need to have

a comment from you. I want to have a sense that you hear me loud

and clear on that, that it is——

Secretary PRINCIPI. Senator—oh, I am sorry.

Senator Rockefeller. Go ahead, please.

Secretary PRINCIPI. I would just say, I had the pleasure to tour

West Virginia with you. I saw firsthand, as you have experienced,

the needs of veterans in rural America, in West Virginia. I had the

privilege of being in Western Pennsylvania with Senator Specter,

an awful lot of poor people, an awful lot of elderly people, veterans,

who are lacking health care. So I certainly intend to very carefully

review the commission’s report, analyze it, and do what is best for

veterans.

I know it is going to entail some changes because health care is

changing and demographics change, and if we don’t change with

the changing dynamics in health care, I am afraid we will fail

America’s veterans maybe 10, 15, 20 years from now, because our

infrastructure has been built up over 150 years. So we just need

to be mindful of that, but at the same time recognize it is not only

in large urban areas, but also in rural areas that we have a responsibility. I just want you to know I am listening and hopefully we

will make the right decision.

Senator Rockefeller. Thank you, Mr. Secretary, and I have two

other questions which I will simply submit for the record. I thank

you, sir, and I thank the chairman.

Chairman SPECTER. Thank you very much, Senator Rockefeller.

Mr. Secretary, I have a thick sheet of 19 questions to ask you for

the record on going into some substantial details. May I inquire of

my colleagues if they would like another round?

Senator GRAHAM. I would like to ask two more questions, Mr.

Chairman.

Chairman SPECTER. Senator Murray. Senator Nelson.

Senator NELSON. Nothing.

Chairman SPECTER. Senator Jeffords. Senator Graham, two questions.

Senator GRAHAM. The first has to do with the assumptions in the

budget. The assumptions, as I read them, are that veterans will

make $1.3 billion in copayments for their medical care, but only $1

billion will be collected from insurers who are third party responsible persons. That results in nearly $2 billion in claims being rejected by those insurers. It is my assumption that if we could do

better with insurance company collections, that would relieve some

of the pressures off taxpayers and veterans. What would be your

recommendations as to what could be done? What role will Congress play in increasing the percentage of collections made from

claims submitted?

Secretary PRINCIPI. As you know, we can’t bill Medicare, and

that is a Finance, Ways and Means Committee, and that has been

an issue, a longstanding issue with regard to that. But I think that

Congress can help us with HMOs. I think there is a very signifiVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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cant amount of resources that we do not collect from HMOs and

it has been a real struggle. So I think legislation that would somehow require HMOs to reimburse us at a certain level, reasonable

level for billed charges would certainly generate significant revenues to the VA and that would expand the reach of health care,

because you said we can keep those dollars. So I would look to that

area and we will work with you, Senator Graham.

Senator GRAHAM. If you could give us what you believe would be

the most effective legislative solution in combination with your administrative action, I would be very appreciative.

Secretary PRINCIPI. Yes, sir.

Senator GRAHAM. The second question goes back to a hearing

that was held last week with Secretary Thompson of HHS. We

were talking about the fact that there seems to be a difference in

the way in which the VA is currently negotiating pharmaceutical

prices, whereas Medicare in the recent legislation is prohibited

from doing so. When asked about this difference, Secretary Thompson said that Medicare was reluctant to negotiate because it might

constitute an undue intrusion into the marketplace, i.e., could be

described as price setting.

As I understand it, and I know this was true at the VA hospital

in Miami where I spent a day in November, it is getting better

than a 50 percent reduction off what would be the drug store prices

of some $39 million of prescription drugs that they dispense a year.

Has it been your finding that the VA’s effective use of negotiations

has constituted an undue intrusion in the marketplace?

Secretary PRINCIPI. No, not at all. I think we have done extraordinarily well. We have had $1.1 billion in cost avoidance for pharmaceuticals over the past 3 years. We rely very heavily, we use a

lot of generic drugs. Sixty-five percent of the drugs we provide are

generic. Unfortunately, the brand name drugs, the 35 percent

brand name drugs account for 92 percent of our costs.

So I think a combination of factors of how we procure pharmaceuticals, how we manage them, our formulary, I think that it has

worked very, very well for our nation’s veterans and for the American taxpayer.

Senator GRAHAM. I would urge you to consider having that conversation with Secretary Thompson because there is tremendous

savings for the taxpayers and Medicare beneficiaries if his agency

would use the same techniques that the VA has done, and I would

hope that he would be authorized and encouraged to do so.

Let me ask just one short follow-up question. Are there any other

areas in which the VA could use authority to negotiate to reduce

costs?

Secretary PRINCIPI. Nothing comes to mind at the moment, Senator Graham, but I would appreciate the opportunity to advise you

in writing.

Chairman SPECTER. Thank you very much, Senator Graham.

Senator Murray.

Senator MURRAY. Thank you, Mr. Chairman. I appreciate the accommodation.

Mr. Secretary, I am really concerned that this budget request is

low for major medical construction and it goes back to the CARES

process, where we were told that we will get $5 billion in new faVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
30

cilities for our veterans. Veterans were asked to accept some pretty

significant changes to their health care system today in exchange

for a future promise of funds for new clinics and hospitals and facilities in the future, and I don’t think this budget request even

comes close to meeting the CARES promises for new facilities.

One of the areas that is slated for a new clinic is in Central

Washington in my home State, and I am concerned that the $5 billion promise in new facilities is an empty promise and at the very

least this budget sets us behind in meeting the CARES promise.

Can you comment on this, and specifically whether the administration, do you believe, will request adequate funding for the

CARES initiative?

Secretary PRINCIPI. Yes, Senator. The construction portion of

CARES has always been viewed as a 5- to 7-year effort, that would

not all be funded in the first year. I really do believe that we have

put forth a good down payment. It would be misleading to say we

have all we need, but we have doubled the CARES money from

$280 million to $540 million for 2005. We have increased major

construction, I think, from about $180 to, what, to $382 or $362.

So I think we are moving in the right direction and it will take additional funding in the out years to do what I hope to approve in

the next couple weeks.

Senator MURRAY. You can understand why people are really concerned. They are giving up a lot today on the hope that something

big is going to happen tomorrow, and we have seen with budget

deficits and cutback programs that that doesn’t necessarily occur.

Secretary PRINCIPI. Well, I think CARES is a very, very high priority and I certainly think so in the outpatient clinic arena, so——

Dr. ROSWELL. If I could, Senator Murray, we have actually anticipated the CARES report, though we were unable to anticipate

the specific recommendations. But to make sure that we are prepared, we have identified 41 projects for which we have begun the

advanced planning. This would put them in a State of readiness so

that when the Secretary makes a decision, those 41 projects, which

we believe are the highest priority, would be ready to go into the

design phase. That design phase requires 10 percent of the total

project cost up front, or the typical cost is 10 percent.

So even though it is a small amount of money, you are absolutely

right that the promise has to go to $4.6 or $5 billion. We believe

that the amount of money that will be available to the Secretary

in fiscal year 2004 and 2005 will be sufficient to get this thing

jump-started with the expectation that the monies must follow

after that.

Senator MURRAY. Let me just ask a quick question and make a

comment. Mr. Secretary, on December 6, President Bush signed the

Veterans’ Health Care Capital Assets and Business Improvement

Act. There was a section in that, 231, requiring the VA to develop

a plan for meeting the future hospital care needs of veterans who

live in North Central Washington State. I know that that report is

not due back until April 15, but I would like to know whether you

have people who are conducting that study and whether or not my

staff can be a resource to you as you do that.

31

Secretary PRINCIPI. I assume they are, Senator. I don’t know for

certain, but I will certainly get back to you and make sure that is

done.

Senator MURRAY. Would you let me know on that?

Secretary PRINCIPI. Yes.

Senator MURRAY. And finally, Dr. Roswell, my colleague, Senator

Cantwell, and I sent you a letter on December 19 regarding our

continued belief that the CARES initiative has not properly considered the current and future needs for veterans’ health care service

in VISN 20. We noted a number of things, including the relatively

young veterans population as well as the low-market penetration

in our home State. We just sent 3,500 troops off yesterday to Iraq

from my State. We know we are going to have some of those new

veterans back in our State and we want to make sure that this is

part of that. I know you have the letter. I have a copy of it today,

but I was hoping that we could get an answer back on that as

quickly as possible.

Dr. ROSWELL. We will do everything we can, Senator, to get you

a prompt response.

Senator MURRAY. Thank you. Thank you, Mr. Chairman.

Chairman SPECTER. Thank you very much, Senator Murray.

Thank you, Secretary Principi, and thank you, gentlemen, for accompanying the Secretary. You have heard praise on your efforts.

We recognize the work that you are doing. You have also heard a

great many concerns about the ability of the Veterans Administration to deliver the necessary care within the confines of the budget.

We would encourage you, Mr. Secretary and the others, to explore the Medicare subvention, or as you term it VA Advantage,

and the insurance premiums and Category A. We hope there will

be some way to not bar them from coverage.

We now turn to our next panel, the veterans’ service organizations, and ask Mr. Peter Gaytan, Mr. Paul Hayden, Mr. Rick

Surratt, Mr. Richard Fuller, and Mr. Richard Jones to come forward.

Thank you very much for coming, gentlemen. We have been

asked to change the order to some extent because this distinguished group of witnesses has already had the wisdom to divide

up the topic so as to make their words most effective. We regret

the limitations on time, but that is one of the problems here in the

Capitol, as you know.

Our first witness is Mr. Peter Gaytan, Principal Deputy Director

of Veterans Affairs and Rehabilitation in June 2002 for the American Legion. He has a long, distinguished resume which we will

have included in the record, but in the interests of time, may the

record show a dismissive gesture from Mr. Gaytan to get on with

the business at hand. So the floor is yours, Mr. Gaytan.

Mr. GAYTAN. Thank you, Mr. Chairman, and thank you for the

opportunity to express the views of the 2.8 million members of the

American Legion.

Chairman SPECTER. I am going to have to interrupt you at the

very outset because I have to excuse myself for a few minutes. I

wonder in advance of your opening statements, Senator Graham,

if we might yield to you for a round of questions if you would like.

32

I will only be a few minutes, but I am going to have to have a brief

adjournment of the meeting.

Senator GRAHAM. Or would you like to start the statements? You

want to be here for the statements?

Chairman SPECTER. I want to be here for the statements, but if

you would like to question.

Senator GRAHAM. OK. Thank you.

Chairman SPECTER. Senator Graham will proceed. He knows

what to ask even though he hasn’t heard your opening statements.

[Laughter.]

Senator GRAHAM [presiding]. Thank you, gentlemen. We look forward to your statements, and as soon as the Chairman is able to

return, we will turn to you. This is a little bit out of order, but let

me ask a question that has been already discussed, and that is the

potential for Priority 7 and Priority 8 veterans to not come to VA

due to the $250 user fee and the increase in drug copayment from

$7 to $15.

What group of veterans do you think will be most affected by

this, and what are the likely effects?

Mr. GAYTAN. Well, sir, let me just State that the American Legion has opposed the restriction of enrollment for Priority Group 8

veterans since it was announced last January, a year ago January.

We also adamantly oppose the provisions in the 2005 budget request that would implement a $250 enrollment fee for Priority

Group 7s and 8s. We also oppose the increase in copayments for

pharmaceuticals and the increase in copayments for outpatient

care.

Mr. FULLER. Senator Graham, I am Richard Fuller with Paralyzed Veterans of America. We, too, have opposed the increases in

the fees, and what we basically have been seeing over the past several years is that the administration constantly proposes increasing

the costs of health care on the backs of veterans, and more and

more they are relying on these fees as part of their appropriations

process to reduce appropriations and have one veteran paying for

the health care of another veteran out of his own pocket.

We also find it interesting that they keep lumping Category 7s

and Category 8s together by implicating that the Category 7s are

somehow high-income veterans, whereas, this committee and the

Congress a couple of years ago created that particular category to

be able to capture people who fell just above the nationwide low income level but who lived in geographic areas of higher cost.

Category 7 veterans are basically low-income Category 5 veterans in some people’s minds and in our minds, as well. To think

that they can afford to pay these costs and user fees and copayments in the same fashion as, say, some high-income veteran in

Category 8 can, we find rather implausible.

Senator GRAHAM. What is the range of income for a person who

is designated as a Category 7?

Mr. FULLER. The range is based on a HUD low-income index,

which is really rather complicated, but HUD has been using it for

gauging low-income housing payments. It varies from, actually

from what I understand, even from county to county in the United

States. But it is a formula and it is very easy to plug into that formula and find out what the income levels are.

33

Senator GRAHAM. In my opening statement, I made the state- ment that Category 7 went as low as $24,000 a year. Is that——

Mr. FULLER. Twenty-four thousand is the national threshold if

you are just looking at what the base means test is. Now, if you

lived in Miami or you lived in San Francisco or Brooklyn, New

York, I haven’t seen the actual scales and studied them that closely

myself, but you could get up to maybe $27,000, $28,000, something

of that nature, but you are not going to be considered rich by any

stretch of the imagination. You are basically going to be considered,

if you are faced with a catastrophic illness, as medically indigent.

Senator GRAHAM. If I could move on to another question, and

thank you for your comments on that first question, this is the

issue of claims processing. This has been a very big issue in my

State, where there has been a history of long delays.

It is my understanding that this budget calls for cutting the

claims processing staff nationwide by some 500-plus persons. I

would be interested in what your assessment of the likely impact

of that reduction would be and what do you consider to be the minimum appropriate level of claims processors in order to meet the

demands and reduce the backlog on claims that have already been

filed?

Mr. SURRATT. Senator, as you know, the VA has been struggling

with claims backlogs for years. With some focus on fixing their deficiencies and some additional resources from the Congress, they

made some gains. But I think VA’s own budget projections speak

for themselves here.

We just finished fiscal year 2003, so that makes a good comparison with what they are asking for for 2005. Compensation claims,

the VA projects they will have 178,966 more in 2005 than they had

in the fiscal year we just completed, yet they are reducing staffing.

Now, 2004 has a reduced staffing and 2005 goes even below that.

Education, in the education department, they are going to have

10 percent more claims in 2005 than we had last year, some

51,000. Yet again, they propose cutting the budget. It is the same

way with voc rehab. They anticipate more claims and they just had

a task force that is about to report, and if those task force recommendations are implemented, VA will get more into the employment business. It is vocational rehabilitation and employment, but

they have very few people devoted to actual employment now for

veterans.

So finding increased efficiencies to stay even is one thing. That

is a challenge. But finding increased efficiencies to do more with

less, that is—I guess that is the kind of magic we see in Washington sometimes in budgets, but it doesn’t seem realistic. We have

made specific FTE recommendations and I have covered those in

my written statement. But essentially, for most of the services, we

have recommended that they keep their—that they have the fiscal

year 2003 level. I think we ask for 200 more FTE in vocational rehabilitation and employment.

Mr. GAYTAN. Sir, if I may for the American Legion, we are very

concerned about the wait times for benefit claims. We understand

the mandated quotas implemented by the Secretary last year and

it has improved some of the wait times and reduced the backlog of

benefit claims. But we are cautious in this hurried rush to adjuVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
34

dicate claims in that we don’t want to reduce the quality of the

claims as they are processed the first time. We don’t want them to

have to come back as remands, and some of those will be going

back as remands as these claims adjudicators are trying to meet

these production quotas. We must be conscious that faster is not

always better. We need the quality in the claims in the first process before they are sent back as a remand. We do not agree with

reducing the number of FTEs to adjudicate these claims.

Senator GRAHAM. It has, again, been my experience in Florida

that there is a relationship between the number of claims and the

staff deciding the claims and then the percentage of those claims

that denied and then appealed. I think it is the old adage that an

ounce of prevention is worth a pound of care. If you do a good job

at the front end, then you are less likely to have to replicate it.

Let me raise a question that I asked the Secretary about, and

that has to do with the fact that apparently there are approximately $3 billion in annually claims sent to private insurance carriers. I have been told that since the VA can’t bill Medicare, none

of that is Medicare related, and we are recovering now about $1

billion. I asked if there were any steps that the secretary thought

VA could take to increase that level of recovery so as to loosen or

reduce the demand on veterans for paying things like the $250 enrollment fee in order to make up the difference in claims that are

not collected. Do any of you have any thoughts about that or suggestions?

Mr. FULLER. Senator, historically, VA has done a very poor job

in trying to collect these third-party reimbursements, as they are

known. They are getting better. There are institutional challenges,

however, which makes it difficult, if not impossible, for them to collect from, as the Secretary said, from HMOs and people who they

need to negotiate and establish rates and exchange with. I believe

that we have been discussing it for several years, that this problem

existed and ought to be addressed undoubtedly through legislation

and we were glad to hear that the Secretary thought so too so perhaps that can help.

On the Medicare side, VA, of course, has been subsidizing Medicare for years and to great, great savings to the Medicare Trust

Fund. There are difficulties involved in opening that door back up,

not only institutional but also from the standpoint that every time

we think of some way to fund VA health care from non-appropriated funds, what happens is that OMB offsets the appropriation

by those collections the next year, so it is just a pass-through of

money from one side to the other and is a constant battle.

As we state in The Independent Budget—this is The Independent

Budget for 2005, which was provided to all of you which we will

be addressing here today. The Independent Budget has never

counted the collections as being part of the funding mechanism for

VA health care. Some people have said this is rather unrealistic,

but we want to keep a pure marker as to what the appropriated

dollar need is for the Congress to be aware of and not have the

budget obscured by the fact that the collections are becoming an increasingly larger amount of the total that the Administration is

asking for.

Senator GRAHAM. Any other comments on my question?

35

Mr. JONES. May I retract the question, Senator? My concern is

with the decision to ban Priority 8’s access to VA hospitals. It was

suggested when it was done, the year it was done, that the cost

savings would be about $340 million by denying access. In the

same year, we rescinded from the VA budget $225 million and we

rolled over $650 million. Yet the decision was made that we didn’t

have enough money. If we did not roll over $650 million and kept that in the medical

care system, that money would have provided access to over

300,000 veterans. That is more than was estimated by the VA that

came to VA looking for access but were barred. They estimated it

at 167,000. I am concerned about that.

VA says that the average cost of the priority veterans is about $2,500 a year, and yet we have rolled over $600 million, we have

rescinded $225 million, and we saved $339 million by barring their

access. That is one of the things that concerns me, the decisionmaking.

I think the law says that an assessment is supposed to be made

with regard to the resources available. It seems that the decision

is being made prior to resources being provided or even to resources being suggested. I am concerned about this. I am concerned

about the law. I am concerned that money that is available isn’t

being used.

The Congress is generous. Your generosity was spoken about earlier today, 11 percent-plus increase, far, way and above, what the

President has suggested. But the money isn’t being used. It is

being rolled over. The estimate for fiscal year 2005 is at $800 million that we rolled over into fiscal year 2005’s budget from fiscal

year 2004.

That is just what I wanted to say.

Senator GRAHAM. Let me move to a related subject, and that is

access to prescription drugs. In the questions to Secretary Principi,

I indicated the very significant savings that veterans secure by getting access to prescription drugs through the VA as opposed to

through normal channels.

One of the barriers for veterans getting access to prescription

drugs is that VA requires an independent evaluation of the patient

before the VA will make prescription drugs available to them, even

though a non-VA provider has authorized a prescription. Of course,

this restriction on Category 8 veterans getting access to health care

means that they are also losing their access to the less-expensive

prescription drugs.

Is that an accurate assessment of the situation, and what do you

think are the policy rationales of requiring veterans to have a second physical before they can get prescription drugs?

Mr. FULLER. Historically, Senator, we have taken the position

with an argument along these lines, that the VA health care system is a health care provider. It historically has been a provider

of health care from the standpoint they want to have control over

the patients, the patients’ care, and what the patient is prescribed

from the standpoint of both quality and medical interactions.

The concept of veterans taking prescriptions from private physicians to the VA changes the role of the VA in a way that it becomes

not a provider but it becomes a drug store. It loses control over

36

that particular patient as being able to find out if there are complications in mixes of other prescriptions and other types of care

that the individual might be getting.

Indeed, it does cost money to be able to put these people into the

system and examine them, but at the same time, I believe the Secretary a couple of years ago testified over on the House side that

the cost of everybody going to the VA to get their prescriptions

filled at such a modest rate would be in the neighborhood of $4 or

$5 billion a year. You would be shifting a major part of VA costs

from being a health care provider to being a prescription provider. Of course, if OMB wants to provide that $4 or $5 billion, we

would love to have the VA turned into a pharmacy, but I can’t

quite see that money coming across when they aren’t funding the

health care system side adequately right now.

Senator GRAHAM. Any other comments on that issue?

Mr. JONES. We know the Secretary did lift the ban earlier last

year in order to address the waiting list problem. I haven’t seen

any costs of that or any studies or reports as to what happened.

As you recall, the Secretary trying to address the waiting list offered the opportunity for those who had been on the waiting list

for greater than 6 months an opportunity to bring their prescriptions to VA and have them filled if the prescription had been written by a private doctor.

That, I believe, has been suspended at the time, but there was

a brief time, a brief moment last year the Secretary used exactly

what you are suggesting might be used and perhaps some data

could be gained from requesting the Secretary to submit a study

or some results from that activity.

Senator GRAHAM. To me, one of the ironies is that the typical

veteran over the age of 65 prior to going to the VA probably was

getting most of his or her health care financed through Medicare

at a Medicare-approved physician. The Federal Government is paying for that cost through Medicare. Now the veteran comes to the

VA and is required to spend more Federal money to get an examination before they can get prescription drugs in VA. There needs

to be some better coordination, both for the benefit of the veteran,

who shouldn’t have to wait 6 months to get access to prescription

drugs, and for the taxpayers, who shouldn’t have to pay twice to

do the same essential examination of the patient. If anybody has

any suggestions about how to do that better, I am sure we would

all be interested.

Another issue is funding for medical research. VA historically

has not only provided a great service to American veterans, but to

health care literally on a global scale by the quality of its medical

and prosthetics research. That budget is now being suggested to be

reduced by $50 million, which equates to 149 research projects and

500 VA employees. VA has indicated that the area of those lost

projects will include aging, cancer, and heart disease research.

How do the organizations that represent veterans, what value do

you put on VA’s research budget?

Mr. GAYTAN. Sir, on behalf of the American Legion, we are very

concerned about the proposed cuts in the budget for research funding. Not only as you mentioned have the historical research advantages created through the VA benefited the veterans who seek their

37

health care at the VA, it has also benefited all Americans nationwide.

In addition to those benefits that are accrued the research that

is carried forth in the VA, there is also the key factor of the affiliations, the medical schools that are affiliated with the VA who

carry out some of these research projects through the VA facilities.

Last year, the American Legion initiated a ‘‘System Worth Saving,’’

where our National Commander visited over 60 VA medical centers, and one of the areas he tried to focus on was the affiliations

and the partnerships between the medical schools and the VA facilities and exactly how much the VA facilities benefited through

these affiliations, through volunteers, through students, and mainly through the research, and the American Legion fears this decrease in funding for research and the detrimental effects it will

have on not only the veterans who seek care at the facilities, but

patients nationwide.

Mr. FULLER. Senator, on behalf of Paralyzed Veterans of America, we were actually astonished at this budget request. This is totally unprecedented. Granted, as we have seen the administration

and Congress almost double funding for NIH research, the VA research program sort of limps along with little increases every year

of $5 or $10 million or something of that nature. But to swoop in

in one stroke and to call for a reduction of $50 million, which we

anticipate in both the grant money and the indirect support funding, would reduce VA research back to 1999 levels.

When you are talking about losing 500 researchers, you are not

talking about guys and gals who are just sitting in a laboratory.

These are clinician researchers. These are doctors and nurses who

work certainly in the laboratory doing research, but they are also

there at the VA treating a veteran patient and this would be a

stunning loss to a program which has received Nobel prizes and

then TOP awards both nationally and internationally and we certainly hope that Congress can do something to set this straight.

Mr. JONES. We agree, Senator. The research is clinical research.

It is applied to veterans almost immediately on discovery. It is not

theoretical or basic research, and that is one of the marks that

makes the difference between VA research and National Institutes

of Health research. It is applied at the base where delivery of

health care is done. So it is an important element and could have

adverse effects on the health of veterans.

Senator GRAHAM. If I could move to another issue, The Independent Budget raises some questions about VA’s proposal for

achieving management efficiencies. In this budget, those efficiencies are projected to result in a cost reduction of approximately

$1 billion.

Based on previous VA management efficiency programs, what do

you think might result from the one that is suggested in this budget in terms of service to beneficiaries, cuts to employees, and reductions in particularly specialty programs?

Mr. FULLER. When you look at a figure that large, Senator, of $1

billion, and you figure that the VA appropriation, the largest

amount of it is in domestic discretionary funding, and the cost of

VA health care is basically based upon the cost of FTE, of people,

certainly there is equipment and construction and all those other

38

things, but where you achieve the savings are through people. And,

if you have to cut people, then you are cutting services to veterans

and you are cutting both the quantity of the services you can provide but also the quality of those services.

This, as you well know, is a standard trick of all administrations

in every annual budget to try to force imaginary and unrealistic

management efficiencies as just being part of their bottom line and

they are never achieved.

Senator GRAHAM. This is especially true in my State, but it is

also a national phenomenon that the veteran population is aging.

My own brother, who was a radar operator on a B–29 in the Second World War, just had his 80th birthday. How well prepared do

you think VA is for this increasingly older population in areas such

as providing community care so that veterans don’t have to be unnecessarily institutionalized, and where they do require institutionalization, having facilities that will be appropriate to their

needs and provide a quality of service?

Mr. GAYTAN. I can say the American Legion is very concerned

with the budget proposal that would reduce long-term care beds.

We support first meeting the mandates of the Millennium Health

Care Act, which they aren’t doing, but then aside from not reaching

those goals, to propose a budget that would reduce long-term care

beds which are going to be needed by that very population of veterans that you mentioned, those aging veterans who are turning to

long-term care, and when the VA can’t supply it, then they are offering a budget that reduces the existing long-term care beds. The

American Legion is very concerned that VA will be unable to meet

the mandate of these aging veterans as they turn to long-term

health care to the VA.

Mr. FULLER. From PVA’s standpoint, of course, long-term care

issues are our great interest and a necessity of all our membership.

Of course, the last thing in the world we want for anyone, any person with a disability, is to be institutionalized if there is an alternative to that institutionalization.

That being said, of course, we have no real direct long-term care

policy in the United States, either in the public or private sector,

and it is one of the embarrassments for our country, when we compare our system with other countries of the world.

The VA could serve as the most shining example of how to put

together an enlightened long-term care policy if they would provide

the resources to do it. The Congress and this Committee required

the VA a couple years ago by statute to maintain a floor for the

number of nursing home beds. They have ignored that statutory requirement and this particular budget calls for a reduction of 5,000

nursing home beds. They claim, on the other hand, that they are

going to be increasing their home and community-based programs,

which is admirable, but, of course, they never really meet the targets that they say that they are going to meet. You wind up with

a gap in the middle of services between inpatient and home and

community-based programs. There really ought to be a way for the

Congress to—and you have done yeoman work in this committee in

trying to force the VA into doing the right thing as far as long-term

care is concerned, but we have got a long way to go, still.

39

Chairman SPECTER [presiding]. Senator Graham, thank you very

much for holding the fort and thank you for your patience and the

fact that you have been patient. It is hard to get our time to any

extent, as you have found out, but now we will begin the testimony.

Mr. Gaytan, I had introduced you, so if you will proceed.

STATEMENT OF PETER S. GAYTAN, PRINCIPAL DEPUTY

DIRECTOR, VETERANS AFFAIRS AND REHABILITATION,

THE AMERICAN LEGION

Mr. GAYTAN. Thank you, Mr. Chairman. The American Legion,

as you know, continues a proud tradition of advocating for funding

to ensure America’s veterans receive the health care and benefits

they have earned through their honorable service to this country.

As American service members continue to fight for our freedom in

a number of countries worldwide, it is the responsibility of this

Congress to provide a budget that will allow VA to fulfill its mission.

In the fiscal year 2005 budget request, there is a continued emphasis on the treatment of the core mission veteran population.

The term ‘‘core mission veteran population’’ does not appear in

Title 38. In 1998, eligibility reform ensured all eligible veterans

could seek health care through VA, not simply those designated as

the core mission veteran population. Since then, we have seen VA

shut its doors to Priority Group 8 veterans.

Tailoring the patient population to meet the budget was not the

intent of Congress when VA eligibility was reformed. The American

Legion urges this committee to fund VA at a level that will ensure

all veterans have access to the VA health care system. The VA

budget must reflect the true demand for care.

Today, veterans continue to suffer as a result of a system that

has been routinely underfunded, is now ill-equipped to handle the

large influx of veterans waiting to use their services. Veterans continue to experience long waiting times for medical appointments as

well as long waiting times for claims adjudication.

The American Legion applauds Secretary Principi for his efforts

to reduce the extreme backlog of patients waiting to receive care

at VA facilities and we urge VA to continue to implement practices

that will eliminate the backlog systemwide.

Last year, as I mentioned earlier, the American Legion initiated

the ‘‘System Worth Saving’’ initiative. National Commander Ron

Conley visited 60 Veterans’ Affairs medical centers, and so far this

year, a team of Legionnaires has visited more than 30 facilities. We

are learning that one of the main issues of concern is the increased

medical care collection fund targets. Medical center directors are

concerned over the significant increases in their medical care collection fund goals and what impact the restriction on enrolling any

Priority Group 8 veterans will have on their ability to meet these

goals.

The American Legion shares their concern and we are also concerned about the impact of certain proposals included in the fiscal

year 2005 budget request. The American Legion opposes the continuation of the suspension of enrollment of new Priority Group 8

veterans. Denying veterans access to VA health care, particularly

while the Nation is at war, is the wrong message to send, not only

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to the members of the all-volunteer force, but also to the young

men and women who may be considering a life of service in the

U.S. Armed Forces.

The American Legion also opposes the implementation of a $250

annual enrollment fee for non-service connected Priority Group 7

and 8 veterans. The American Legion would urge Congress to once

again reject this proposal, just as it did last year. While the American Legion applauds the initiative to exempt any hospice care

from copayments and to exempt former POWs from copayments for

extended care services, we do not support increasing the pharmacy

copay from $7 to $15.

Additionally, the American Legion opposes the proposed regulatory change that would increase outpatient primary care copayments from $15 to $20. The American Legion would rather VA seek

reimbursement from CMS for all enrolled Medicare-eligible veterans being treated for non-service connected medical conditions

before they try to balance the budget on the backs of Priority

Group 7 and 8 veterans.

The American Legion is very concerned with the proposed reduction in long-term care beds, as I mentioned earlier. VA must meet

the mandates of the Millennium Health Care bill, and eliminating

long-term care beds is not the answer. The American Legion recommends $30 billion for VA medical

care without the inclusion of MCCF collections. The American Legion continues to advocate for all MCCF collections to be added to

the budget numbers and not be treated as an offset to the budget.

Regarding Veterans’ Benefits Administration, the American Legion is committed to ensuring VA will adjudicate veterans’ claims

fairly and impartially within a reasonable amount of time, and I

think I expressed that during our Q and A earlier.

The American Legion is pleased, however, with the fiscal year

2005 budget request proposal to address the influx of claims resulting from returning service members from Operation Enduring

Freedom and Operation Iraqi Freedom. These deserving veterans

should not be told to wait in line when turning to VBA.

Chairman SPECTER. Mr. Gaytan, would you mind summarizing?

Mr. GAYTAN. Yes.

Chairman SPECTER. You are 50 percent over time now.

Mr. GAYTAN. Yes, sir. I apologize. I just want to mention or reaffirm the American Legion’s support for mandatory funding. We

fully support designating VA medical care as a mandatory funding

item within the Federal budget.

I apologize for extending my time and I appreciate your patience.

Chairman SPECTER. Thank you. Thank you very much, Mr.

Gaytan.

[The prepared statement of Mr. Gaytan follows:]

PREPARED STATEMENT OF PETER S. GAYTAN, PRINCIPAL DEPUTY DIRECTOR, VETERANS AFFAIRS AND REHABILITATION, THE AMERICAN LEGION

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to present the views of the 2.8 million members

of The American Legion regarding the Department of Veterans Affairs’ (VA) fiscal

year (FY) 2005 budget request. The American Legion continues to advocate adequate funding levels to ensure America’s veterans receive the health care and benefits they have earned through their honorable service to this country. As America’s

soldiers, sailors, airmen, and Marines continue to fight in more than 130 countries

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worldwide, this Nation must fulfill its obligation ‘‘. . . to care for him who has borne

the battle, and for his widow and his orphan.’’

In the fiscal year 2005 VA budget request, there is a continued emphasis on focusing resources for medical treatment of the core-mission veteran population. The

term core-mission veteran population does not appear in Title 38, United States

Code. In 1996, Congress passed VA eligibility reform legislation. It was not until

1998 that VA finally established the rules to enforce the statute. Eligibility reform

ensured all eligible veterans could seek health care through VA, not simply those

designated as the core-mission veteran population. Tailoring the veteran population

to meet the budget was not the intent of Congress when it reformed access eligibility. The American Legion believes VA must be funded at a level that will ensure

all eligible veterans have access to the VA health care system. The VA budget must

reflect the true demand for care.

Once again, the Administration attempts to place the burden of financing VA

health care on the backs of veterans. The fiscal year 2005 budget request contains

provisions that would increase prescription co-payments and create an annual enrollment fee. These legislative initiatives target those Priority Group 7 and 8 veterans who are currently enrolled in the system. At the same time, VA continues to

deny enrollment of any future Priority Group 8 veterans who could help shoulder

this burden. These are the very veterans required to pay VA’s co-payments and

make third-party reimbursements for their health care. Rationing health care to

America’s veterans is not the solution to VA’s accessibility crisis. The American Legion supports repealing the suspension of enrollment of Priority Group 8 veterans.

We applaud the Administration efforts to alleviate co-payments for veterans receiving hospice care and former prisoners of war. The American Legion supports

provisions within the budget request that would increase the income threshold from

the Pensions level of $9,894 to the aid and attendance level of $16,509 for certain

Priority Group 2–5 veterans. This would help reduce the pharmacy co-payment for

those veterans struggling to meet the sky-rocketing cost of health care.

In addition, The American Legion supports provisions to allow VA to pay for

emergency room care at non-VA facilities for enrolled veterans. This will prevent

any delays in treating life threatening injuries or illnesses for enrolled veterans not

in close proximity to a VA facility. During visits to VA facilities under The American

Legion’s ‘‘System Worth Saving’’ initiative, Past National Commander, Ronald

Conley discovered many VA facilities operated under a ‘‘divert’’ policy that imperiled

veterans by denying them immediate access to health care.

The American Legion is equally concerned with VA’s continued efforts to create

the new ‘‘VA Advantage’’ Medicare plan that would offer limited health care services

to Priority Group 8 veterans 65 or older with Medicare Part B. Keep in mind that

only nonservice-connected veterans who fall above the geographical means test and

are Medicare-eligible will be considered under this proposal. Priority Group 8 veterans who are not Medicare-eligible will simply continue to be denied access to VA

medical care.

Indian Health Services and TRICARE for Life are classic examples of effective

Medicare and Medicaid Federal partners. Since over half of VA’s enrolled patient

population are Medicare-eligible veterans, The American Legion strongly believes

Congress should consider passing legislation to ensure VA is reimbursed for treatment of Medicare-eligible veterans for allowable, nonservice-connected medical conditions.

The fiscal year 2005 budget request must provide an adequate level of funding

to eliminate the backlog of veterans waiting to receive care, to meet the needs of

returning servicemembers who must now receive health care from VA, and to once

again allow Priority Group 8 veterans to receive timely access to quality VA medical

care through the very system created to meet their unique health care needs.

THE AMERICAN LEGION’S BUDGET REQUEST FOR SELECTED DISCRETIONARY PROGRAMS

FOR VA IN FISCAL YEAR 2005

The American Legion strongly recommends Congress provide VA with the following specified funding in fiscal year 2005:

Counts Budget Request

Medical Care ...................................................................................................................................... $30 billion*

Medical & Prosthetics Research ....................................................................................................... $445 million

Construction:

Major ............................................................................................................................................. $325 million

Minor ............................................................................................................................................. $255 million

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Counts Budget Request

State Grants for Extended Care Facilities ........................................................................................ $120 million

State Grants for Veterans’ Cemeteries ............................................................................................. $40 million

National Cemetery Administration ..................................................................................................... $160 million

General Administration ...................................................................................................................... $1.8 billion

* Third-party reimbursements should supplement rather than offset discretionary funding.

VETERANS HEALTH ADMINISTRATION

Medical Care

Over the past 20 years, VA has dramatically transformed its medical care delivery

system from a struggling collection of hospitals and homes to an integrated health

care system of excellence that leads private and other government health care providers in almost every measure. The quality of care that is provided through the

VA health care system is exemplary. However, the quality of care is irrelevant when

access to that care is impeded.

Today, there are over 25 million veterans. As more veterans choose to use VA as

their primary health care provider (over 8 million veterans enrolled or waiting to

enroll), the strain on the system continues to grow. The American Legion fully supported the enactment of Public Law 104–262, the Veteran’s Health Care Eligibility

Reform Act that opened enrollment in the VA health care system. Many veterans

who, until this time, were restricted from VA health care in the 1980’s were once

again able to gain access. Veterans recognize that the Veterans Health Administration provides affordable, quality care that they cannot receive anywhere else.

The astronomical growth of Priority Groups 7 and 8 veterans seeking health care

at their local VA medical facility resulted in over 300,000 veterans being placed on

waiting lists regardless of their assigned Priority Group. As mentioned earlier, fiscal

year 2003 saw the suspension of enrollment of new Priority Group 8 veterans due

to this growth in enrollees. The American Legion does not agree with the decision

to deny health care to veterans simply to ease the backlog. Denying earned benefits

to eligible veterans does not solve the problems resulting from an inadequate budget.

The simple fact is VHA does not have the funding needed to treat all veterans

seeking care from VA. VHA operates under a constant cloud of fiscal uncertainty.

The fiscal year 2004 VA appropriations battle delayed much-needed funds until

more than 5 months into the fiscal year. Future spending projections, staffing levels,

equipment purchases, and structural improvements are all stalled if the funding is

not a certainty. Delayed funding means delayed services for deserving veterans who

rely on VA for their care.

In an effort to provide a stable and adequate funding process, The American Legion supports mandatory funding for veterans’ medical care, as well as Medicare reimbursement for VA.

MANDATORY FUNDING FOR VETERANS MEDICAL CARE

The American Legion believes that health care rationing for veterans must end.

It is time to guarantee health care funding for all veterans. The American Legion

has called for the current discretionary funding process, in which VA must compete

with other agencies for scarce budget dollars, to be replaced by a mandatory funding

formula for VA medical care. VA must be adequately funded to meet its own growth

and end intolerable waiting periods.

For over a decade, The American Legion has advocated allowing veterans to spend

their health care dollars on the health care system of their choice. The American

Legion believes the VHA can efficiently expand to meet the health care needs of the

men and women who have honorably served this Nation in its armed forces—in war

and in peace.

When Congress opened access to the VA health care system, many veterans believed VA was their best health care option and newly eligible veterans began seeking care at VA. Since the Centers for Medicare and Medicaid Services (CMS), the

nation’s largest public health insurance program, does not offer its beneficiaries the

full continuum of care or a substantive prescription benefit program, many Medicare-eligible veterans chose to enroll in VHA specifically to receive quality health

care and access to an affordable prescription program. Although the Department of

Defense’s TRICARE and TRICARE for Life require military retirees to make co-payments or pay premiums, they do not provide for specialized care (like long-term

care) many military retirees may need; therefore, many military retirees chose to

also enroll for VA care to meet their unfulfilled medical needs.

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Veterans continue to suffer as a result of a system that has been routinely under

funded and is now ill-equipped to handle the large influx of veterans waiting to use

their services. Veterans continue to endure extensive waiting times for medical appointments, as well as unacceptably long waiting times for claims adjudication.

Funding for VA health care currently falls under discretionary spending within

the Federal budget. The VA health care budget competes with other agencies and

programs for limited Federal dollars each year. The funding requirements of health

care for service-disabled veterans are not guaranteed under discretionary spending.

VA’s ability to treat veterans with service-connected injuries is dependent upon discretionary funding approval from Congress each year.

However, under mandatory spending, VA health care would be funded by law for

all enrollees who meet the eligibility requirements, guaranteeing annual appropriations for the earned health care benefits of veterans.

The American Legion believes it is disingenuous for the government to promise

health care to veterans and then make it unattainable because of inadequate funding. Rationed health care is no way to honor America’s obligation to the brave men

and women who unselfishly put our nation’s priorities in front of their own needs.

Mandatory funding for VA health care will help ensure timely access to quality

health care for America’s veterans.

Mandatory funding of VA medical care would not prohibit the use of other revenue streams to meet fiscal obligations, such as co-payments and third-party reimbursements from all health care insurers, both public and private.

THIRD PARTY REIMBURSEMENT AND MEDICAL CARE COLLECTION FUNDS

Public Law 105–33, the Balanced Budget Act of 1997, established the VA Medical

Care Collections Fund (MCCF) and requires that amounts collected or recovered

after June 30, 1997, be deposited into this fund. The MCCF is a depository for collections from third party insurance, outpatient prescription copayments and other

medical charges and user fees. The funds collected may only be used for providing

VA medical care and services and for VA expenses for identification, billing, auditing and collection of amounts owed the Government.

Technically, the MCCF is not considered a Treasury offset because the funds collected do not actually go back to the Treasury account, but remain within VHA and

are used as operating funds. Instead, in developing a budget proposal, the total appropriation request is reduced by the estimate for MCCF for the fiscal year in question. We fail to see the difference in the net effect to the VISN’s and VAMC’s. Offsetting estimated MCCF funds largely defeats the purpose of realigning VHA’s financial model to more closely approximate the private sector. The American Legion adamantly opposes offsetting annual VA discretionary funding by the MCCF recovery.

Implementation by VHA of the Revenue Cycle Enhancement Plan has a dramatic

effect on the amount of revenue collected. Resuming in early fiscal year 2002 it has

resulted in significantly higher receipts than projected. VHA doubled the amount expected in fiscal year 2004 from $1.3 billion to 2.1 billion. However, any system can

stand improving and agency models are available that clearly illustrate the efficiencies that can be gained through practical application. Considering that VA is

prohibited from collecting third-party reimbursements from the nation’s largest

health care insurer—CMS—and the vast majority of VA enrolled patient population

are Medicare-eligible, VA’s MCCF program has the potential of becoming even more

effective in the recovery of third-party reimbursements.

MEDICARE REIMBURSEMENT TO MCCF

As do all working citizens, veterans pay into the Medicare system without choice.

A portion of each earned dollar is allocated to the Medicare Trust Fund. Although

veterans must pay into the Medicare system, they cannot use their Medicare benefits at any VA health care facility. VA cannot bill Medicare for the treatment of

Medicare-eligible veterans. The American Legion does not agree with this policy and

supports Medicare reimbursement for VHA for the treatment of allowable, nonservice-connected medical conditions of enrolled Medicare-eligible veterans. As a

Medicare provider, VHA should be authorized to bill and collect allowable thirdparty reimbursements from the Medicare Trust Fund for the treatment of nonservice-connected medical conditions of enrolled Medicare-eligible veterans.

Since VA is working with CMS contractors for the purpose of providing VA with

a Medicare-equivalent remittance advice (MRA) for veterans who are using VA services and are covered by Medicare, the American Legion recommends including all

Medicare-eligible veterans assigned to Priority Groups 7 and 8. Under the Veterans

Equitable Resource Allocation (VERA) formula, enrolled Priority Group 7 and 8 vetVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
44

erans are not included in the current VERA formula that ultimately results in an

inequitable distribution in resources. The fiscal year 2005 budget optimistically projects a $2.4 billion revenue stream

attributed to third-party collections, but still supports the suspension of Priority

Group 8 veterans from enrolling in VA.

As The American Legion continues to visit VA facilities nationwide as part of the

‘‘System Worth Saving’’ initiative, we are hearing first-hand from facility leadership

of the problems that exist with increased third-party collection rates. During a recent visit to a VAMC, the facility staff stated that their fiscal year 2004 MCCF collection goal was ‘‘not realistic’’. They added that the goal is probably ‘‘not attainable

as long as Category 7 & 8 veterans who bring in the MCCF dollars are excluded

from using the system’’. The American Legion recommends $30 billion for Medical Care in fiscal year 2005

in addition to MCCF collections, as well as eliminating the MCCF offset and authorizing VA to collect third-party reimbursements from Medicare for the treatment of allowable, nonservice-connected medical conditions.

MEDICAL AND PROSTHETICS RESEARCH

VA Medical and Prosthetic Research has a history of productivity in advancing

medical knowledge and improving health care, not only for veterans, but all Americans. VA research has led to the creation of the cardiac pacemaker, nicotine patch,

and the Computerized Axial Tomography (CAT) scan, as well as other medical

breakthroughs. Over 3800 VA physicians and scientists conduct more than 9,000 research projects each year involving more than 150,000 research subjects.

The VA Medical and Prosthetic Research budget has not kept pace with inflation

during the past 15 years. It is essential that Congress and the Administration support strong medical and prosthetic research programs within VA so that veterans

and all citizens continue to benefit from the exceptional research capability of the

Department.

The American Legion supports adequate funding for VA biomedical research activities. Congress and the Administration should encourage acceleration in the development and initiation of needed research on conditions that significantly affect

veterans—such as prostate cancer, addictive disorders, trauma and wound healing,

post-traumatic stress disorder, rehabilitation, and others—jointly with the Department of Defense (DoD), the National Institutes of Health (NIH), other Federal agencies, and academic institutions.

The American Legion recommends $445 million for Medical & Prosthetics Research in fiscal year 2005.

MEDICAL CONSTRUCTION AND INFRASTRUCTURE SUPPORT

Major Construction

Over the past several years, The American Legion has testified on the inadequacy

of funding for VA’s major and minor construction programs. Buildings continue to

be neglected and the persistent deterioration results in unsafe environments similar

to unsanitary conditions discovered at the VAMC in Kansas City, Missouri. Of

course, those that pay the price of this neglect are the veterans who are receiving

care at these facilities.

A 1998 study recommended that VA fund two to 4 percent of Plant Replacement

Value (PRV) per year to reinvest in new facilities to replace aging facilities. The conclusion of this analysis was that VA’s reinvestment rate of .84 percent was significantly lower than the benchmark of 2 percent. This equates to hundreds of millions

of dollars that conceivably could be used for major construction projects. Private consultants have been warning for years that dozens of VA patient buildings were at

the highest level of risk for earthquake damage or collapse yet funding continues

to be woefully short of what is actually needed to correct this problem.

The American Legion supports legislation that would provide $1.8 billion over the

next three fiscal years to improve, replace, update, renovate or establish facilities

within the existing VA infrastructure. These funds would be exempt from 38 USC

§ 8103 (a)(2) which requires enabling legislation for construction procurements in excess of $4 million or leases in excess of $600,000 per year. This money would be

available at the discretion of VA for:

• Seismic protection;

• Life safety upgrades;

• Utility improvements; and

• Accommodations for disabled persons.

Facilities eligible for improvements include:

• Blind rehabilitation centers;

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• Inpatient and residential programs for seriously mentally ill veterans and veterans with substance abuse disorders; • Physical medicine and rehabilitation activities; • Long term care including adult day care, nursing facilities and geriatric research and education facilities; • Amputation care facilities including prosthetics and orthotics and sensory aids; • Spinal cord and traumatic brain injury centers; • Women’s veterans’ health programs; and • Hospice and palliative care facilities.

The American Legion is concerned that veterans are needlessly being placed in

harm way within existing VA facilities. There are over 60 patient care and other

related use buildings in danger of collapse or heavy damage in the event of an

earthquake. The sorely needed seismic corrections, along with the necessary ambulatory care and patient safety projects, will require a significant increase in funding

to address VHA’s current major construction requirements. This legislation will go

a long way toward correcting these deficiencies.

The American Legion further supports legislation that would authorize the following major medical construction projects at the amounts specified: • Construction of two bed towers to consolidate inpatient sites in inner-city Chi- cago at the West Side Division in an amount not to exceed $98.5 million. • Construction in Clarke County, Nevada of a multi-specialty outpatient clinic to

replace the leased Las Vegas ambulatory care center and a satellite office for the

Veterans Benefits Administration in an amount not to exceed $97.3 million.

• Seismic corrections to strengthen Medical Center Building 1 at VA health Care

System at San Diego, California not to exceed $48.6 million.

• Renovation of all inpatient care wards at the VA West Haven, Connecticut

healthcare facility at a cost not to exceed $50 million.

The American Legion recommends $325 Million for Major Construction in fiscal

year 2005.

MINOR CONSTRUCTION

Similar to VA’s major construction program, VA’s minor construction program has

likewise suffered significant neglect over the past several years. The requirement

to maintain the infrastructure of VA’s buildings is no small task. When combined

with the added cost of the CARES program recommendations and the request for

minor infrastructure upgrades in several research facilities, it is easy to see that

a major increase is crucial.

The American Legion recommends $255 Million for Minor Construction in fiscal

year 2005.

STATE EXTENDED CARE FACILITY GRANTS PROGRAM

State Veterans Homes were founded for indigent and disabled Civil War veterans

beginning in the late 1800’s and have continued to serve subsequent generations of

veterans for over one hundred years. Under the provisions of 38 USC, VA is authorized to make payments to states to assist in the construction and maintenance of

State Veterans Homes. Today, there are 109 State Veterans Homes facilities in 47

states with over 23,000 beds providing nursing home, hospital, and domiciliary care.

The State Veterans Home Program has proven to be a cost-effective provider of

quality care to many of the nation’s veterans and this program is an important adjunct to VA’s own nursing, hospital, and domiciliary programs. The Grants for Construction of State Veterans Home Program provides funding for 65 percent of the

total cost of building new veterans homes. VA has not been able to keep pace with

the number of grant applications; and currently there is over $120 million in unfunded new construction projects pending.

Recognizing the growing long-term health care needs of older veterans, it is essential that the State Veterans Home Program be maintained as a viable and important alternative health care provider to the VA system. The American Legion supports increasing the amount of authorized per diem payments (40 percent) for nursing home and domiciliary care provided to veterans in State Veterans Homes. The

American Legion also supports the provision of prescription drugs and over-thecounter medications to State Homes Aid & Attendance patients, along with the payment of authorized per diem to State Veterans Homes. Additionally, VA should

allow for full reimbursement of nursing home care to 70 percent service-connected

veterans or higher, if the veteran resides in a State Veterans Home. The National

Association of State Veterans Homes and VA should develop mutual planning efforts, enhanced medical sharing agreements, and enhanced-use construction contracts with qualified providers.

46

The American Legion recommends $120 Million for the State Extended Care Facility Grants Program in fiscal year 2005.

NURSING HOME CARE

Except for the occasional congressional initiative to build nursing homes in individual states or congressional districts and some CARES planning initiatives, VA

has no plans to expand its own nursing home capacity.

VA has failed to fulfill the promise of its landmark mid–1980’s study, Caring for

the Older Veteran. That study recommended large increases in both inpatient and

alternative programs, such as respite, hospice, adult-day and home-based care, so

that VA could approach the needs of World War II veterans with meaningful, health

and end-of-life care programs, on both institutional and non-institutional bases. This

has not been achieved.

Millennium Act required VA to maintain its in-house NHU bed capacity at the

1998 level of 13,391. This capacity has significantly eroded rather than been maintained. In 1999, there were 12,653 VA NHU beds, 11,812 in 2000, 11,672 in 2001

and 11,969 in 2002. VA estimates it will have only 9,900 beds in 2003 and 8,500

in 2004. VA has claimed that it cannot maintain both the mandated bed capacity

and implement all the non-institutional programs required by the Millennium Act.

VA should be required to maintain its nursing home capacity as intended by Congress. VA must create incentives and receive appropriate funding to maintain its

NHCU beds rather than abandon them to alternative sources. These beds are a vital

component of the VA Long Term Care (LTC) continuum of care, and they are essential in addressing the needs of the aging veteran population.

According to VA’s fiscal year 2002 Annual Accountability Report Statistical Appendix, in September 2002, there were 93,071 World War II and Korean War era

veterans receiving compensation for service-connected disabilities rated seventy percent or higher. The American Legion opposes provisions in the fiscal year 2005

budget request that would reduce funding for VA nursing homes by $270.5 million

and reduce staffing by 2,500 full time employees. VA should comply with the intent

of Congress to maintain an adequate LTC nursing home capacity for those disabled

veterans who are in the most resource intensive groups; clinically complex, special

care, extensive care and special rehabilitation case mix groups. The Nation has a

special obligation to these veterans. They are entitled to the best care that the VA

has to offer.

CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

The CARES process was designed to take a comprehensive look at veterans’

health care needs and services. However, because of problems with the model in

projecting long-term care, domiciliary, and outpatient mental health care needs into

the future, specifically to 2012 and 2022, these critical health care services were

omitted from the CARES planning. An extensive look, such as that proposed by the

CARES initiative, cannot possibly be accomplished when an assessment of need for

those services is missing from the process.

The Draft National Plan contains several proposals to realign campuses and consolidate services. These realignments were introduced in the eleventh hour, with no

stakeholder input sought by VA. There are 13 such realignments proposed in the

plan. The American Legion does not support the closing of a VA facility just for the

sake of saving money while veterans are denied care.

The Draft National CARES Plan expects substantial renovations and expansions

as consolidations happen. A great deal of money will have to be allocated up front

to ensure the new construction and renovations are completed. The American Legion understands that CARES is an ongoing process and when dealing with vacant

space and renovations, incremental changes may have to take place. The price tag

for all of the construction and renovations proposed is in the billions of dollars. With

the proposed consolidations and transferring of services, it is imperative that veterans not experience delays in the delivery of their care. No facilities should be

closed, disposed of, or downsized until the proposed movement of services is complete and veterans are being treated in the new locations.

Funding should be provided to ensure that any realignment resulting from the

CARES initiative does not lead to the suspension of services for veterans seeking

care.

VETERANS BENEFITS ADMINISTRATION

Over the years, Congress has established a system of laws that provide veterans

and their survivors a spectrum of the services and benefits earned by virtue of the

veteran’s service in the Armed Forces of the United States. Since 1938, VA has had

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the responsibility of implementing these laws in a pro-claimant, informal, ex parte,

and nonadversarial manner. The American Legion continues to closely monitor the

programs and policies of the Veterans Benefits Administration (VBA) and assess

whether or not these are truly meeting the needs of veterans and their families. The

American Legion has a number of concerns about the current State of claims adjudication and the level and quality of service being provided by VBA and the Board

of Veterans Appeals.

The American Legion emphasizes that it is committed to ensuring that VA carries

out its historic and statutory responsibility to provide medical care and benefits to

those who have served and sacrificed in the defense of this nation. Veterans have

the right to expect that VA will adjudicate their claims fairly and impartially within

a reasonable period of time. We believe there are still too many instances where veterans and other claimants are being arbitrarily denied the benefits to which they

are entitled.

Over the course of fiscal year 2002 and fiscal year 2003, VBA has been able to

make notable progress toward realizing Secretary Principi’s often stated goal of the

reducing the number of pending cases down to 250,000 and cutting the average

processing time down to 100 days by the end of this month. This has been a major

challenge for VBA. In March 2002, at its peak, the regional offices had a backlog

of over 423,000 cases that required rating action. Of these, 40 percent were over 6

months old. There were another 147,000 cases in which some other type of action

was pending. In addition, there were approximately 107,000 pending appeals, which

included over 22,000 cases that had been remanded by the Board of Veterans Appeals. In human terms, thousands of these sick and disabled veterans or their survivors were waiting a year or more for a regional office to make a decision on their

claim. If the claim was denied and they pursued an appeal, their wait could extend

another two to 3 years or more. Such delays caused increased stress as well as serious financial hardship. The American Legion has commended the Secretary for his

commitment to improving the regional office claims adjudication process. Recognizing the fact that many of these backlogged claims were from elderly veterans,

one of the Secretary’s first service improvement initiatives was the establishment

of the Tiger Team at the Cleveland VA Regional Office. This unit has been primarily

responsible for expedited action on the claims of older veterans, particularly those

aged 70 and older, whose cases have been pending for a year or more.

The Tiger Team initiative has been a success and they too should be commended

for their efforts and dedication. However, it is regrettable that a sick and disabled

veteran has to wait months, if not a year or more for action on their claim for benefits. Because of processing delays and necessity of an appeal to the Board of Veterans Appeals (the Board or BVA) or the Federal courts, many veterans have died

before receiving a final decision on their case. In the view of The American Legion,

the regional offices should be more concerned with people than process.

It is clear that there has been a dramatic reduction in the claims backlog in the

past year and a half. This decline means that regional offices are taking less time

to adjudicate claims than in the past. Last year at this time, there were some

358,000 claims awaiting final action. Of these, almost 36 percent were over 6

months old. At the end of August, VBA reported there were about 265,000 pending

claims and, of these, about 20 percent are over 6 months old. The average processing time has been reduced from 224 days in June 2002 to about 160 days currently. However, given the complexities of the claims adjudication process and requirements of the law, numbers do not tell the whole story and ‘‘faster’’ is not always ‘‘better.’’

In its annual budget request over the past several years, VBA has reported a

steady decrease in claims adjudication error rate. At the end of 1997, the error rate

had been 36 percent. In 1998, it was 30 percent. It increased slightly in 1999 to

32 percent. In 2000, there was a dramatic increase to 41 percent. The reported error

rate declined to 22 percent in 2001. It was 20 percent in 2002 and, in 2003, it had

declined to only 12 percent. The error rate goal for fiscal year 2004 is 10 percent.

Over this same period, The American Legion’s regional office quality review visits

do not confirm a substantial and dramatic improvement in the overall error rate.

There is little doubt that the vast majority of regional office adjudicators are dedicated, hardworking men and women. They continue to operate under tremendous

stress to meet the Department’s and veterans’ expectations. However, The American

Legion believes the effectiveness of VBA’s quality improvement efforts has been severely compromised by the drive to achieve the Secretary’s mandated production

quotas. Veterans and other claimants are being short-changed by VBA policies and

procedures that tend to promote less than adequate claims development, premature

denials, and under-evaluations.

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The lack of proper and appropriate action on thousands of claims continues to result in a high level of claimant dissatisfaction and a steady influx of new appeals

to the regional offices. There are now over 134,000 pending appeals with some

111,500 requiring adjudicative action. Even though there is a concerted effort to resolve appeals at the regional office through the Decision Review Officer program,

most of these cases will eventually go to the Board of Veterans Appeals for a final

decision on the merits of the claim.

The straight line staffing level requested for fiscal year 2004 is based on the assumption that, with the accomplishment of the Secretary’s backlog reduction goals,

VBA would be able to refocus its efforts to more effectively address the quality-related problems and other long-standing issues. Given past performance, The American Legion continues to believe that this is an unrealistic policy and will not afford

VBA the flexibility to cope with current workload demands, let alone some unanticipated contingency, such as supporting the Department of Defense new Combat-related Special Compensation Program and the additional resources that will be required to comply with the Huston decision. The American Legion recognizes that

VBA has made a concerted effort to hire additional staff in the last several years.

This policy of continuing growth is both prudent and necessary, given the increasingly complex nature of the claims and appeals process, the heavy volume of new

claims, and the ongoing need to buildup the core adjudication staff in anticipation

of the retirement of the more experienced regional office decisionmakers.

The American Legion is concerned with support in the budget request for legislation that would reverse the Allen vs. Principi court decision. Clearly, the intent of

this proposal is to overturn the 2001 decision of the United States Court of Appeals

for the Federal Circuit (the Federal Circuit or the Court) in Allen v. Principi 237

F.3d 1368 (Fed. Cir., 2001). The Court held that Congress, in enacting P.L. 96–466,

the ‘‘Omnibus Budget Reconciliation Act of 1990’’ (OBRA 90), did not intend to preclude compensation for an alcohol or drug-related disability resulting from or secondary to a non-willful misconduct service-connected disability. Prior to OBRA 90,

VA considered alcoholism and drug abuse disabilities unrelated to a service connected psychiatric disorder as willful misconduct. The term ‘‘willful misconduct’’ was

defined in VA regulations as a deliberate and intentional act involving conscious

wrongdoing or known prohibited action, with knowledge of or wanton and reckless

disregard of the probable consequences.

However, the definition noted that the mere technical violation of police regulations and ordinances would not, per se, constitute willful misconduct unless it is the

proximate cause of injury, disease, or death. VA’s policy was that the misconduct

bar to benefits did not apply to those veterans whose alcohol or drug addiction was

secondary to a service connection mental or physical disability. OBRA 90 specifically

provided in 38 U.S.C. §§ 1110 and 1131, that an injury or disease resulting from the

abuse of alcohol or drugs is not considered to have been incurred in the line of duty

and VA may not pay compensation for disabilities that are the result of ‘‘the veteran’s own willful misconduct or alcohol or drug abuse.’’ Under OBRA 90, VA as a

matter of policy and practice, would not grant secondary service connection for substance abuse, but would, where appropriate, incorporate the symptoms of alcohol

and drug abuse into the overall evaluation of the primary service connected disability. As an example, a veteran may have been rated for ‘‘PTSD with alcoholism.’’

In 1998, the United States Court of Appeals for Veterans Claims (CVAC), in Barela

v. West (11 Vet. App. 280) (1998), held that, while OBRA 90 provided for service

connection of alcohol and drug-related disabilities as being secondary to a service

connected disability, VA could not pay compensation for such disabilities.

BOARD OF VETERANS APPEALS

The reduction in the number and the average processing time of pending claims

represents only one aspect of VA’s overall case backlog, since not all claims can or

should be approved. When a veteran or other claimant receives an unfavorable decision either denying the claim in whole or in part, they have the right to appeal.

The number of appeals filed each year is a direct reflection of the level of claimant

satisfaction with the quality of the regional office adjudication. The action taken by

the Board of Veterans Appeals (BVA) is a further reflection and commentary on the

quality of regional office decisionmaking. Of those appeals decided in the first 10

months of fiscal year 2003, the Board affirmed the decisions of the regional office

only 38 percent of the time and rejected their decision in about 59 percent of the

cases. Such poor performance by the regional office adjudicators is of grave concern

to The American Legion, since it represents a tremendous waste of time and taxpayers’ money, and a hardship for thousands of veterans and their families. Clearly,

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VBA’s efforts to date have not effectively addressed the persistent systemic problems that adversely affect regional office claims processing and adjudication.

COURT OF APPEALS FOR VETERANS CLAIMS AND THE COURT OF APPEALS FOR THE

FEDERAL CIRCUIT

The regulations and procedures of both the VBA and the BVA will be fundamentally changed by several recent court decisions. The courts have held that VA, as

a matter of policy, had promulgated regulations that were misleading, basically unfair, and a violation of claimants’ right to full due process.

In 2002, there was a combined effort by the Board of Veterans Appeals and VBA

to try and improve the timeliness and quality of action on remanded appeals. By

alleviating some of the regional offices’ appellate workload, this would enable the

regional offices to devote more resources to resolving previous remands and further

reduce the backlog of pending claims. This initiative was prompted by the fact that

remands often sat in a regional office for months or even years with little or no action taken. In many instances, the development that was done would be inadequate

or incomplete and the Board had to remand the case two or three times, which

meant greater delay and hardship for the appellant. Rather than sending a case

back to the regional office, a unit was established within the Board to undertake

the development specified in the remand decision. If the decision included a benefit

grant, the unit could initiate the award, so there would be no delay in payment.

The American Legion supported the intent of this service improvement effort.

In a decision early last summer, the United States Court of Appeals for the Federal Circuit held that the BVA’s Development Unit was unlawful. As a result, there

are about 8,000 remands plus new remands that are in the process of being transferred from the BVA Development Unit to VBA’s Appeals Management Center

(AMC), which is located at the Washington VA Regional Office, for further development and readjudication. While generally supportive of the effort to try and improve

the handling of remands, there are problems in handling cases where the Board has

awarded benefits. The lack of action by the AMC to expedite payment action has

prompted several veterans to contact The American Legion for assistance. We are

hopeful that appropriate steps have now been taken by VBA to ensure this type of

problem does not recur. The AMC is projected to be fully staffed and operational

by December 2003. In the interim, remands are being referred to the Huntington,

West Virginia Regional Office and the Tiger Team in Cleveland for action. However,

the prior BVA Development Unit initiative and the current AMC leave unaddressed

the larger and more difficult issues relating to poor regional office decisionmaking,

incomplete development, inadequate VCAA notices, and premature denials. Furthermore, there does not appear to be any incentive for the regional offices to improve

their case development, nor is there any disincentive to keep them from certifying

cases, because the AMC have to do what they should have done. VBA must ensure

that the AMC does not become a dumping ground for the regional offices.

In a system with tens of thousands of claims to be processed, there is a constant

tension between management’s need to have cases decided as quickly as possible

and the statutory need to protect the claimant’s right by ensuring that any decision

made is proper and consistent with the law and regulations. For the past two and

a half years, VBA management has been emphasizing speed and production volume.

Under such pressure, there has been a tendency among some VBA managers and

adjudicators to ignore the law and VA’s own regulations and put bureaucratic convenience ahead of quality decisionmaking and the welfare and well being of the individual veteran and his or her family.

In the opinion of The American Legion, one of the key impediments to progress

on improving the quality of regional office decisionmaking and, thereby, claimant

satisfaction, has been VBA’s lack of compliance with both the letter and spirit of

the ‘‘Veterans’ Claims Assistance Act of 2000’’ (PL 106–475) (VCAA). The American

Legion was actively involved in the development of this landmark legislation. It was

designed to overcome the deficiencies and lack of clarity in the way VBA communicated with claimants and the way in which it developed claims. It made clear the

exact nature and extent of VA’s obligations and responsibilities to notify and to assist claimants. The idea was that, if claims were better developed, they could be

promptly and more accurately adjudicated, thereby improving service to claimants.

In the long run, these improvements should also reduce the overall appeals workload for the regional offices and the Board of Veterans Appeals. It was to be a ‘‘win/

win’’ situation for all parties. However, as we have seen thus far, VBA has generally

given lip service to the requirements of VCAA.

While claimants are provided what is termed a ‘‘VCAA’’ letter, little time or effort

goes into trying to help the individual veteran understand his or her claim and what

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evidence is going to be needed and who is responsible for developing it. Such letters

usually lack essential information regarding the individual’s claim and the evidence

needed to grant the benefit sought in the particular case. These are unnecessarily

long, confusing, nonspecific letters, which are filled with bureaucratic jargon. In

some of the cases reviewed during The American Legion’s regional office quality review visits, the information in many VCAA letters was found to be incorrect or not

even appropriate to the claim. Rather than facilitating the adjudication process, as

they were intended, these notice letters set the stage for an appeal to the BVA and

the Federal courts.

The American Legion’s concerns regarding the deficiencies in the VCAA letters

have been brought to Secretary Principi’s attention as well as discussed in testimony before the Veterans’ Affairs Committees on a number of occasions. Despite

these efforts, VBA policy on the use of this type of letter remained unchanged. However, as a result of the July 2003 decision by the United States Court of Appeals

for Veterans Claims (CVAC), in Huston v. Principi, VBA will now be forced to comply with the duty to notify and duty to assist provisions of title 38, United States

Code, sections 5103(a) and 5103A. VA will now be obligated to clearly tell the claimant what evidence to submit in order to obtain the benefits claimed. The American

Legion is disappointed that it took a court order to make VBA do what it should

have been doing since the enactment of the VCAA. We will be watching very closely

how VBA and Board of Veterans Appeals implement the Huston decision. Continued

strong oversight by the Veterans’ Affairs Committees will also be important in ensuring the VBA is, in fact, meeting its historic and statutory responsibilities to the

veterans of this nation.

GI BILL EDUCATIONAL BENEFITS

The American Legion commends the 108th Congress for its actions to improve the

current Montgomery GI Bill (MGIB). A stronger MGIB is necessary to provide the

Nation with the caliber of individuals needed in today’s Armed Forces. The American Legion appreciates the efforts that this Congress has made to address the overall recruitment needs of the Armed Forces and to focus on the current and future

educational requirements of the All-Volunteer Force.

Over 96 percent of recruits currently sign up for the MGIB and pay $1,200 out

of their first year’s pay to guarantee eligibility. However, only one-half of these military personnel use any of the current Montgomery GI Bill benefits. This is directly

related to the fact that current GI Bill benefits have not kept pace with the increasing cost of education. Costs for attending the average 4-year public institution, as

a commuter student during the 1999–2000 academic year was nearly $9,000. PL

106–419 recently raised the basic monthly rate of reimbursement under MGIB to

$650 per month for a successful 4-year enlistment and $528 for an individual whose

initial active duty obligation was less than 3 years. The current educational assistance allowance for persons training full-time under the MGIB—Selected Reserve is

$263 per month.

The Servicemen’s Readjustment Act of 1944, the original GI Bill, provided millions of members of the Armed Forces an opportunity to seek higher education.

Many of these individuals may not have been afforded this opportunity without the

generous provisions of that act. Consequently, these servicemen and servicewomen

made a substantial contribution not only to their own careers, but also to the economic well being of the country. Of the 15.6 million veterans eligible, 7.8 million

took advantage of the educational and training provisions of the original GI Bill. Between 1944 and 1956, when the original GI Bill ended, the total educational cost

of the World War II bill was $14.5 billion. The Department of Labor estimates that

the government actually made a profit because veterans who had graduated from

college generally earned higher salaries and therefore paid more taxes. Today, a

similar concept applies. The educational benefits provided to members of the Armed

Forces must be sufficiently generous to have an impact. The individuals who use

MGIB educational benefits are not only improving their career potential, but also,

making a greater contribution to their community, state, and nation.

The American Legion recommends the following improvements to the current

MGIB:

• The dollar amount of the entitlement should be indexed to the average cost of

a college education including tuition, fees, textbooks, and other supplies for a commuter student at an accredited university, college, or trade school for which they

qualify.

• The educational cost index should be reviewed and adjusted annually.

• A monthly tax-free subsistence allowance indexed for inflation must be part of

the educational assistance package.

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• Enrollment in the MGIB shall be automatic upon enlistment, however; benefits

will not be awarded unless eligibility criteria have been met. • The current military payroll deduction ($1,200) requirement for enrollment in

MGIB must be terminated. • If a veteran enrolled in the MGIB acquired educational loans prior to enlisting

in the Armed Forces, MGIB benefits may be used to repay those loans. • If a veteran enrolled in MGIB becomes eligible for training and rehabilitation

under Chapter 31, of Title 38, United States Code, the veteran shall not receive less

educational benefits than otherwise eligible to receive under MGIB. • A veteran may request an accelerated payment of all monthly educational benefits upon meeting the criteria for eligibility for MGIB financial payments, with the

payment provided directly to the educational institution. • Separating service members and veterans seeking a license, credential, or to

start their own business must be able to use MGIB educational benefits to pay for

the cost of taking any written or practical test or other measuring device. • Eligible veterans shall have 10 years after discharge to utilize MGIB educational benefits. • Eligible members of the Select Reserves, who qualify for MGIB educational benefits shall receive not more than half of the tuition assistance and subsistence allowance payable under the MGIB and have up to 5 years from their date of separation

to use MGIB educational benefits.

HOME LOAN GUARANTY PROGRAM

The American Legion believes that the current limit of VA Home Loan Guarantee

of $252,500 should be raised to $300,000 and that higher limits be established for

areas of the country where justified by prevailing real estate market conditions. In

San Francisco, California in 2002 the median price of a home was $482,300, an actual decrease of .3 percent from 2001. In Boston, Massachusetts the median price

of a home was $358,000; in the New York City Metro area, 285,600; and here in

Washington D.C. the median home cost $229,100 in 2002, up 19.8 percent from

$183,700 in 2001. Clearly, in these cities, the difference between many veterans

being able to secure financing for a decent home for his or her family and being

shut out of the market is due to the inadequate levels of the VA Home Loan Guarantee Program.

The American Legion also supports the recognition of VA Home Loan Guaranty

benefits in cases where both members of a married couple are eligible for the benefit. If both members are eligible to receive the benefit, both members should be allowed to use the benefit.

The American Legion is also concerned with a provision in the budget request

supporting legislation that would limit the VA Home Loan program to one-time use

for military members who separate after the legislation is passed and for all current

veterans 5 years after enactment. Veterans have earned the right to this benefit and

it should not be limited to one-time usage.

The VA Home Loan program is one of the core elements of the original Servicemen Readjustment Act of 1944, the GI Bill of Rights. This legislation is often referred to as ‘‘one of the most important pieces of social legislation ever enacted.’’

Successful participation in the VA Home Loan program should be rewarded, not restricted or terminated. Due to the transient nature of our society, many Americans

may experience several relocations based on business opportunities or upgrades in

their financial situations. Living the American dream of homeownership should be

encouraged and promoted as continuous economic stimulus opportunity.

NATIONAL CEMETERY ADMINISTRATION (NCA) THE NATIONAL CEMETERY SYSTEM

VA’s National Cemetery Administration (NCA) is comprised of 120 cemeteries in

39 states and Puerto Rico as well as 33 soldiers’ lots and monuments. NCA was established by Congress and approved by President Abraham Lincoln in 1862 to provide for the proper burial and registration of graves of Civil War dead. Since 1973,

annual interments in NCA have increased from 36,400 to over 84,800. Annual burials are expected to increase to more than 115,000 in the year 2010 as the veteran

population ages. Currently 59 national cemeteries are closed for casket burials. Most

of these can accept cremation burials, however, and all of them can inter the spouse

or eligible children of a family member already buried. Another 22 national cemeteries are expected to close by the year 2005, but efforts are underway to forestall

some of these closures by acquiring adjacent properties.

Maintaining cemeteries as National Shrines is one of NCA’s top priorities. This

commitment involves raising, realigning and cleaning headstones and markers to

renovate gravesites. The work that has been done so far has been outstanding, howVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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ever, adequate funding is key to maintaining this very important commitment. At

the rate that Congress is funding this work, it will take twenty-eight years to complete. The American Legion supports the Under Secretary for Memorial Affairs in

his goal of completing the NCA’s National Shrine Commitment in 5 years. This

Commitment includes the establishment of standards of appearance for national

cemeteries that are equal to the standards of the finest cemeteries in the world. Operations, maintenance and renovation funding must increased to reflect the true requirements of the National Cemetery Administration to fulfill this Commitment.

Congress must provide sufficient major construction appropriations to permit

NCA to accomplish its stated goal of ensuring that burial in a national or State cemetery is a realistic option by locating cemeteries within 75 miles of 90 percent of

eligible veterans.

P.L. 107–117 required NCA to build six new National Cemeteries. Fort Sill

opened in 2001 under the fast-track program, while the remaining five (Atlanta, Detroit, South Florida, Pittsburgh and Sacramento) are in various stages of completion. Additional acreage is currently under development in 10 national cemeteries,

columbaria are being installed in 4 and additional land for gravesite development

has been acquired at national cemeteries in 5 states. 9 national cemeteries are expected to close to new interments between 2005 and 2010. The rate of interments

in national cemeteries has increased from 36,400 in 1978 to 84,800 in 2001. This

rate is expected to rise to 115, 000 in 2015.

The average time to complete construction of a national cemetery is 7 years. The

report of a study conducted pursuant the Millennium Bill concluded that an additional 31 national cemeteries will be required to meet the burial option demand

through 2020. Legislation is currently pending in this session that will authorize the

establishment of 10 new national cemeteries in areas of the country facing a shortage of burial space. Together with the 6 national cemeteries under development,

this will go a long way toward fulfilling this need. NCA will be able to keep pace

with current demand for burial space if this legislation is enacted and fully funded

this year.

The American Legion urges Congress to provide sufficient major construction appropriations to permit NCA to accomplish its mandate of ensuring that burial in a

national cemetery is a realistic option for 90 percent of our nation’s veterans. The American Legion recommends $156 Million for the National Cemetery Administration in fiscal year 2005.

STATE CEMETERY GRANTS PROGRAM

The National Cemetery Administration (NCA) administers a program of grants to

states to assist them in establishing or improving state-operated veterans cemeteries through VA’s State Cemetery Grants Program (SCGP). Established in 1978,

the matched-funds program helps to provide additional burial space for veterans in

locations where there are no nearby national cemeteries. Through fiscal year 2002,

more than $169 million in grants has been awarded to states and the Territories

of Guam and the Northern Marianas, including 5 new State cemeteries and the improvement and/or expansion of 9 existing ones.

Under the Veterans Programs Enhancement Act of 1998, PL 105–261, VA may

now provide up to 100 percent of the development cost for an approved project. For

establishment of new cemeteries, VA can provide for operating equipment. States

are solely responsible for the acquisition of the necessary land. The American Legion recommends $40 Million for the State Cemetery Grants Program in fiscal year 2005.

Mr. Chairman, this concludes my testimony. I again thank the Committee for this

opportunity to express the views of The American Legion on VA’s fiscal year 2005

Budget Request and look forward to working with you and the members of the Committee to ensure VA is funded at a level that will allow all veterans to receive the

care they have earned through their service.

Chairman SPECTER. Our next witness is Mr. Richard Fuller, National Legislative Director of the Paralyzed Veterans of America.

Thank you for joining us, Mr. Fuller, and your full biographical resume will be placed in the record.

STATEMENT OF RICHARD B. FULLER, NATIONAL LEGISLATIVE

DIRECTOR, PARALYZED VETERANS OF AMERICA

Mr. FULLER. Thank you, Mr. Chairman. The balance of the panel

here represent the four organizations who co-authored The IndeVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00056 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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pendent Budget every year. This year’s 2005 Independent Budget is

available for every member of the committee and will be sent to

every member of the Senate.

[The Independent Budget follows:]

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Mr. FULLER. What we do in the interest of time and also so we

don’t repeat ourselves is that each organization takes a certain segment of The Independent Budget to testify on, and for the past 18

years, Paralyzed Veterans of America has worked on the health

care portion. I will address my comments to that today.

The Administration’s budget request for health care is a shocking

one, providing once again a woefully inadequate funding level for

sick and disabled veterans. Calling for only a $310 million increase

in appropriated dollars is a mere 1.2 percent increase over fiscal

year 2004. This is the smallest health care appropriation request

of any Administration in nearly a decade.

Indeed, the VA Under Secretary for Health testified just last

year that the VA requires a 13 to 14 percent increase just to keep

its head above water each year. Once again, we are faced by a request that relies too heavily on budgetary gimmicks and accounting

sleight-of-hand rather than on real dollars that veterans need.

The Administration is again resurrecting its user fee and increased copayment schemes, proposals that were soundly rejected

before and we hope they will be rejected again. Once again, we see

unrealistic management efficiencies utilized to mask how truly inadequate this budget is.

For fiscal year 2005, The Independent Budget recommends a medical amount of $29.8 billion. This amount represents an increase of $3.2 billion over the amount provided in 2004. For medical and prosthetic research, The Independent Budget is recommending $460 million. This represents a $54 million increase over

the 2004 amount. Sadly, the Administration has proposed cutting

research grants alone by approximately $21 million, which is absolutely unprecedented in recent history. Accepting this level of funding would set the research grant program back to fiscal year 1999

levels. This also needs to be corrected.

In closing, the VA health care system faces two chronic problems.

The first is underfunding, which I have already outlined, and the

second is a lack of consistent funding. The budget and appropriations process over the last number of years demonstrates conclusively how the VA labors under the uncertainty of not only knowing how much money it is going to get, but more equally important,

when it is going to get that money. No Secretary of Veterans’ Affairs, no VA hospital director, no doctor running an outpatient clinic knows how to plan and even provide care on a daily basis without the knowledge that the dollars needed to operate those programs are going to be there when they need them.

The only solution we can see is for this committee and the Congress as a whole to approve legislation removing VA health care

from the discretionary side of the budget process and making annual VA budgets mandatory. The health care system can only operate when it knows how much it is going to get and when it is going

to get it.

This concludes my testimony. I will be happy to answer any

questions you may have.

Chairman SPECTER. Thank you. Thank you very much, Mr.

Fuller. Your full statements will all be made a part of the record

and we will have a chance to review them in some detail and staff

will analyze them. We appreciate this very impressive booklet. I

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thought you would probably read it in 3 minutes, but you couldn’t

do it.

[Laughter.]

[The prepared statement of Mr. Fuller follows:]

PREPARED STATEMENT OF RICHARD B. FULLER, NATIONAL LEGISLATIVE DIRECTOR, PARALYZED VETERANS OF AMERICA

Mr. Chairman and members of the Committee, as one of the four veterans services organizations publishing The Independent Budget, Paralyzed Veterans of America (PVA) is pleased to present the views of The Independent Budget regarding the

funding requirements for the Department of Veterans Affairs (VA) health care system for fiscal year 2005.

This is the eighteenth year, PVA, along with AMVETS, Disabled American Veterans and Veterans of Foreign Wars have presented The Independent Budget, a policy and budget document that represents the true funding needs of the Department

of Veterans Affairs. The Independent Budget uses commonly accepted estimates of

inflation, health care costs and health care demand to reach its recommended levels.

This year, the document is endorsed by 32 veterans service organizations, and medical and health care advocacy groups.

Mr. Chairman, we are becoming increasingly troubled by the delays in enacting

VA appropriations. In fiscal year 2000, VA appropriations were not enacted until

October 20th, in fiscal year 2001 October 27th, in fiscal year 2002 November 26th,

in fiscal year 2003 February 20th, and this year, January 23rd. For the past 2 years

alone, the VA health care system has had to struggle along at previous year’s inadequate funding levels for nearly one-third of each year. This is unacceptable. These

delays directly affect the health care received by veterans. This deplorable State further points to the importance of a mandatory funding mechanism for VA health

care. But until that happens, we ask that this Congress move expeditiously to put

the necessary funding levels in place by the start of fiscal year 2005. We also are

disappointed in the practice of using rescissions as a budgetary mechanism in the

omnibus spending bills that have become far too common. These cuts also have real

consequences for veterans and their families.

This year, as we did last year, The Independent Budget is presented in the traditional account format. The VA is once again presenting its budget in the format it

unveiled last year, a format that did not find wide acceptance. The House Appropriations Committee has adopted its own format, a format adopted in the recently

enacted Omnibus spending bill. Until this format dispute is settled, and until we

have adequate data in which to analyze the VA health care system under whichever

format is adopted, we will continue to utilize the traditional account structure. It

can become confusing amid the din of competing dollar amounts based upon these

different formats, but we ask you to compare oranges to oranges and to bear in

mind that attractive numbers may not exactly match reality.

The Administration’s budget request for health care is a shocking one, providing

once again a woefully inadequate funding level for sick and disabled veterans. Calling for only a $310 million increase in appropriated dollars, a mere 1.2 percent increase over fiscal year 2004, this is the smallest health care appropriation request

of any Administration in nearly a decade. Indeed, the VA Under Secretary for

Health testified just last year that the VA requires a 13 to 14 percent increase just

to keep its head above water.

In addition, we once again are faced by a request that relies far too heavily on

budgetary gimmicks and accounting sleight of hand rather than on real dollars that

veterans need. The Administration is again resurrecting its enrollment fee and increased co-payment schemes, proposals soundly rejected by both the Senate and the

House of Representatives. And once again we see unrealistic ‘‘management efficiencies’’ utilized to mask how truly inadequate this budget is. The VA must be accorded real dollars in order to care for real veterans. Shifting costs onto the back

of other veterans is not the way to meet this Federal responsibility. Punitive co-payments and charges are designed not so much to swell projected budget increases as

they are to deter veterans from seeking their care at VA medical facilities. Imagine

the effect of these additional costs on those who have no other choice but to get care

at VA. We may indeed have the greatest health care system in the world, but if

you cannot get in the door we might as well have the worst.

Mr. Chairman, The Independent Budget makes a strong statement in opposition

to co-payments. The Congress gave the Secretary of Veterans Affairs the authority

to set and raise fees. What was once thought of as only an administrative function

has now become, in times of tight budgets, an easy way to try and find the dollars

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to fund health care for veterans. When appropriations are in short supply and demand for health care is high, co-payments have become the new way to fund the

VA out of the pockets of the veteran patient.

For fiscal year 2005, The Independent Budget recommends a Medical Care amount

of $29.791 billion. This figure does not include funds attributed to MCCF, which we

believe should be used to augment a sufficient appropriated level of funding. This

amount represents an increase of $3.2 billion over the amount provided in fiscal

year 2004.

The Independent Budget recommendation is a conservative one. The VA health

care system, in order to fully meet all of its demands and to ameliorate the effects

of chronic under-funding, could use many more dollars. The Independent Budget rec- ommendation provides for the impact of inflation on the provision of health care,

and mandated salary increases of health care personnel. It provides resources to

begin funding the VA’s critical fourth mission to back up the Department of Defense

health care system. Make no mistake about it, the VA will be spending money to

comply with its new responsibilities in this area, and if specific funding is not included, then these resources will have to come directly from dollars used to care for

sick veterans. It provides increased prosthetics funding and long-term care funding,

and provides enough resources, we believe, to enroll Priority 8 veterans. With the

VA’s decision to cease enrolling Priority 8 veterans, undertaken only because of the

lack of resources, we are losing an entire class of veterans, veterans who are an integral part of the VA health care system.

Of course, these recommendations are only estimates, and our crystal ball is often

cloudy. Health care inflation may be higher, or lower than we have estimated. Demand may increase, or decrease. The implications, as they pertain to VA health care

funding estimates, of the 2-year grant of health care eligibility to recently discharged or released active duty personnel as provided in P.L. 105–363, are difficult

to account for. But what we must account for, and provide for, are the necessary

resources for the VA to meet its responsibilities, and this Nation’s responsibilities,

to sick and disabled veterans. These resources must be provided in hard dollars, and

not dollars magically realized out of the thin air of ‘‘management efficiencies’’ and

other budgetary gimmicks.

For Medical and Prosthetic research, The Independent Budget is recommending $460 million. This represents a $54 million increase over the fiscal year 2004

amount. Sadly, the Administration has proposed cutting research by approximately

$21 million. Accepting this level of $385 million would set the research grant program back 6 years to fiscal year 1999 funding levels. This program is a vital part

of veterans’ health care, and an essential mission for our national health care system. We must provide additional dollars for VA research as we provide additional

funding for our other national research endeavors. Over the course of 5 years, the

budget for the National Institutes of Health was doubled. We should seek a similar

commitment for VA research.

In closing, the VA health care system faces two chronic problems. The first is

underfunding which I have already outlined. The second is a lack of consistent funding.

The budget and appropriations process over the last number of years demonstrates conclusively how the VA labors under the uncertainty of not only how

much money it is going to get, but, equally important, when it is going to get it.

No Secretary of Veterans Affairs, no VA hospital director, and no doctor running

an outpatient clinic knows how to plan and even provide care on a daily basis without the knowledge that the dollars needed to operate those programs are going to

be available when they need them.

Health care delayed is health care denied. If the health care system cannot get

the funds it needs when it needs those funds the resulting situation only fuels efforts to deny more veterans health care and charge veterans even more for the

health care they receive.

The only solution we can see is for this Committee and the Congress as a whole

to approve legislation removing VA health care from the discretionary side of the

budget process and making annual VA budgets mandatory. The health care system

can only operate properly when it knows how much it is going to get and when it

is going to get it.

We look forward to working with this Committee in order to begin the process

of moving a bill through the Senate, and the House, as soon as possible.

This concludes my testimony. I will be happy to answer any questions you may

have.

Chairman SPECTER. Our next witness is Mr. Rick Surratt, the

Deputy National Legislative Director for the Disabled American

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Veterans. Thank you for joining us, Mr. Surratt, and your full resume will be placed in the record.

STATEMENT OF RICK SURRATT, DEPUTY NATIONAL

LEGISLATIVE DIRECTOR, DISABLED AMERICAN VETERANS

Mr. SURRATT. Thank you, Mr. Chairman. On behalf of the DAV

and The Independent Budget, I am pleased to present our views on

the President’s fiscal year 2005 budget and to highlight our recommendations for resources and program improvements.

Other than a cost-of-living adjustment for compensation and reinstatement of the 1-year period for filing death pension claims, the

President’s budget contains no positive recommendations for improvements to the benefit programs. It does, however, include two

objectionable recommendations to eliminate entitlement to benefits.

It again requests the Congress eliminate entitlement to compensation for any portion of a service-connected disability attributable to the effects of alcohol or drug abuse. Under current law,

alcohol abuse, for example, is not itself a compensable disability.

However, when it is a secondary product and part and parcel of the

manifestations of a service-connected psychiatric disorder, for example, its effects are properly for consideration in assessing the

overall level of disability for compensation purposes.

There is a great difference between a veteran who uses alcohol

for its pleasurable intoxicating effects and one who suffers from

such unbearable and unremitting psychological distress or physical

pain that he or she resorts to alcohol to escape the agony. Current

law recognizes this distinction. Congress should again reject VA’s

recommendation.

The President’s budget also proposes legislation to eliminate a

veteran’s entitlement to a home loan guarantee after its initial use,

despite the benefits of the repeat use to the veteran and to the

American economy and despite the apparent lack of any good reason for this adverse action against veterans. The IB urges you to

reject this recommendation.

The IB recommends a number of beneficial adjustments in veterans’ benefits programs. We hope you will favorably consider those

recommendations this year as you have many of our recommendations in past years.

Veterans deserve good benefit programs and also have every

right to expect to receive their benefits when they need them. The

proper and timely delivery of benefits requires, among other things,

resources that match the workload. Here again, we must disagree

with the President’s budget request.

The President’s budget proposes to reduce staffing in the Veterans’ Benefits Administration by 540 full-time employees. Because

of the war and other factors, VBA’s workload can only be expected

to increase. VBA has been laboring for several years to improve

proficiency and efficiency, but it has not historically achieved gains

at a rate that would allow it to make up for such a large loss of

personnel in a single year.

The improvident reductions in staffing suggested by the President’s budget may very well make VA lose those gains and return

to the entirely unacceptable situation that existed before. We urge

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ing. In the IB, we recommend staffing levels more consistent with

VBA’s workload.

Mr. Chairman, that concludes my statement and I will be happy

to answer any questions you may have.

Chairman SPECTER. Thank you very much, Mr. Surratt.

[The prepared statement of Mr. Surratt follows:]

PREPARED STATEMENT OF RICK SURRATT, DEPUTY NATIONAL LEGISLATIVE DIRECTOR, DISABLED AMERICAN VETERANS

Mr. Chairman and Members of the Committee:

Thank you for inviting the Disabled American Veterans (DAV) and our partners

in The Independent Budget (IB)—AMVETS, the Paralyzed Veterans of America

(PVA), and the Veterans of Foreign Wars of the United States (VFW)—to present

our views on the budget for the upcoming fiscal year.

As with the President’s budget submission, the IB is a broad plan for veterans’

programs and includes recommendations for legislation to improve the benefits and

services our Government provides to meet veterans’ special needs. Consistent with

DAV’s primary responsibility in preparing the IB, and to avoid unnecessarily duplicating the testimony of my colleagues from the IB, my testimony will focus predominantly on the benefit programs, the administrative operations and resource requirements for delivering those benefits, and the judicial appeals process for veterans’

claims.

The importance of an adequate budget for veterans’ programs cannot be overstated. All else that the veterans’ community seeks and this Committee undertakes

during the year ahead is influenced to a large degree on available resources. Fortunately, the President’s budget only provides a discussion document to begin deliberations. It does not dictate what Congress does for veterans. Likewise, support

from the Budget Committee and appropriators is important but not entirely indispensable to what you, the authorizing committee, determine is appropriate for our

Nation’s veterans. Unfortunately, the Administration’s budget request for fiscal year

(FY) 2005 does fall short in many respects, and we are disappointed with its meager

recommendations for benefit improvements.

The President’s budget contains few recommendations for legislation to improve

the benefit programs. For compensation, it includes the usual recommendation for

a cost-of-living adjustment (COLA) based on the increase in the cost of living during

the current year, projected to be 1.3 percent for fiscal year 2004. This increase for

disability compensation would include dependency and indemnity compensation and

the clothing allowance provided to veterans whose service-connected disabilities

tend to increase wear and tear of their clothing.

To prevent the purchasing power of compensation from falling behind the cost of

living as it increases, the IB also recommends a compensation COLA. However, to

maintain the value of compensation in relation to the cost of living, the IB urges

Congress to repeal provisions that require rounding down the COLA to the nearest

whole dollar. Though this rounding down may erode the value of compensation very

slightly for 1 year, rounding down year after year, with its compounding effect,

eventually amounts to a significant degradation of the modest compensation veterans rely on to purchase the necessities of life.

The Administration’s budget seeks legislation to bar compensation altogether for

the effects of the added disability that results when veterans resort to alcohol to escape the extreme distress and disturbing symptoms of some service-connected mental disorders and other disabilities. This request reveals a callous disregard and insensitivity to the true nature of these secondary disabilities and how severely disabled veterans are victimized by them. It ignores the cause-and-effect relationship

between the primary service-connected disability and the secondary effects. By using

alcohol to ameliorate the psychological pain of these disabilities, veterans are attempting to quell their symptoms rather than choosing to be more disabled. In many

of these instances, the underlying illness is so debilitating by itself that any additional disability attributable to alcohol accounts for no greater rate of compensation

or is so inextricably intertwined with other psychiatric symptoms as to be essentially indistinguishable from them. Current law resolves these unfortunate circumstances equitably. Congress rejected VA’s request for this legislation last year,

and the IB urges Congress to respond with an emphatic ‘‘no’’ again this year.

Similarly, the IB is resolute in its opposition to any repeat of last year’s misplaced

scheme to fundamentally alter the bases for establishing service connection for service-related disabilities. Military service is not merely a job where an individual

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member to be at the disposal of the military authorities 24 hours a day 7 days a

week and encompasses, indeed dictates, directly or indirectly all of a servicemember’s life activities. Military service is inherently hazardous, and it involves

physical and mental stresses beyond those experienced by civilian society. Current

law therefore equitably treats disabilities that occur during service as service connected, without requiring a showing of cause and effect between particular activities

or factors of service and the disability.

Because of the full-time, extraordinarily rigorous, and dangerous nature of service

in the Armed Forces, and rather than becoming mired in the problematic nuances

of causation in such a unique environment, causation is presumed. No other fair,

foolproof, and practical method exists for determining service connection. The

scheme devised last year for inclusion in the defense authorization bill would have

been anything but fair, foolproof, and practical, although it would have been expedient for its self-serving purpose of permitting the Government to dishonorably disavow its obligation to care for our Nation’s sons and daughters who are disabled

in service to their country. By excluding from eligibility for service connection essentially all accidental injuries and diseases incurred during military service except

those caused directly by work-related activities of servicemembers’ military occupations, few would meet the extremely restrictive terms of service connection, and

many would have insurmountable difficulties in producing evidence to isolate the

cause to the direct performance of military duties.

The Department of Veterans Affairs (VA) projected that approximately two-thirds

of the disabled veterans now entitled to disability compensation would not have

qualified for service connection under these criteria. Obviously, the proposed scheme

was calculated to achieve just that result. The action was brazen and reprehensible.

Because its proponents were so shameless and unrestrained, we may very well see

the same or similar action repeated. It will be no less repugnant, and no less objectionable to the veterans’ community. We appreciate the decisive stand against this

plan taken by the Chairman and other members of this Committee last year, and

we urge you to again flatly reject any similar efforts this year.

The IB makes three additional recommendations to improve the disability compensation program. We recommend legislation:

• to exclude compensation as countable income for Federal programs;

• to repeal the prohibition of service connection for disabilities related to tobacco

use; and

• to repeal delayed effective dates for payment of increased compensation based

on temporary total disability.

The President’s budget submission suggests legislation to make awards of death

pension effective the first day of the month in which death occurred if the claim is

filed within 1 year of the date of death. Prior amendments reduced this period from

1 year to 45 days. We have no recommendation for this legislation in the IB, but

we note that it would be beneficial to needy widows of wartime veterans, and it

would bring this effective date provision back into line with effective date provisions

applicable to other disability benefit payments, simplifying the law for VA adjudicators.

Service-connected disabilities result in functional impairments that not only adversely impact upon veterans’ ability to perform job functions but also adversely impact upon their ability to perform the everyday activities of living. For veterans suffering from service-connected blindness and physical disabilities that require special

fixtures and modifications to allow them mobility and independence within the

home, VA provides grants for the purchase or construction of specially adapted

housing. For veterans with service-connected disabilities that interfere with their

ability to operate motor vehicles, VA provides grants for the purchase and special

modification of automobiles. Like other benefits that are subject to the effects of rising costs, the grants for specially adapted housing and automobiles must be increased regularly to match increases in costs of homes and vehicles. The value of

these benefits has fallen substantially behind rising costs because there have been

long periods between adjustments. Congress increased these grants last year, but

the increase did not equal their cumulative loss in value and therefore did not fully

restore them to the value they had when first established. To remedy this deficiency

and to improve these programs, the IB recommends that Congress enact legislation:

• to increase the amount of the grants for specially adapted housing and to provide for automatic annual adjustments for increased costs;

• to provide a grant for adaptations to a home that replaces the first specially

adapted home; and

• to increase the amount of the automobile grant and to provide for automatic annual adjustments for increased costs.

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For the education programs, the President’s budget includes suggestions for legislation to make three minor ‘‘technical’’ changes, although one of the amendments

would make a substantive change to prohibit education benefits for servicemembers

who are incarcerated for crimes and whose character of service upon discharge following their release from prison will be disqualifying. The IB has no position on

these suggested legislative changes. However, for the education programs, we make

two recommendations for legislation: • to expand Montgomery GI Bill eligibility to persons who, but for service on or

before June 30, 1985, would be eligible for education benefits under this program;

and• to authorize refund of contributions to veterans who become ineligible for the

Montgomery GI Bill by reason of discharges characterized as ‘‘general’’ or ‘‘under

honorable conditions’’.

Although we have come to expect the Administration to propose actions to reduce

or eliminate benefits and services for veterans, we were surprised by this year’s suggestion in the President’s budget for VA that Congress enact legislation to restrict

veterans’ use of home loan guaranties to one time. When they return to civilian life

from military service, veterans often have very limited means to achieve the American dream of owning a home. They purchase ‘‘starter’’ homes. As their economic situation improves and families grow, they, like many other Americans, want to expand and improve their housing. In today’s mobile society, veterans may be required

to move to new locations to follow their jobs or the job market. If a veteran is in

good standing with VA, his or her purchase of another home can be made easier

by a VA guaranteed loan. Because of the limits on VA loans, veterans who use VA

loan guaranty are those who must purchase moderately priced homes, and the repeat use of this benefit provides no unwarranted windfall for veterans. At the same

time, it is no great burden on the Government. The ability of veterans to use their

loan guaranty more than once can be very beneficial to them and to the American

economy, without any undue cost to the Government. Therefore, this proposal to

limit veterans to one loan seems to have as its object the reduction of veterans’ benefits merely for the sake of reducing them, without any reciprocal benefit to the

Government. In any event, this suggested legislation is unwarranted, and the IB

urges you to soundly reject it.

The IB makes positive recommendations to improve the home loan guaranty program for veterans and other eligible beneficiaries. We recommend that Congress

enact legislation: • to increase the maximum VA home loan guaranty and provide for automatic annual indexing to 90 percent of the Federal Housing Administration-Federal Home

Loan Mortgage Corporation loan ceiling; and • to repeal funding fees imposed upon certain home loan guaranties.

For the insurance programs, the President’s budget proposes legislation for technical amendments ‘‘to clarify certain points such as defining an insurable dependent, terms of coverage and premiums.’’ According to the budget, these changes require no additional funds. Without more specifics, we have no position on the proposed legislation at this time.

The insurance programs for veterans are in need of added protections and revisions to replace long outdated rates and increase the maximum coverage available.

Often, a veteran’s life insurance policy is all that a veteran has to pay for his or

her last expenses and burial. Yet, for nursing home care under Medicaid, the Government forces veterans to surrender their Government life insurance polices and

apply the cash value toward nursing home care as a condition for Medicaid coverage.

Because of service-connected disabilities, disabled veterans have difficulty getting

or are charged higher premiums for life insurance on the commercial market. VA

therefore offers disabled veterans life insurance at standard rates under the Service

Disabled Veterans’ Insurance (SDVI) program. When this program began in 1951,

its rates, based on mortality tables then in use, were competitive with commercial

insurance. Commercial rates have since been lowered to reflect improved life expectancy shown by current mortality tables. VA continues to base its rates on mortality

tables from 1941, however. Consequently, SDVI premiums are no longer competitive

with commercial insurance, and SDVI therefore no longer provides the intended

benefit for eligible veterans.

When life insurance for veterans had its beginnings in the War Risk Insurance

program first made available to members of the Armed Forces in October 1917, coverage was limited to $10,000. A $10,000 life insurance policy provided sufficiently

for the loss of income from the death of an insured in 1917. Today, some 87 years

later, maximum coverage under the base SDVI policy is still $10,000. Given that

the annual cost of living is many times what it was in 1917, the same maximum

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coverage, well over three quarters of a century later, clearly does not provide meaningful income replacement for the survivors of service-disabled veterans.

Similarly, the maximum coverage under the Veterans’ Mortgage Life Insurance

(VMLI) program has fallen behind current needs. The maximum VMLI coverage

was last increased in 1992. Since then, housing costs have risen substantially. Because of the great geographic differentials in the costs associated with accessible

housing, many veterans have mortgages that exceed the maximum face value of

VMLI. Thus, the current maximum coverage amount does not cover many catastrophically disabled veterans’ outstanding mortgages. Moreover, severely disabled

veterans may not have the option of purchasing extra life insurance coverage from

commercial insurers at affordable premiums.

These deficiencies substantially reduce the effectiveness of the insurance programs. To correct these shortcomings, the IB recommends legislation:

• to exempt the dividends and proceeds from, and cash value of, VA life insurance

policies from consideration in determining entitlement under other Federal programs;

• to authorize VA to use modern mortality tables instead of 1941 mortality tables

to determine life expectancy for purposes of computing premiums for SDVI;

• to increase the maximum protection available under the base policy of SDVI

from $10,000 to $50,000; and

• to increase the maximum coverage under VMLI from $90,000 to $150,000.

Veterans’ benefits are for veterans, not others who have no right to them. Congress has been careful to ensure veterans receiving benefits are not easy prey for

persons seeking to divert these benefits away from veterans and into their own

pockets. Congress has placed restrictions on attorney fees, and Congress has included broad and sweeping protections in the law to prohibit the assignment of veterans’ benefits and to protect them against the claims of third parties. Existing law

provides:

‘‘Payments of benefits due or to become due under any law administered by

the Secretary shall not be assignable except to the extent specifically authorized

by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not

be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.’’

Despite the prohibition against assignment, some commercial entities were enticing vulnerable veterans into arrangements whereby the veterans traded their future

compensation payments for lump sums amounting to a fraction of the value of the

compensation. Last year, Congress added language to the prohibition against assignment to leave no room for convenient interpretation of the law as permitting

that practice. Despite the clear and emphatic language in the law shielding veterans’ benefits from the claims of third parties, the courts have conveniently interpreted the law to permit what it unquestionably prohibits. As a result, veterans’

benefits have become an easy target for former spouses seeking alimony. The courts

show little reverence for the principle that veterans’ benefits were created for veterans and little regard for congressional intent that a disabled veteran, and not

someone else, should be compensated for the effects disability. Courts seem to have

no hesitation in ordering disabled veterans to pay part of their disability compensation to able-bodied former spouses. This situation is appalling. The IB therefore recommends legislation to reinforce existing law so there can be no doubt that it means

what it says.

While not under the jurisdiction of this Committee, we also call for legislation to

remove, for all service-connected disabled military longevity retirees, the offset between their military retired pay and disability compensation. As you know, the legislation enacted near the end of the last session of Congress provides for removal

of this inequitable offset for some disabled veterans. In so doing, it left the injustice

in place for many other veterans. We also recommend legislation to extend the 3-

year limitation on recovery of taxes withheld from disability severance pay and military retired pay later determined to be exempt from taxable income.

Although they need fine tuning from time to time, the benefit programs have been

carefully crafted by Congress to alleviate the disadvantages veterans suffer as a result of disabilities and as a result of educational and vocational opportunities forgone by young men and women who chose to serve their country before personal

advancement. These programs are effective only to the extent the benefits and services are delivered to entitled veterans when they need them. Efficiently and proficiently administering this broad range of programs for millions of veterans naturally and unquestionably presents formidable management challenges. Small mistakes can have major consequences for large numbers of veterans. Management and

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process deficiencies, and insufficient resources, have consequences that are directly

revealed through poor service to veterans.

Although such poor service frustrates veterans who must deal with a massive and

complex bureaucracy, it causes more than mere inconveniences. Incorrect decisions

deprive entitled veterans of the benefits they need, and long delays due to incorrect

decisions and insufficient resources deprive entitled veterans of the benefits they

need when they most need them. Of course, the correct and timely payment of disability compensation is imperative for veterans who must rely on compensation for

food and shelter.

In fulfilling its mission of effective management of the benefit programs and effective delivery of benefits and services, the Veterans Benefits Administration (VBA)

has a checkered history, especially in accurate and timely delivery of the core veterans’ benefit, disability compensation. Some of the failures were self-inflicted and

the product of a wrong-headed institutional mindset, others were due to more innocent mistakes, and many were caused or compounded by insufficient resources or

other factors beyond VA’s control.

With a focus and decisive action directed to real reforms and improvement, current management has made some headway in overcoming systemic deficiencies in

the delivery of benefits. Congress has helped by providing the additional resources

necessary to bring the workforce and technology to the capacity required. To continue on the course of restoring VBA to acceptable levels of performance and service

to veterans—indeed, to avoid losing the gains made thus far—VBA must continue

to devote its full energies to the process, and Congress must continue to provide the

resources required to get the job done. The IB makes specific recommendations in

both of these areas.

To enable it to more effectively enforce agency policy and performance standards,

we have recommended that VBA make changes to remedy some weak links in its

management structure. We have called for improvements in VA rulemaking to make

VA’s regulations more fairly serve veterans and to avoid litigation over challenged

regulations. For VBA’s Compensation and Pension Service (C&P), we have urged VA

to devote more effort to attacking the root causes of errors in claims adjudication.

To ensure that VBA has the personnel and tools necessary to carry out its mission, we have made several recommendations regarding staffing and appropriations

to support ongoing initiatives to develop and install modern information technology

systems. Unfortunately, the President’s budget request appears to seriously undermine VBA’s systematic efforts to correct its deficiencies, employ better information

technology, and improve its production and service to veterans.

The President’s budget submission for VA clearly does not remain fixed on the objective of strengthening VBA to make it better able to fulfill its responsibilities to

veterans. Due to the war in Iraq and the many hostilities in which our Armed

Forces are engaged today, we can only expect an influx of new veterans needing VA

benefits and services. Logically, more resources will be needed in some areas just

to stay even with the workload. However, the President’s budget proposes major reductions in resources for the delivery of benefits and services to veterans. For VBA,

the President’s budget requests 829 fewer full-time employees (FTE) for fiscal year

2005 than authorized at the end of the fiscal year we have just finished, fiscal year

2003. The request is 540 FTE below the fiscal year 2004 level. We note, incidentally,

that the difference between the fiscal year 2003 and fiscal year 2005 FTE for VBA

is apparently greater than the 829 employees indicated by the budget submission

because, at the beginning of fiscal year 2004, the responsibilities and the 31 FTE

of the Evidence Development Unit of the Board of Veterans’ Appeals (BVA) were

reassigned from BVA to VBA, without any corresponding request to increase VBA’s

authorized FTE by an equal amount.

Under the President’s budget request, every benefit line except Insurance Service

would lose employees. Even with all-out efforts, VBA’s progress in reducing the

backlog of work and the waiting times for benefits has been gradual and fairly slowpaced, representative of deliberate efforts within the limits of its abilities under the

resource levels available in the past few years. We seriously doubt that VBA can

suddenly accelerate and achieve enough productivity improvements to offset such a

substantial loss of resources, especially against the weight of added work. The President’s budget would also substantially scale back investments in ongoing programs

to modernize VBA’s essential information technology. These two proposed reductions

strike the core of the veterans’ benefits delivery system.

The President’s budget proposes 7,270 FTE, or 487 fewer direct program FTE for

C&P Service in fiscal year 2005 than in fiscal year 2003. In addition, the President’s

budget requests 185 fewer FTE for management direction and support and information technology in C&P Service for fiscal year 2005 than it had in fiscal year 2003.

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sumed by VBA from BVA are charged to C&P Service. With those FTE absorbed

by C&P and without any equal increase in the FTE requested for C&P, that number

of employees must be calculated as an additional net reduction of FTE for C&P

Service when comparing the fiscal year 2003 staffing with the request for fiscal year

2005.

We recommend in the IB that C&P Service be authorized 7,757 FTE for fiscal

year 2005. VA had projected that its workload would allow it to draw down its FTE

in fiscal year 2005 by approximately 268 below its staffing level of 7,757 FTE at

the end of fiscal year 2003. However, those projections did not take into account additional work VA now expects incident to legislation that expanded eligibility for

Combat Related Special Compensation and authorized concurrent receipt of military

retired pay and disability compensation for certain veterans. VA projects that this

legislation will generate 391,000 new claims and 52,869 appellate cases over the

next 5 years. In addition, VA projects it will have to rework approximately 48,000

claims to meet the requirements of a court decision invalidating VA procedures that

placed unlawful requirements upon veterans. Though most of that work should be

done during fiscal year 2004, this additional volume will likely delay work on some

of C&P’s inventory and carry some extra caseload over into fiscal year 2005. This

additional workload requires that VA, at least, have approximately the same direct

program staffing levels for fiscal year 2005 that it had at the end of fiscal year 2003.

Just as VA must have sufficient staffing to match its compensation and pension

claims workload, it must continue to have efficient procedures and technology for

processing claims and related information. To aid in accuracy and uniformity in

claims adjudication, and to achieve the greater efficiencies of modern information

technology, VA began its Compensation and Pension Evaluation Redesign (CAPER)

initiative during 2001. To determine and implement its optimum performance in

record development, disability examinations, and claims decisions, VA is undertaking a review of its claims process with the goal of developing and deploying an

integrated electronic format to aid in uniform and correct application of procedures

and substantive rules and to allow for the electronic transmission of data from its

source into the claims data base. VA now hopes to have this system fully in place

by September 2006. To achieve that goal, VA needs approximately $3.5 million in

fiscal year 2005 to continue development of this system. The IB recommends that

Congress provide this essential funding to VA. The President’s budget requests only

$2.7 million for this project.

Another aspect of systems modernization is the use of electronic files to replace

manual paper transfer and storage of claims records. With the necessary imaging

and other equipment, VA can acquire, store, and process claims data much more

timely and efficiently, reducing task times and staffing needs. VA’s project, known

as ‘‘Virtual VA,’’ has been deployed at VA’s Pension Maintenance Centers and is undergoing evaluation and assessment based on experience at these three sites. With

eventual full implementation, all VBA regional offices will have document imaging

capabilities, and VA medical centers will have electronic access to veterans’ claims

folders for review in connection with disability examinations ordered by claims adjudicators. Accordingly, the IB recommends that Congress provide VA the $8 million

it needs in fiscal year 2005 to continue document preparation and scanning at the

Pension Maintenance Centers and to continue development of the system for application nationwide. The President’s budget requests only $1.6 million for Virtual VA.

As with C&P Service, VBA’s Vocational Rehabilitation and Employment Service

(VR&E) faces major challenges in meeting its responsibilities to disabled veterans

under circumstances of heavy workloads and limited resources. The impact of the

worldwide war on terrorism, hazardous duty in other locations around the world,

and major combat operations in Iraq and Afghanistan, will undoubtedly be felt by

VR&E when these veterans begin pouring into the system with the need for rehabilitation training and employment suitable to their service-connected disabilities.

To sustain current levels of performance with its projected workload, VR&E needs

to retain the staffing strength it had at the end of fiscal year 2003. In addition, the

VA Secretary’s VR&E Task Team has made a number of recommendations to improve vocational rehabilitation and employment services for veterans. It is projected

that approximately 200 additional FTE will be needed to implement these substantial reforms in the programs, organization, and work processes of the VR&E program. At the end of fiscal year 2003, VR&E direct program staffing was 931 FTE.

The IB therefore recommends that Congress authorize 1,131 direct program FTE for

VR&E in fiscal year 2005. The President’s budget requests only 876 FTE for fiscal

year 2005, and seeks 21 fewer FTE for management direction and support and information technology than VR&E had in fiscal year 2003.

Similarly, VBA’s Education Service expects some increase in its workload, due to

legislation last year that expanded coverage of the program to include additional

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types of training. VA is striving to provide more timely and efficient service to

claimants seeking education benefits. Education Service reports gains in these areas

during fiscal year 2003. To continue on the course of improvement and to meet the

added workload projected, Education Service must at least maintain its fiscal year

2004 staffing level. In fiscal year 2004, Education Service had 766 direct program

FTE authorized, and the IB recommends that Congress authorize 766 FTE for Education Service in fiscal year 2005.

For veterans who do not receive a correct disposition of their benefit claims from

VA’s administrative claims adjudication processes, judicial review is available. Because the United States Court of Appeals for Veterans Claims is not a part of the

VA or the executive branch, its funding is not included under the budget for veterans’ benefits and services. The Court is nonetheless an integral part of the system

of benefits for veterans, and this Committee does, of course, have oversight responsibilities and jurisdiction over any authorizing legislation pertaining to the Court

and its functioning. Additionally, the United States Court of Appeals for the Federal

Circuit has jurisdiction to hear appeals from decisions of the Court of Appeals for

Veterans Claims and has jurisdiction to hear direct challenges to VA regulations.

This Committee has jurisdiction over laws that govern review of these appeals and

challenges to regulations in the Federal Circuit. For this area of great importance

to veterans, the IB includes several recommendations.

In previous years, we have recommended in the IB that Congress amend the

standard under which the Court of Appeals for Veterans Claims reviews the propriety of factual findings by VA’s administrative appellate board, BVA. Under the

‘‘clearly erroneous’’ standard, the Court was essentially upholding any finding of fact

against a VA claimant that had some ‘‘plausible basis’’ in the record although the

law mandates that VA decide a factual question in a claimant’s favor unless the evidence against the claim outweighs the evidence supporting it. This mandate in law

is known as the ‘‘benefit-of-the-doubt’’ rule. This rule is based on the time-honored

principle that we owe veterans greater considerations than ordinary citizens litigating in court or seeking government assistance from other agencies and that a

veteran claiming benefits is therefore entitled to the benefit of the doubt when the

evidence neither proves nor disproves his or her claim. With the Court upholding

adverse factual findings for which there is merely some plausible basis, BVA was

completely free to ignore the law and deny a claim for VA benefits even though the

supporting evidence was much stronger than, or at least as strong as, the evidence

against it. The Court was turning a blind eye to erroneous and unjust denials of

meritorious claims, making the benefit-of-the-doubt rule unenforceable and meaningful only to the extent VA chose to observe it. Appeals to the Court often follow

from arbitrary decisions in which VA chose to ignore the rule, but these appeals

were essentially futile, with meritorious claims and justice denied. To correct this

grave injustice, the IB recommended that Congress amend the law to require the

Court to reverse any BVA factual finding against a claimant that was clearly inconsistent with the benefit-of-the-doubt rule. To accomplish this, we recommended that

the clearly erroneous standard be replaced with an instruction that the Court must

reverse any finding of fact adverse to a claimant that was not reasonably supported

by a preponderance of the evidence, which is weight of the evidence required for

such adverse finding under the benefit-of-the-doubt rule.

Seeking to continue its immunization from meaningful judicial review of its factual findings, VA opposed this change, and the veterans’ committees compromised

with less definite changes than the IB had recommended and thought necessary. As

a result, the Court has construed the new legislation as making no change whatsoever. Indeed, VA itself argued to the Court that Congress made no substantive

change in the law by these amendments. Deserving veterans are still left with no

remedy for outright violations of the law. That is unacceptable. We therefore renewed in this year’s IB our previous recommendation that Congress replace the

clearly erroneous standard with the requirement that the Court reverse factual findings not reasonably supported by a preponderance of the evidence. Certainly, you

should not again be persuaded to accept any compromise proposed by VA that will

enable VA to once more argue to the Court that you did nothing. We want to reiterate here that this issue is one that remains very important to veterans and their

rights.

When Congress ended the longstanding absence of judicial review for veterans’

claims, it was very concerned that the formalities typical of judicial proceedings not

change the informalities of VA’s administrative claims processes. The legislative history for judicial review legislation emphasizes repeatedly congressional intent to

preserve this informality and the pro-veteran procedures at the administrative level.

Congress maintained in the law provisions that put the obligation on VA to develop

the claims record and afford consideration to all possible theories of entitlement

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under all relevant laws, regulations, and other legal authorities. The veteran is not

required to know or argue the legal technicalities of benefits laws. Thus, failure of

BVA to consider all points of law bearing on a claim is legal error, an error of omission. Yet, the Court has refused to consider these points in appeals on the grounds

that the veteran failed to argue them before BVA. In effect, the Court is relieving

VA of its obligations under the law and shifting them to veterans. The Court is imposing upon veterans the very thing Congress did not intend, the obligation to formally plead all the finer points of law that are often very complex and poorly understood by average laypersons. To prevent the Court from further imposing the formalities of adversarial judicial proceedings upon the non-adversarial veterans’

claims process, the IB recommends legislation to prohibit judicial imposition of formal pleading or so-called ‘‘exhaustion’’ requirements upon the VA claims system.

Though veterans have deep frustration with some of the Court’s actions, judicial

review and many of the Court’s precedents have added legitimacy to the process and

forced VA to follow the law more carefully. Judicial review exposed deeply ingrained

unlawful practices and deficiencies in VA’s claims adjudication, and more than any

other factor, forced VA to acknowledge these systemic defects and make fundamental reforms. As a result of the availability of judicial review and enforcement

of the law by the Court, veterans stand a much better chance of getting a fair decision today than they did before judicial review was authorized by your landmark

legislation in 1988. We still need to make adjustments to bring the process closer

to that envisioned by Congress in its 1988 legislation, however.

The Chief Judge has begun exploratory steps toward securing a site and authority

for construction of a courthouse and justice center. After an appropriate site is located, Congress must enact authorizing legislation and provide necessary funding

if the project is to be undertaken. The IB fully supports the project to construct a

courthouse for the veterans’ court. We seek the support and essential assistance of

the members of this Committee in securing a site, enacting the necessary legislation, and working with your colleagues in Congress to obtain the funding required

to build this courthouse and justice center for veterans.

When Congress authorized judicial review of VA’s claims decisions, it also authorized judicial review of VA’s regulations. However, Congress exempted one area of

VA’s rulemaking from review by the courts. Congress expressly deprived the courts

of jurisdiction to review VA’s Schedule for Rating Disabilities. We agree with the

reasoning that the courts should not be empowered to intervene in VA’s application

of its special expertise and the exercise of its discretion in formulating criteria for

evaluating the effects of disabilities. However, we believe the United States Court

of Appeals for the Federal Circuit should be authorized to review and invalidate rating schedule provisions that are, on their face, contrary to the laws enacted by Congress or are arbitrary and capricious. Such narrow review would not interfere with

VA’s lawful and legitimate exercise of its broad discretion, and would empower the

Federal Circuit to intervene in only the most egregious abuses of discretion and invalidate only the unequivocally unlawful rating schedule provisions. Today, VA is

totally immune to any remedy for flatly unlawful or arbitrary and capricious actions

in adopting or revising its rating schedule. The IB therefore recommends expanding

Federal Circuit jurisdiction to permit that court to review challenges to VA’s rating

schedule on these narrow grounds.

Finally, I want to join with our IB witness who is covering veterans’ medical care

in this hearing in stressing the importance of putting a mechanism in place to end

what has unquestionably proven to be an inadequate process for funding veterans’

medical care. Year after year, the President’s budget request falls well below the

minimum needed to maintain medical services for sick and disabled veterans seeking those services from the medical care system established to serve them. Year

after year, we must fight an uphill battle to get more realistic appropriations, and

that annual battle is getting ever more difficult despite the strong advocacy of the

members of this Committee, who know what resources VA really needs. To get funding to continue operation of their medical programs, veterans should not have to

compete with all the many other interests who seek part of the limited discretionary

dollars. Veterans and VA should not have to face the yearly uncertainty of whether

there will be sufficient funding provided to continue essential medical care services

for disabled veterans. Veterans should not have to wait months to be treated for

their illnesses. VA should not have to continue operating the largest medical care

system in this country on the shoestring of annual appropriations and without any

means to plan strategically for long-term efficiencies. We have thoroughly tested the

discretionary appropriations process whereby political will, rather than actual resource needs, determines how much funding veterans’ medical care receives each

year. With consistent experience that funding veterans’ medical care under that

process has repeatedly failed, and will only continue to be unsatisfactory, the remVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00187 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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edy is to guarantee adequate and stable funding through a permanent authorization

that uses a reliable formula to project resource needs. Among all the meritorious

issues to be addressed by this Committee this year, this issue is the most urgent

and therefore the most important to veterans. We need strong bipartisan support

from the members of this Committee to get legislation for mandatory funding, and

we renew our earnest request for your support this year.

In closing, I want to acknowledge and express the DAV’s sincere appreciation for

the advocacy and support veterans have received from this Committee. The Committee has acted favorably on many of the recommendations of the IB in past years,

and many of the recommended changes are now in law, making the programs more

effective for our veterans. Working together, the IB and this Committee have made

numerous improvements in the benefits and the delivery system. We hope you will

again find our recommendations meritorious and will shepherd legislation through

this year to adopt more of them.

Chairman SPECTER. Our next witness is Mr. Paul Hayden, National Legislative Service, Veterans of Foreign Wars of the United

States. Thank you for coming in today, Mr. Hayden, and we will

put your whole resume in the record.

STATEMENT OF PAUL A. HAYDEN, DEPUTY DIRECTOR, NATIONAL LEGISLATIVE SERVICE, VETERANS OF FOREIGN

WARS OF THE UNITED STATES

Mr. HAYDEN. Thank you, Mr. Chairman, Ranking Member

Graham. As a member of The Independent Budget for VA, the

VFW is responsible for the construction portion of the VA budget,

so I will limit my testimony to that area.

The President’s fiscal year 2005 budget indicates that along with

gross funding deficiencies in practically every VA account, VA construction is to be dramatically and most detrimentally shortchanged, as well. In fact, since 1993, VA construction funding has

been in steady decline. The fiscal year 1993 combined major and

minor construction total was $600 million, and the fiscal year 2005

proposal is only $170 million.

VA’s history of low construction budgets the last 12 years is an

explicit indication of poor stewardship of the system’s facility capital assets. It also flies in the face of statutory mandates to provide

for the short- and long-term care needs of our most seriously service-connected veterans.

Once again, the administration is proposing counting State nursing home beds as part of its long-term care capacity. We view this

as an attempt to circumvent both the letter and intent of the law

with a number of our most deserving and vulnerable veterans suffering as a consequence.

Further, there continues to be a major resistance to fund an adequate construction budget before the CARES process has been completed. We have been supportive of the CARES process from the

beginning as long as the primary emphasis is on the ES, enhanced

services. However, we believe that it is poor policy to defer all VA

construction needs until the CARES process is complete.

We agree with the findings of the President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans. The VA

must accomplish three key objectives. No. 1, invest adequately in

the necessary infrastructure to ensure safe, functional environments for health care delivery. No. 2, right-size the respective infrastructures to meet projected demands for inpatient, ambulatory,

mental health, and long-term care requirements. And finally, creVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00188 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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ate abilities to respond to a rapidly changing environment using

strategic and master planning to expedite new construction and

renovation efforts.

In order to accomplish these objectives, we recommend that Con- gress appropriate $571 million to the major construction account

for fiscal year 2005, not the totally inadequate $97 million asked

for by the administration. This amount is needed for seismic correction, clinical environmental improvements, National Cemetery Administration construction, and land acquisition. We also call on Congress to appropriate $545 million to the

minor construction account for fiscal year 2005 while rejecting the

administration proposal of $69 million. These funds contribute to

construction projects costing less than $7 million while providing

for inpatient and outpatient care and support, infrastructure, physical plant, and historic preservation projects.

Mr. Chairman and members of this committee, this concludes my

statement and I will be happy to answer any questions.

Chairman SPECTER. Thank you. Thank you very much, Mr. Hayden.

[The prepared statement of Mr. Hayden follows:]

PREPARED STATEMENT OF PAUL A. HAYDEN, DEPUTY DIRECTOR, NATIONAL

LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS OF THE UNITED STATES

Mr. Chairman and Members of the Committee:

On behalf of the 2.7 million men and women of the Veterans of Foreign Wars of

the United States (VFW) and our Ladies Auxiliary, I would like to take this opportunity to thank you for being included in today’s important hearing regarding the

Department of Veterans Affairs (VA) budget. As a member of The Independent

Budget for VA, the VFW is responsible for the Construction portion of the VA budget, so I will limit my testimony to that area.

The VA construction budget includes major construction, minor construction,

grants for construction of State extended care facilities, grants for State veterans’

cemeteries and the parking garage revolving fund.

The President’s fiscal year 2005 budget indicates that, along with gross funding

deficiencies in practically every VA account, VA construction is to be dramatically

and most detrimentally short-changed as well. In fact, since 1993, VA construction

funding has been in steady decline. The fiscal year 1993 combined total was $600

million and the fiscal year 2005 proposal is only $200 million once the Capitol Asset

Realignment for Enhanced Services (CARES) is backed out. VA’s history of low construction budgets the last 12 years is an explicit indication of poor stewardship of

the system’s facility capital assets. It also flies in the face of moral as well as statutory mandates to provide for the short- and long-term care needs of our most seriously service connected veterans. Once again, the administration is proposing counting State nursing home beds as part of its own long-term capacity. We view this

as an attempt to circumvent both the letter and intent of the law with a number

of our most deserves and vulnerable veterans suffering as a consequence.

Further, there continues to be major resistance to fund an adequate construction

budget before the CARES process has been completed. We have been supportive of

the CARES process from the beginning, as long as the primary emphasis is on the

‘‘ES’’-enhanced services; however, we believe that it is poor policy to defer all VA

construction needs until CARES is complete.

Currently, most VA medical centers, with an average age of 54 years, are in critical need of repair. Sadly, the prospect of system-wide capital asset realignment

through the CARES process has been used as an excuse to hold all construction

projects hostage. These projects are essential to patient safety; moreover, they will

eventually pay for themselves through future savings as a result of modernization.

The ongoing reconfiguration of the system through CARES must not distract VA

from its obligation to protect its current assets by postponing needed funding for the

construction, maintenance and renovations of VA facilities.

While we still believe the CARES process should proceed, we perceive a need for

further data to support various recommendations that would close or change missions of certain VA long-term care and small-size facilities. These data should inVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00189 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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clude such items as a cost analysis associated with these changes to include the

costs of transferring patients and staff; the cost associated with contracting for care

in the community; the cost related to shutting down and disposing of property to

include asbestos removal; the cost to build or lease new facilities like communitybased clinics and patient bed towers to include associated site elements to make the

building functional, such as equipment, relocation, and activation costs; and updating facility infrastructures to handle additional patient workloads while maintaining

privacy and safety requirements.

We acknowledge that the VA Office of Facilities Management has assembled construction cost data for various functional building types; however, the inclusion of

the aforementioned cost could provide the rationale for reconsidering some decisions.

In addition, the assumption that Congress will adequately fund all CARES proposed changes must be questioned. The VFW and other Independent Budget Veterans Service Organizations (IBVSO) are concerned that when CARES implementation costs are factored into the appropriations process, Congress will not fully fund

the VA system, further exacerbating the current obstacles impeding veterans’ access

to quality health care in a timely manner. It is our opinion that VA should not proceed with CARES changes until sufficient funding is appropriated for the construction of new facilities and renovation of existing hospitals is approved. We recommend that Congress appropriate $571 million to the Major Construction Account for fiscal year 2005, not the totally inadequate $97 million asked for by the

administration. This amount is needed for seismic correction, clinical environment

improvements, National Cemetery Administration construction, land acquisition,

and claims. Allocated as follows: Seismic Improvements—$285,000; Clinical Improvements—25,000; Patient Environment—10,000; Research Infrastructure Upgrade and Replacement—50,000; Advance Planning Fund—60,000; Asbestos Abatement—60,000; National Cemetery Administration—81,000; IB Recommended fiscal

year 2005 Appropriation—$571,000.

We also call for the Congress to appropriate $545 million to the Minor Construction Account for fiscal year 2005 while rejecting the administration proposal of $69

million. These funds contribute to construction projects costing less than $7 million.

This appropriation also provides for a regional office account, National Cemetery

Administration account, improvements and renovation in VA’s research facilities, a

staff office account, and an emergency fund account. Increases provide for inpatient

and outpatient care and support, infrastructure, physical plant, and historic preservation projects. Allocated as follows: Inpatient Care Support—$130,000; Outpatient

Care and Support—100,000; Infrastructure and Physical Plant—150,000; Historic

Preservation Grant Program—25,000; Other—25,000; VBA Regional Office Program—35,000; National Cemetery Program—35,000; and VA Research Facility Improvement and Renovation—45,000; IB Recommendation fiscal year 2005 Appropriation—$545,000.

Annually, the VHA submits a list of Top 20 Priority Major Medical Construction

Projects to Congress, which identifies the major medical construction projects that

have the highest priority within VA. This list includes buildings that have been

deemed as ‘‘significant’’ seismic risk and buildings that are at ‘‘exceptionally high

risk’’ of catastrophic collapse or major damage. Currently, 890 of VA’s 5,300 buildings have been classified as significant seismic risk, and 73 VHA buildings are at

exceptionally high risk.

The IBVSO’s believe, as we have indicated in the past, that there is ill-advised

resistance to funding any major construction projects before the CARES process has

been completed, and this includes correcting seismic deficiencies in VHA facilities.

Regardless of the recommendations of the CARES program on facility realignments,

it is our contention that VA must maintain and improve its existing facilities to support the delivery of health-care services in a risk-free environment for veterans and

VA employees alike.

Most seismic correction projects should include patient-care enhancements as part

of their total scope. Also, consideration must be given to enhanced service recommendations provided for in CARES. Due to the lengthy and widespread disruption to ongoing hospital operations that are associated with most seismic projects,

it would be prudent to make qualitative medical care upgrades at the same time.

We contend that Congress should appropriate $285 million to correct seismic deficiencies. Further, VA should schedule facility improvement projects and CARES recommendations concurrently with seismic corrections.

In The Independent Budget for Fiscal Year 2004, we cited the recommendations

of the interim report of The President’s Task Force to Improve Health-Care Delivery

for Our Nation’s Veterans (PTF). That report was made final in May 2003. To underscore the importance of this issue, we will cite the recommendation of the PTF again

this year.

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VA’s health-care facility major and minor construction over the 1996 to 2001 pe- riod averaged only $246 million annually, a recapitalization rate of 0.64 percent of

the $38.3 billion total plant replacement value. At this rate, VA will recapitalize its

infrastructure every 155 years. When maintenance and restoration are considered

with major construction, VA invests less than 2 percent of plant replacement value

for its entire facility infrastructure. A minimum of 5 percent to 8 percent investment

of plant replacement value is necessary to maintain a healthy infrastructure. If not

improved, veterans could be receiving care in potentially unsafe, dysfunctional settings. Improvements in the delivery of health care to veterans require that VA and

DOD adequately create, sustain, and renew physical infrastructure to ensure safe

and functional facilities.

It was also recommended by the PTF that ‘‘an important priority is to increase

infrastructure funding for construction, maintenance, repair, and renewal from current levels. The importance of this initiative is that the physical infrastructure must

be maintained at acceptable levels to avoid deterioration and failure.’’

The PTF also indicated that ‘‘Within VA, areas needing improvement include developing systematic and programmatic linkage between major construction and

other lifecycle components of maintenance and restoration. VA does not have a strategic facility focus, but instead submits an annual top 20 facility construction list

to Congress. Within the current statutory and business rules, VA can bring new facilities online within 4 years. However, VA facilities are constrained by reprogramming authority, inadequate investment, and lack of a strategic capital-planning program.’’

The PTF believes that VA must accomplish three key objectives:

(1) invest adequately in the necessary infrastructure to ensure safe, functional environments for healthcare delivery;

(2) right-size their respective infrastructures to meet projected demands for inpatient, ambulatory, mental health, and long-term care requirements; and

(3) create abilities to respond to a rapidly changing environment using strategic

and master planning to expedite new construction and renovation efforts.

Additionally, it was recommended by the PTF that ‘‘an important priority is to

increase infrastructure funding for construction, maintenance, repair, and renewal

from current levels.’’

In a study completed in 1998, Price Waterhouse was asked to determine the

spending level required to ensure that the Veterans Health Administration’s (VHA)

investment in facility assets would be adequately protected against adverse deterioration and to keep the average condition of facilities at an appropriate level. Price

Waterhouse concluded that the VHA was significantly underfunding its construction

spending, and based on their observations across the industry, appropriate annual

spending should be between 2 percent and 4 percent of the plant replacement value

(PRV) on reinvestment to replace aging facilities. Price Waterhouse considered reinvestment to be improvements funded from the major and minor construction appropriations. PRV for the VHA is approximately $35 billion. The 2 percent–4 percent

range would therefore equate to annual funding of $700 million to $1.4 billion.

The VFW supports the Price Waterhouse recommendation that VA spend at least

2 percent of the value of its buildings or $700 million annually on upkeep. Together

with the IBVSO’s, we believe that $400 million should be appropriated in fiscal year

2005 with continued increases in the following years until an appropriate level of

funding, that will forestall the continued deterioration of VA properties, is achieved.

Congress should appropriate no less than $400 million for nonrecurring maintenance in fiscal year 2005 to provide for adequate building maintenance. VA should

direct no less than $400 million for nonrecurring maintenance in fiscal year 2005.

VA should also make annual increments in nonrecurring maintenance in the future

until 2 percent of the value of its buildings is budgeted and utilized for nonrecurring

maintenance.

Good stewardship demands that VA facility assets be protected against deterioration and that an appropriate level of building services be maintained. Given VA’s

construction needs, such as seismic correction, compliance with the Americans with

Disabilities Act (ADA) and Joint Commission of Accreditation of Healthcare Organization (JCAHO) standards, replacing aging physical plant equipment, and CARES,

VA’s construction budget continues to be inadequate.

In addition, it has been suggested that the VA medical system has vast quantities

of empty space that can be cost effectively reused for medical services. It has also

been suggested that unused space at one medical center may help address a deficiency that exists at another. Although the space inventories may be accurate, the

basic assumption regarding viability of space reuse is not.

Medical facility planning is a complex task because of the intricate relationships

that must be provided between functional elements and the demanding technical reVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00191 Fmt 6633 Sfmt 6601 D:\VA\97531.TXT SSC2 PsN: SSC2
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quirements of the sophisticated equipment that must be accommodated. For these

reasons, space in medical facilities is rarely interchangeable—except at a prohibitive

cost. Unoccupied rooms located on a hospital’s eighth floor, for example, cannot offset a space deficiency in a second floor surgery because there is no functional adjacency. Medical space has very critical inter- and intra-departmental adjacencies that

must be maintained for efficient and hygienic patient care. In order to maintain

these adjacencies, departmental expansions or relocations usually trigger extensive

‘‘domino’’ impacts on the surrounding space. These secondary impacts greatly increase construction costs and patient care disruption.

Some permanent features of medical space, such as floor-to-floor heights, columnbay spacing, natural light, and structural floor loading, cannot be altered. Different

medical functions have different technical requirements based on these permanent

characteristics.

Laboratory or clinical space, for example, is not interchangeable with patient

ward space because of the need for different column spacing and perimeter configuration. Patient rooms need natural light and column locations that are compatible

with patient room layouts. Laboratories should have long structural bays and function best without windows. If the ‘‘shell’’ space is not appropriate for its purpose,

renovation plans will be larger and more inefficient and therefore cost more.

Using renovated space rather than new construction yields only marginal cost

savings. Build out of a ‘‘gut’’ renovation to accommodate medical functions usually

costs approximately 85 percent of the cost of similar new construction. If the renovation plan is less efficient, or the ‘‘domino’’ impact costs are greater, the small potential savings are easily lost. Renovation projects often cost more and produce a less

satisfactory result. Renovations are sometimes appropriate to achieve desirable

functional adjacencies, but they are rarely economical.

Early VA medical centers used flexible campus-type site plans with separate

buildings serving different functions. Since World War II, however, most main hospitals have been consolidated into large, tall ‘‘modern’’ structures. Over time, these

central medical towers have become surrounded by radiating wings and connecting

corridors leading to secondary structures. Many current VA medical centers are

built around prototypical ‘‘Bradley buildings.’’ These structures were rapidly constructed in the 1940’s and 1950’s for returning World War II veterans.

Fifty years ago, these brick facilities were easily site-adapted and inexpensive to

build, but today they provide a very poor chassis for a modern hospital. Because

most Bradley buildings were designed before the advent of air conditioning, for example, the floor-to floor heights are very low. This makes it almost impossible to

retrofit modern mechanical systems. The older hospital’s wings are long and narrow

(in order to provide operable windows) and therefore provide inefficient room layouts

by contemporary standards. The Bradley hospital’s central service core with a few

small elevator shafts is inadequate for the vertical distribution of modern medical

services.

In addition, much of the currently vacant space is not situated in prime locations.

If the space were, it would have been previously renovated or demolished to clear

the way for new additions. Unused space is typically located in outlying buildings

or on upper floor levels. Its permanent characteristics often make it unsuitable for

modern medical functions.

VA should perform a comprehensive analysis of its excess space and deal with it

appropriately. Some of this space is located in historic structures that must be preserved and protected. Some space may be appropriate for enhanced use. Some may

be appropriate for demolition. While it is tempting to focus on unused space, it

should not be a major determinant in CARES realignments. Each medical center

should develop a plan to find appropriate uses for its vacant properties.

Mr. Chairman and members of this Committee, this concludes my statement and

I will be happy to respond to any questions you may have.

Chairman SPECTER. Our final witness in this round is Mr. Rick

Jones, National Legislative Director of AMVETS. Thank you for

being with us, Mr. Jones, and the floor is yours.

STATEMENT OF RICHARD JONES, NATIONAL LEGISLATIVE

DIRECTOR, AMVETS

Mr. JONES. Thank you, Mr. Chairman, Ranking Member

Graham. It is an honor to be here with you today and I would like

to note appreciation for your strong leadership and continuing support.

189

Last year, Mr. Chairman, you played a critical role in terminating a dark-of-night proposal to make future disabled veterans

pay the compensation of past veterans for their service-connected

injury and we applaud you for your stand up, stand out defense of

veterans. Thank you very much.

Mr. Chairman, without your strong commitment, Congress may

fall short of providing the appropriations necessary to ensure that

burial space for millions of veterans and their eligible dependents

will be provided. The Independent Budget Veterans Service Organizations do work together and we work to ensure that the National Cemetery Administration remains a world class, quality

service that honors veterans and recognizes their contribution to

the security and development of our nation.

The members of The Independent Budget recommend Congress

provide $175 million in fiscal year 2005 for the operational requirements of the National Cemetery Administration, the National

Shrine Initiative, and the backlog of repairs. We recommend your

support for a budget that would be consistent with NCA’s growing

demands and in concert with the respect that is due every man and

woman who ever wore the uniform of the Armed Service of the

United States. This is an increase of nearly $30 million over current year funding.

Funding for the State Cemetery Grants program, the members

of The Independent Budget recommend $37 million in the new fiscal year. The intent of the State Cemetery Grants program is to develop a true complement to, not a replacement of, the National

Cemetery System and it is a vital program. It has greatly assisted

States to increase burial service to veterans, especially those living

in more rural areas, less densely-populated areas that are not currently served by the National Cemetery System. For example, in

the current year, the IBO’s anticipate fast track opening in Idaho,

Kansas, Massachusetts, and the Tidewater area of Virginia, where

over 200,000 veterans reside.

The IB VSO’s also recommend a series of upgrades on a number

of burial benefits that have eroded over time since their initiation

in 1973. The legislative proposals are part of the fiscal year 2005

Independent Budget and we ask for consideration of these proposals.

Mr. Chairman, I would just note one thing. On the cover of The

Independent Budget, you will note that in the bottom left hand corner there is an individual in a wheelchair who has lost a leg who

is sitting with his family. The picture above is also a picture of the

same individual standing with his comrades prior to injury. I think

this is important for us to note, that individuals who we expect to

return, in full health as Priority 8 veterans may return otherwise.

But in each case, it’s a Priority 8 veteran who needs to step forward when a fellow soldier is injured, hurt, or, unfortunately,

killed. We don’t win our battles and we don’t have victory without

that commitment.

Thank you, sir, and God bless America.

Chairman SPECTER. Thank you. Thank you very much, Mr.

Jones.

[The prepared statement of Mr. Jones follows:]

190

PREPARED STATEMENT OF RICHARD JONES, NATIONAL LEGISLATIVE DIRECTOR,

AMVETS

Mr. Chairman, Ranking Member Graham, and members of the Committee:

AMVETS is honored to join fellow veterans service organizations at this hearing

on the VA’s budget request for fiscal year 2005. We are pleased to provide you our

best estimates on the resources necessary to carry out a responsible budget for the

fiscal year 2005 programs of the Department of Veterans Affairs. AMVETS testifies

before you today as a co-author of The Independent Budget. This is the 18th year

AMVETS has worked with the Disabled American Veterans, the Paralyzed Veterans

of America, and the Veterans of Foreign Wars to produce a working document that

sets out our spending recommendations on veterans’ programs for the new fiscal

year. Indeed, we are proud that over 30 veteran, military, and medical service organizations endorse these recommendations. In whole, these recommendations provide

decisionmakers with a rational, rigorous, and sound review of the budget required

to support authorized programs for our nation’s veterans.

In developing this document, we believe in certain guiding principles. Veterans

must not be forced to wait for the benefits promised them. Veterans must be assured of access to high quality health care. Veterans must be guaranteed access to

a full continuum of healthcare services, including long-term care. And, veterans

must be assured burial in a State or national cemetery in every state.

It is our firm belief that the mission of the VA must continue to include support

of our military in times of emergency and war. Just as this support of our military

is essential to national security, the focus of the VA medical system must remain

centered on specialized care. VA’s mission to conduct medical and prosthetics research in areas of veterans’ special needs is critical to the integrity of the veterans

healthcare system and to the advancement of American medicine.

In addition, the budget must recognize that VA trains most of the nation’s

healthcare workforce. The VA healthcare system is responsible for great advances

in medical science, and these advances benefits all Americans. The Veterans Health

Administration is the most cost-effective application of Federal healthcare dollars,

providing benefits and services at 25 percent lower cost than other comparable medical services. In times of national emergency, VA medical services can function as

an effective backup to the DoD and FEMA.

Noting the mission of the VA, it is important to understand the areas where VA

funding must be increased. The VA budget must address the pending wage increases for VA employees. It must address the continuing backlog in veterans waiting for health care and it must address, as well, VA’s benefits casework backlog.

There are severely disabled veterans and those needing home-based healthcare in

those backlogs, and I think we can all agree that this situation should be addressed

and corrected.

As we look to fiscal year 2005, we watch a live lesson about the challenges inherent to inadequate funding. Due to a lack of resources, VA took action on January

17, 2003, to ban healthcare access to 164,000 veterans who could have enrolled last

year. This ban remains in force, despite substantial increases in healthcare funding

over the past 2 years. It is remarkable that after blocking entry to these so-called

‘‘high income’’ veterans, VA issued a healthcare directive (VHA Directive 2003–003,

January 17, 2003) telling workers to send banned veterans to Community Social

Work for assistance.

It is hoped that recently passed provisions contained in the fiscal year 2004 appropriations bill, which aim to overcome VHA Directive 2003–003, will remedy this

breach of faith. When an individual commits to the defense of the rest of us, undertakes training that is inherently more dangerous than the typical civilian occupation, and stands ready to go into harm’s way so that others need not, this country’s

gratitude should not be demonstrated with a simple referral, however courteous and

sincere, to the welfare line.

Looking to the new year, The Independent Budget recommends Congress provide

$29.8 billion to fund VA medical care for fiscal year 2005, an increase of nearly $3.1

above fiscal year 2004. We ask Congress to recognize that the VA healthcare system

is an excellent investment for America. It can only bring quality health care, however, if it receives adequate funding.

We also ask Congress to understand that there are other potential challenges regarding veterans health care especially in regard to a new generation of veterans

returning from Iraq, Afghanistan and the war on terrorism. By last year’s count,

more than 80,000 veterans who returned from the war have sought VA health care.

And, it is likely the demand will remain strong for the foreseeable future. To facilitate their care, it is important that Congress work with the administration to accelVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00194 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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erate the development of a seamless, transferable lifetime medical record between

the DoD and VA.

It is also important to clearly State that AMVETS along with its IB partners

strongly support shifting VA healthcare funding from discretionary funding to mandatory. Mandatory funding would give some certainty to healthcare services. VA facilities would not have to deal with the uncertainty of discretionary funding, which

has proven inconsistent and inadequate. Mandatory funding would provide a comprehensive solution to the current funding problem. Once healthcare funding

matched the actual average cost of care for veterans enrolled in the system, the VA

can fulfill its mission.

THE NATIONAL CEMETERY ADMINISTRATION

Before I address budget recommendations for the National Cemetery Administration, I would like members of the Committee to know that AMVETS fully appreciates the strong leadership and continuing support demonstrated by members of

the Senate Veterans’ Affairs Committee. AMVETS is truly grateful to those who

serve on this important committee. Through your work, you have distinguished

yourselves as willing to lead the country in addressing issues important to veterans

and their families.

Since its establishment, the National Cemetery Administration (NCA) has provided the highest standards of service to veterans and eligible family members in

the system’s 120 national cemeteries.

Currently, the National Cemetery Administration maintains more than 2.6 million gravesites on approximately 14,000 acres of cemetery land, while providing

nearly 90,000 interments annually.

VA is scheduled to open new cemeteries in Atlanta, GA; Oklahoma City, OK;

Pittsburgh, PA; Detroit, MI; Miami, FL; and Sacramento, CA. Also under legislation

passed last year (P.L. 108–109), VA is directed to design and construct cemeteries

at six new national locations in Philadelphia, Pennsylvania; Birmingham, Alabama;

Jacksonville, Florida; Bakersfield, California; Greenville, South Carolina; and Sarasota County, Florida.

The strong effort to build new cemeteries recognizes the dramatic increases in the

interment rate of veterans. NCA requires increases in funding if it is to carry out

its statutory mandates. Without the firm commitment of Congress and its authorizing and appropriations committees, VA would likely fall short of burial space for

millions of veterans and their eligible dependents.

The members of The Independent Budget urge Congress and the administration

to significantly boost NCA resources for fiscal year 2005. It should be recognized

that not only is the interment rate increasing and the construction of new facilities

accelerating, but also there are repair and upgrades needed. The Study on Improvements to Veterans Cemeteries, a comprehensive report submitted in 2002 by VA to

Congress on conditions at each cemetery, identified nearly $300 million in over 900

projects for gravesite renovation, repair, upgrade, and maintenance.

As any public facilities manager knows, failure to correct identified deficiencies

in a timely fashion results in continued, often more rapid, deterioration of facilities

and increasing costs related to necessary repair. The IBVSO’s agree with this assessment and believe that Congress needs to carefully consider this report to address the condition of NCA cemeteries and ensure they remain respectful settings

for deceased veterans and visitors. We recommend that Congress and VA work together to establish a timeline for funding these projects based on the severity of the

problems.

Volume 3 of the Study describes veterans cemeteries as national shrines saying

that one of the most important elements of veterans cemeteries is honoring the

memory of America’s brave men and women who served in the Armed Forces. ‘‘The

commitment of the nation,’’ the report says, ‘‘as expressed by law, is to create and

maintain national shrines, transcending the provisions of benefits to the individual

even long after the visits of families and loved ones.’’

Indeed, Congress formally recognized veterans cemeteries as national shrines in

1973 stating, ‘‘All national and other veterans cemeteries’’ shall be considered national shrines as a tribute to our gallant dead.’’ (P.L. 93–43) Moreover, many of the

individual cemeteries within the system are steeped in history and the monuments,

markers, grounds and related memorial tributes represent the very foundation of

these United States. With this understanding, the grounds, including monuments

and individual sites of interment, represent a national treasure that deserves to be

protected and nurtured.

Unfortunately, despite NCA continued high standards of service and despite a

true need to protect and nurture this national treasure, the system has and conVerDate 03-FEB-2003 12:20 Jul 14, 2005 Jkt 097351 PO 00000 Frm 00195 Fmt 6633 Sfmt 6621 D:\VA\97531.TXT SSC2 PsN: SSC2
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tinues to be seriously challenged. The current and future needs of NCA require continued adequate funding to ensure that NCA remains a world-class, quality operation to honor veterans and recognize their contribution and service to the Nation.

The members of The Independent Budget recommend that Congress provide $175

million in fiscal year 2005 for the operational requirements of NCA, the national

Shrine initiative, and the backlog of repairs. We recommend your support for a

budget consistent with NCA’s growing demands and in concert with the respect due

every man and woman who wears the uniform of the United States Armed Forces.

This is an increase of nearly $30 million over current year funding.

Clearly, the aging veteran population has created great demands on NCA operations. Nearly 655,000 veterans deaths are estimated in 2005 with the death rate

peaking at 690,000 in 2009; of these, it is expected that 109,000 will seek burial

in a national cemetery. As veteran deaths accelerate, it is obvious the demand for

veterans’ burial benefits will increase.

THE STATE CEMETERY GRANTS PROGRAM

For funding the State Cemetery Grants Program, the members of The Independent Budget recommend $37 million for the new fiscal year. The intent of the

State Cemetery Grants Program is to develop a true complement to, not a replacement for, our Federal system of national cemeteries.

With enactment of the Veterans Programs Enhancement Act of 1998, the NCA

has been able to strengthen its partnership with States and increase burial service

to veterans; especially those living in less densely populated areas not currently

served by a national cemetery.

During fiscal year 2004, the IBVSO’s anticipate fast-track openings at new cemeteries under construction—Boise, Idaho (the last State in the United States without

a veterans cemetery); Wakeeny, Kansas (300 miles east of Denver and west of Kansas City, serving rural areas in western Kansas); Winchendon, Massachusetts (serving the densely populated northern part of the State); and Suffolk, Virginia (serving

200,000 veterans in the Tidewater area).

To augment support for veterans who desire burial in State facilities, members

of The Independent Budget support increasing the plot allowance to $725 from the

current level of $300. The plot allowance now covers less than 6 percent of funeral

costs. Increasing the burial benefit to $725 would make the amount nearly proportional to the benefit paid in 1973. In addition, we firmly believe the plot allowance

should be extended to all veterans who are eligible for burial in a national cemetery

not solely those who served in wartime.

The Independent Budget veterans service organizations (IBVSO’s) also request

Congress review a series of burial benefits that have seriously eroded in value over

the years. While these benefits were never intended to cover the full costs of burial,

they now pay for only a fraction of what they covered in 1973, when they were initiated.

The IBVSO’s recommend an increase in the service-connected benefits from

$2,000 to $4,000. Prior to action in the last Congress, increasing the amount to

$2,000, the benefit had been untouched since 1988. The request would restore the

allowance to its original proportion of burial expense.

The IBVSO’s recommend increasing the nonservice-connected benefit from $300 to

$1,225, bringing it back up to its original 22 percent coverage of funeral costs. This

benefit was last adjusted in 1978, and today covers just 6 percent of burial expenses.

The IBVSO’s also recommend that Congress enact legislation to index these burial

benefits for inflation to avoid their future erosion.

Mr. Chairman, this concludes my statement. I thank you again for the privilege

to present our views, and I would be pleased to answer any questions you might

have.

Chairman SPECTER. I would like to ask just a few questions at

the moment. I would like each of you to comment on the proposals

for mandatory funding. That has been a subject under discussion

for a considerable period of time which would avoid the discretionary consideration each year, but the other side of it is it might

not produce the kind of analysis and thoughtful examination depending upon the circumstances.

I would just like you to go down the row and tell me if you would

like to see mandatory funding.

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Mr. GAYTAN. Thank you for the question, first off. The American

Legion fully supports mandatory funding and it is going to be key

for the equation that reaches the amount needed for VA health

care to be adequate. The equation that is used must ensure that

the cost for each veteran is an adequate cost when determining exactly what the overall funding for VA would be under a mandatory

funding mechanism.

Chairman SPECTER. Mr. Fuller, before you respond, Senator

Graham would like to make a brief comment.

Senator GRAHAM. I apologize that I am going to have to leave for

another 5 o’clock appointment, but I want to thank each of you for

your contribution not only today, but with the excellent independent analysis that you have given to the VA’s budget. That is

very helpful to all the Members of the Congress and I thank you

for that and appreciate your very helpful responses to the questions

that I ask. Thank you very much.

Chairman SPECTER. Thank you, Senator. Thank you very much,

Senator Graham.

Mr. Fuller, what do you think about mandatory funding?

Mr. FULLER. Paralyzed Veterans of America fully supports the

concept of mandatory funding. We have become increasingly frustrated year after year after year when it is a constant battle, the

budget fight that goes on. You hardly get one appropriation taken

care of and you are already battling for the next year’s budget request. We think that it is not only the question of how much you

get, as I said in my statement, but when you get it. In the past

2 years alone, VA has——

Chairman SPECTER. Mr. Surratt, your view?

Mr. SURRATT. The DAV is one of the nine organizations, I believe, that is in the coalition supporting mandatory funding. We

have a problem. We know what that problem is. We have a solution. There have been questions raised about whether a mandatory

formula and the law would be flexible enough, but we project funding for discretionary appropriations and I believe that Congress can

come up with a formula that makes necessary adjustments by making funding mandatory in law.

Chairman SPECTER. Mr. Hayden.

Mr. HAYDEN. VFW fully supports mandatory funding, sir.

Chairman SPECTER. Mr. Jones, do you dissent?

Mr. JONES. No, sir. No, sir.

Chairman SPECTER. On the issue of copays or entrance fees, is

there any level that there would be any support for the VA proposals and their ways sprinkled all through the VA budget to try

to raise some revenues, any means testing at all which would be

acceptable to the veterans’ organizations?

Mr. Jones.

Mr. JONES. We have a means test, sir. The interesting thing is

that these user fees seem more intended to drive veterans away.

VA projections last year on user fees suggested up to 1.2 million

veterans who were currently enrolled would not re-enroll if they

had to pay a user fee. The current projections with this smaller

user fee is that over 300,000 veterans would not return and

200,000 would have trouble returning. That is about a half-a-million.

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Chairman SPECTER. So you are opposed to all the user fees?

Mr. JONES. I think the user fees are intended to go about it in

the wrong way, sir. Yes, we are opposed.

Chairman SPECTER. Mr. Hayden.

Mr. HAYDEN. The VFW is opposed to user fees, as well, sir.

Chairman SPECTER. Mr. Surratt.

Mr. SURRATT. The DAV is opposed to user fees.

Chairman SPECTER. Mr. Fuller.

Mr. FULLER. The PVA is opposed to user fees.

Mr. GAYTAN. The American Legion is, as well.

Chairman SPECTER. Mr. Gaytan, it is up to you.

Mr. GAYTAN. Yes, sir. We oppose it, as well.

Chairman SPECTER. The final question, and the hour is growing

late and you have been very patient, the VA customer performance

satisfaction rating remains low at 55 percent, despite stated increases in performance. First of all, do you think that there have

been increases or improvement in performance? Does anybody

think that is so in the VA?

Mr. GAYTAN. Sir, if you are mentioning performance as quality

of care, yes, the American Legion recognizes the improvement in

quality of care over the past 20 years. But as I stated earlier——

Chairman SPECTER. How would you account, Mr. Gaytan, for the

fact that the customer satisfaction remains low at 55 percent?

Mr. GAYTAN. I think it would be due to wait times. Wait times

for care——

Chairman SPECTER. Wait times?

Mr. GAYTAN. Yes, sir. Not only the extended wait times for

months to get into the facility, but those wait times within the

waiting rooms themselves. As I stated earlier, the American Legion

has put together the System Worth Saving Task Force and we are

out there visiting these facilities. Just this past week, we visited

six different facilities in three different States and we are accruing

that information. We are going to present that again to you this

year, sir.

Chairman SPECTER. Does anybody else care to comment on that

question?

Mr. Jones.

Mr. JONES. Well, it is an anomaly. It is hard to figure out, because what we hear is that once you are in, veterans are very

pleased with the care. Fifty-five percent expression of performance

and quality, that is interesting. I had not seen that. I thought that

the performance and quality was way up and those who were in

the system were well pleased with the care they received.

Chairman SPECTER. Mr. Fuller, what do you think?

Mr. FULLER. I think that we have a double-edged sword here.

What we have always heard is that once you got into the VA, you

said this was the greatest thing since sliced bread and I really love

the VA. I am really surprised to see those figures. I would have assumed that they would have been higher, as well. I would be very

interested in seeing a copy of that and also seeing if the committee

staff could follow up on that for us in being able to find out from

the VA what is going on here, because that is really rather astonishing.

Chairman SPECTER. Mr. Surratt.

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Mr. SURRATT. I really don’t have anything to add to that, Mr.

Chairman. Our impression has been that veterans appreciate the

care they get and think it is very good.

Chairman SPECTER. Mr. Hayden.

Mr. HAYDEN. I agree with my colleagues at the table.

Chairman SPECTER. The hearing ran a lot longer than we would

ordinarily expect. You had eight Senators here today. That constituted a quorum. We haven’t had a—I can’t recall when we had

a quorum with this hearing before, but I think that attests to the

tremendous interest that the United States, this committee, and

the whole Senate and the whole Congress have about veterans’

issues.

We are looking at a very, very difficult budget. There is no doubt

about the need for more homeland security and there has been a

9.7 percent increase there, more for national defense, 7 percent

without even accounting for Iraq and Afghanistan, which is later,

and the discretionaries are overall less than a half-a-percent. So

the Veterans Administration did better than most.

But we will take a very, very close look at it, and I was pleased,

as I said, to see Secretary Principi very candidly tell the House

that they thought they ought to have more money, $1.2 billion, and

we admire the work that your service organizations are giving. We

are going to submit detailed questions and we will take into account your full statements and staff will be in touch with you further. Thank you for providing some bedtime reading.

[Laughter.]

Chairman SPECTER. One very short story. When I was one of the

younger stories—and I say younger because I am still a young lawyer—for the Warren Commission staff, we had to produce 400

pages every Friday for Earl Warren because he was an insomniac

and he couldn’t fall asleep unless he had more to read than he

could possibly read. So our assignment—this is a serious point, not

the only serious point today but a serious point—we had to provide

400 pages for Warren every Friday. So thank you for providing

some pages for me.

[Laughter.]

Mr. SURRATT. Mr. Chairman, we are disappointed to learn that

the independent budget is a cure for insomnia.

[Laughter.]

Chairman SPECTER. Thank you all. The hearing is adjourned.

[Whereupon, at 5:08 p.m., the committee was adjourned.]

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